<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 8, 1996
333-04261
- -----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 5
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMERIKING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 5812 36-3970707
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Number) Identification No.)
</TABLE>
AMERIKING, INC.
2215 ENTERPRISE DRIVE, SUITE 1502
WESTCHESTER, ILLINOIS 60154
(708) 947-2150
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
LAWRENCE E. JARO
AMERIKING, INC.
2215 ENTERPRISE DRIVE, SUITE 1502
WESTCHESTER, ILLINOIS 60154
(708) 947-2150
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
---------------
COPIES TO:
<TABLE>
<CAPTION>
<S> <C>
JAMES B. CARLSON, ESQ. PHILIP E. COVIELLO, ESQ.
MAYER, BROWN & PLATT LATHAM & WATKINS
1675 BROADWAY 885 THIRD AVENUE
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10022
(212) 506-2500 (212) 906-1200
</TABLE>
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
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. [ ]
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. [ ]
- -----------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM AGGREGATE
TO BE REGISTERED OFFERING PRICE(1) AMOUNT OF REGISTRATION FEE
- ------------------------------------ --------------------------- -------------------------
<S> <C> <C>
Senior Notes ....................... $100,000,000 $30,303.03 (2)
Units(3) ........................... 30,000,000 9,090.91 (2)
Senior Exchangeable Preferred Stock (4) (4)
Common Stock ....................... (4) (4)
Exchange Debentures ................ (4) (4)
</TABLE>
- -----------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933.
(2) A filing fee of $40,733.79 has been previously paid.
(3) The Units will consist of an aggregate of $30,000,000 of Senior
Exchangeable Preferred Stock and Common Stock.
(4) Such securities are being issued for no additional consideration and,
therefore, no registration fee is required.
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 WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with an underwritten public offering of Senior Notes due
2006 of AmeriKing, Inc. (the "Senior Note Prospectus") and one to be used in
a concurrent underwritten public offering of Units consisting of Senior
Exchangeable Preferred Stock due 2008 and Common Stock of AmeriKing, Inc.
(the "Preferred Stock Prospectus"). The Senior Note Prospectus and the
Preferred Stock Prospectus are identical except for the front, inside front
and back cover pages and the sections entitled "Summary--The Offering,"
"Summary--Concurrent Offering," "Certain Federal Income Tax Considerations"
and "Underwriting." The form of Senior Note Prospectus is included herein and
is followed by the alternate pages to be used in the Preferred Stock
Prospectus. The alternate pages for the Preferred Stock Prospectus included
herein are labeled "Alternate Page For Preferred Stock Prospectus." Final
forms of each prospectus will be filed with the Securities and Exchange
Commission under Rule 424(b) under the Securities Act of 1933, as amended.
<PAGE>
Information contained herein is 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
the solicitation of an offer to buy, nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION, DATED NOVEMBER 8, 1996
PROSPECTUS
, 1996
AMERIKING
LOGO
$100,000,000
% SENIOR NOTES DUE 2006
AmeriKing, Inc., a Delaware corporation ("the Company"), is offering (the
"Notes Offering") $100,000,000 aggregate principal amount of its % Senior
Notes due 2006 (the "Senior Notes"). Interest on the Senior Notes is payable
semi-annually in cash in arrears on and of each year, commencing on
, 1997. The Senior Notes will mature on , 2006. The Senior Notes will
be redeemable at the option of the Company, in whole or in part, at any time
on or after , 2001 at the redemption prices set forth herein, plus
accrued and unpaid interest to the date of redemption. Notwithstanding the
foregoing, at any time prior to , 1999, the Company may redeem up to 35%
of the original aggregate principal amount of the Senior Notes with the net
proceeds of one or more Equity Offerings at a redemption price equal to %
of the principal amount thereof, plus accrued and unpaid interest to the date
of redemption. Upon the occurrence of a Change of Control, the Company will
be required, subject to certain conditions, to make an offer to purchase the
Senior Notes at a price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest to the date of purchase. See "Description of
Securities."
The Senior Notes will be senior unsecured obligations of the Company and
will rank pari passu in right of payment with all other Senior Indebtedness
of the Company and senior to all Subordinated Indebtedness of the Company,
and will effectively rank junior to all secured Indebtedness of the Company
and to all Indebtedness of the Company's subsidiaries, including borrowings
under the Credit Agreement. In the event of insolvency, liquidation,
reorganization, dissolution or other winding-up of the subsidiaries, the
Company will not receive funds available to pay to the holders of the Senior
Notes in respect of the Senior Notes until after the payment in full of all
the claims of the creditors of such subsidiaries. On a pro forma basis, as of
September 30, 1996, after giving effect to the Offerings and the application
of the net proceeds therefrom, the aggregate principal amount of outstanding
secured Indebtedness of the Company and Indebtedness of the Company's
subsidiaries to which the Senior Notes would have effectively ranked junior
would have been approximately $8.0 million. In addition, the Company's
obligations under the Senior Notes are subject to the terms of the BKC
Intercreditor Agreement. The Indenture will permit the Company and its
subsidiaries to incur additional Indebtedness, including secured Indebtedness,
subject to certain limitations. See "Risk Factors--BKC Intercreditor Agreement"
and "Description of Securities."
Concurrent with the Notes Offering, the Company is offering Units (the
"Units"), consisting of $30,000,000 of % Senior Exchangeable Preferred
Stock due 2008 (the "Senior Preferred Stock") of the Company and shares
of Common Stock, $0.01 par value per share (the "Common Stock"), of the
Company (the "Units Offering" and, together with the Notes Offering, the
"Offerings"), to the public. The Notes Offering is contingent upon the
consummation of the Units Offering, and there can be no assurance that the
Units Offering will be consummated. See "Summary--Concurrent Offering." The
Senior Notes, the Units, the Senior Preferred Stock, the Exchange Debentures
and the Common Stock are sometimes referred to herein as the "Securities."
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DESCRIPTION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS IN EVALUATING AN
INVESTMENT IN THE SENIOR NOTES.
THE SENIOR NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO THE UNDERWRITING DISCOUNTS PROCEEDS TOTHE
PUBLIC(1) AND COMMISSIONS(2) COMPANY(3)
---------------- ------------------------- ------------
<S> <C> <C> <C>
Per Senior Note .... % % %
Total ............... $ $ $
</TABLE>
(1) Plus accrued interest, if any, from the date of issuance.
(2) The Company has agreed to indemnify the Underwriters (as defined)
against, and to provide contribution with respect to, certain
liabilities under the Securities Act. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $ .
The Senior Notes are being offered by Donaldson, Lufkin & Jenrette
Securities Corporation and Jefferies & Company, Inc. (together, the
"Underwriters"), subject to prior sale and various prior conditions,
including the Underwriters' right to reject orders in whole or in part. It is
expected that delivery of the Senior Notes will be made in New York, New York
on or about , 1996 against payment therefor in immediately available
funds.
DONALDSON, LUFKIN & JENRETTE JEFFERIES & COMPANY, INC.
SECURITIES CORPORATION
<PAGE>
GRAPHIC OMITTED
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SENIOR NOTES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCOUNTED AT ANY TIME.
BURGER KING(REGISTERED TRADEMARK) IS A REGISTERED TRADEMARK AND SERVICE
MARK, WHOPPER(REGISTERED TRADEMARK) AND "HAVE IT YOUR WAY(REGISTERED
TRADEMARK)" ARE REGISTERED TRADEMARKS, AND "GET YOUR BURGER'S
WORTH(TRADEMARK)" IS A TRADEMARK OF BURGER KING BRANDS, INC., A WHOLLY OWNED
SUBSIDIARY OF BURGER KING CORPORATION. BURGER KING CORPORATION IS WHOLLY
OWNED BY GRAND METROPOLITAN PLC. NEITHER BURGER KING CORPORATION NOR ANY OF
ITS SUBSIDIARIES OR AFFILIATES IS IN ANY WAY PARTICIPATING IN OR APPROVING
THE OFFERINGS. FOR A FULL DISCUSSION OF THE BURGER KING CORPORATION
DISCLAIMER, SEE PAGE 107.
2
<PAGE>
SUMMARY
The following summary is qualified in its entirety by reference to and
should be read in conjunction with the more detailed information and
financial statements, including the notes thereto, appearing elsewhere in
this Prospectus. Unless otherwise indicated, the information in this
Prospectus gives effect to the recapitalization of the Company's capital
stock, including the 1,000-to-1 stock split that will occur in connection
with the Offerings (the "Recapitalization"). See "Description of Capital
Stock--The Recap italization." References to a fiscal year refer in each case
to the year ended December 31, except that references to fiscal 1995 refer to
the fiscal year ended January 1, 1996. Unless the context indicates or
requires otherwise, references in this Prospectus to the "Company" or
"AmeriKing" are to AmeriKing, Inc. and its subsidiaries.
THE COMPANY
AmeriKing is the second largest independent Burger King franchisee in the
United States with 183 restaurants located primarily in eleven Midwestern and
Southern states. The Company's strategy is to capitalize on its significant
presence in targeted markets, the predictable operating performance of Burger
King restaurants and management's extensive experience to (i) make fill-in
acquisitions and develop new restaurants in existing markets to enhance its
operating leverage and (ii) make acquisitions in new markets that offer
significant potential and provide the critical mass necessary to achieve
operating efficiencies. For the twelve months ended September 30, 1996, the
Company generated pro forma restaurant sales and EBITDA (as defined) of
$201.7 million and $25.2 million, respectively.
The Company believes it is well positioned to capitalize on attractive
acquisition opportunities within the growing, highly fragmented Burger King
system. According to information publicly filed by Grand Metropolitan PLC
("Grand Met"), the parent corporation of Burger King Corporation ("BKC"), BKC
is the second largest restaurant franchisor in the world, with system-wide
restaurant sales of $8.4 billion for its fiscal year ended September 30,
1995. There are more than 8,000 Burger King restaurants worldwide, of which
over 90% are operated by approximately 1,500 independent franchise groups.
Management believes that, based upon publicly available information, the five
largest franchisees in the Burger King system operate less than 12% of all
domestic Burger King restaurants. The Burger King system has experienced
considerable success in recent years, as evidenced by the 30% growth in the
number of Burger King restaurants from 1991 to 1995. In addition, Burger
King's share of the quick-service hamburger restaurant market grew from 16%
in 1993 to 18% in 1995. Furthermore, according to market surveys conducted
for BKC by National Adult Tracking in 1996, consumers preferred Burger King
to all other quick-service hamburger brands.
The Company believes its successful operating strategy, combined with the
attractive economics of Burger King restaurants, minimizes the risks of new
restaurant development and future acquisitions. Management believes the
operating cash flow of its Burger King restaurants is highly predictable and
consistent due to the proven success of the Burger King concept and the
stringent evaluation criteria adhered to by the Company in assessing new
development opportunities and acquisitions. On a pro forma basis, the
Company's comparable restaurant sales have increased each fiscal year since
1992. For the twelve months ended September 30, 1996 on a pro forma basis,
the Company generated average restaurant sales of $1,132,000 and average
restaurant operating cash flow of $174,000 (15.4% margin). For the same
period, approximately 98% of the Company's restaurants generated positive
operating cash flow. The Company believes that each of its currently owned
restaurants will generate positive operating cash flow in fiscal 1997.
Furthermore, the Company currently leases each of its properties, minimizing
its cost to develop restaurants. The Company has budgeted approximately
$355,000 to develop each new Burger King restaurant in fiscal 1997. Based on
the results of restaurants developed by the Company, management expects its
newly developed restaurants to generate cash-on-cash returns in excess of 35%
in the first year of operations.
Since the introduction of quick-service restaurants in the mid-1950s, the
percentage of the average family's food budget spent on meals consumed "away
from home" has grown significantly, from approximately 25% of the food budget
in 1955 to approximately 46% in 1995, according to the National Restaurant
Association. The National Restaurant Association estimates that sales at
quick-service restaurants will reach approximately $100 billion in 1996,
representing an inflation-adjusted growth rate of 4.2% over 1995, more than
double the 2.0% projected growth rate of full-service restaurants. According
3
<PAGE>
to Technomic Information Services, an independent research organization,
domestic revenues from quick-service hamburger restaurants were approximately
$37.6 billion in 1995, representing the biggest share of the quick-service
restaurant industry and a 5.1% compounded annual growth rate since 1990. The
Burger King system accounted for approximately 18% of 1995 quick-service
hamburger restaurant sales, as compared to 42% for McDonald's, 11% for
Wendy's and 8% for Hardees.
AmeriKing was formed in 1994 by a group consisting of Burger King
franchisees, former BKC executives and The Jordan Company to take advantage
of significant acquisition and related new restaurant development
opportunities. Since inception, the Company has acquired 175 Burger King
restaurants and developed eight new Burger King restaurants. The Company's
senior management, which owns on a fully diluted basis over 30% of the
Company's Common Stock (prior to giving effect to the Offerings), has
extensive experience in the Burger King system as either former executives of
BKC or as independent Burger King franchisees. Each of the top four members
of the Company's senior management has over 10 years of experience within the
Burger King system operating, developing and acquiring restaurants. In
addition, most of the Company's regional managing directors, district
managers and restaurant managers have substantial experience within the
Burger King system and/or the quick-service restaurant industry.
BUSINESS STRATEGY
AmeriKing's business strategy is to continue to increase revenues,
restaurant contribution and EBITDA. The Company's strategy is based on the
following elements:
o Develop New Burger King Restaurants in Existing Markets. The Company
seeks to develop new Burger King restaurants in existing markets where
it has established a significant presence, enabling the Company to
enhance its operating leverage and increase overall margins and
profitability. Management believes that the underpenetration of the
Burger King system relative to other quick-service hamburger concepts
provides the Company with significant new development opportunities.
Furthermore, management believes the Company's new restaurant
development risk is substantially reduced due to: (i) the proven
success of the Burger King concept; (ii) the predictability of
development costs and restaurant profitability compared to that of
newer restaurant concepts; and (iii) management's extensive experience
within the Burger King system. The Company currently leases each of its
properties, minimizing its cost to develop new restaurants.
o Pursue Strategic Acquisitions of Burger King Restaurants. The Company
intends to selectively pursue strategic acquisitions in the highly
fragmented, growing Burger King system. Since 1994, the Company has
successfully completed 175 restaurant acquisitions for an aggregate
purchase price of approximately $138 million. The Company evaluates
each prospective acquisition using a set of stringent criteria,
including the potential for future fill-in acquisitions and new
restaurant development in targeted markets and the overall
attractiveness of market demographics. The Company seeks to enter new
geographic markets through acquisitions that provide the critical mass
necessary to realize operating efficiencies. Six of the Company's nine
acquisitions to date have been of large, regional operations, each
consisting of more than 10 restaurants. AmeriKing seeks to augment new
market acquisitions with fill-in acquisitions, which enable the Company
to: (i) achieve greater restaurant penetration within existing markets;
(ii) capitalize on its significant operating leverage; and (iii)
increase operating margins and profitability.
o Achieve Operating Efficiencies. The Company's large number of
restaurants, centralized management structure and advanced management
information systems enable the Company to: (i) tightly control
restaurant and corporate level costs; (ii) capture economies of scale
by leveraging its existing corporate overhead structure; and (iii)
continuously monitor point-of-sale data to more efficiently manage its
restaurant operations. The Company has experienced both
restaurant-level and corporate-level savings as a result of its size
and related bargaining power, particularly with respect to food and
paper purchasing and distribution, restaurant maintenance services and
4
<PAGE>
general liability insurance. For example, the Company achieved
significant operating improvements in the 68 restaurants it acquired
from BKC in September 1994. From the twelve month period ending July
31, 1994, prior to the close of the acquisition, to the twelve month
period ending September 30, 1996, restaurant operating cash flow for
these restaurants increased 48% from $7.4 million to $11.1 million, or
from 10.4% of sales to 15.1% of sales.
o Capitalize on Strong Support from Burger King Corporation. The Company
believes that it realizes significant benefits from its affiliation
with BKC as a result of: (i) the widespread recognition of the Burger
King name and products; (ii) BKC's management of the proven, successful
Burger King concept, including new product development, quality
assurance and strategic planning; (iii) the size and market penetration
of BKC's current $200 million annual media budget; and (iv) the
expected continued growth of the Burger King system. During BKC's
fiscal year ended September 30, 1995, a record number of 657 new
restaurants were added to the Burger King system.
o Leverage Sophisticated Management Information System. The Company's
customized integrated management information system, REMACs, typically
not affordable by smaller Burger King franchisees and other smaller
quick-service restaurant chains, provides management with the ability
to identify and quickly capitalize on restaurant sales enhancement and
profit opportunities. The Company utilizes its management information
system to: (i) minimize shrinkage and control labor costs; (ii)
efficiently schedule labor; (iii) effectively manage inventory; (iv)
analyze product mix and various promotional programs using
point-of-sale information; and (v) quickly integrate accounting systems
following acquisitions.
o Consistently Provide High Quality Products and Superior Customer
Service. As the number of restaurants that the Company owns in a
particular market increases, the Company has a greater ability to (i)
ensure overall customer satisfaction in that market through consistency
in food quality, service and restaurant appearance and (ii) coordinate
and influence local Burger King advertising and promotional programs
and pricing policies. In addition, the large number of restaurants that
the Company owns and the corresponding professional development
opportunities permit the Company to attract and retain strong regional,
district and individual restaurant management. Most of these managers
receive significant incentive compensation based on compliance with
Burger King's restaurant operating guidelines and restaurant
profitability.
RECENT RESULTS
Based on preliminary unaudited results, for the four-week period, the
four-month period and the twelve-month period ended October 28, 1996, the
Company's comparable restaurant sales increased by 10.7%, 1.5% and 0.5%,
respectively, over the same period for the prior fiscal year on a pro forma
basis. The Company has experienced strong operating results for the four-week
period ending October 28, 1996 due in part to a nationwide 99 cents Whopper
promotion implemented by BKC for three of the four weeks during this period
(which in 1995 had been implemented during September).
5
<PAGE>
THE NOTES OFFERING
Securities Offered ..... $100.0 million aggregate principal amount of
% Senior Notes due 2006.
Maturity ............... , 2006.
Interest ............... The Senior Notes will bear interest at a
rate of % per annum, payable semi-annually
in cash in arrears on each and
, commencing on , 1997.
Optional Redemption .... On or after , 2001, the Senior
Notes will be redeemable at the option of
the Company, in whole or in part, at the
redemption prices set forth herein, plus
accrued and unpaid interest to the date of
redemption. Notwithstanding the foregoing,
at any time prior to , 1999, the
Company may redeem up to 35% of the original
aggregate principal amount of the Senior
Notes with the net proceeds of one or more
Equity Offerings (as defined) at a
redemption price equal to % of the
principal amount thereof, plus accrued and
unpaid interest to the date of redemption.
See "Description of Securities--Senior
Notes--Redemption of Senior Notes--Optional
Redemption."
Change of Control ...... Upon the occurrence of a Change of Control
(as defined), each holder of Senior Notes
will have the right to require the Company
to purchase such holder's Senior Notes
pursuant to an Offer (as defined) at a
purchase price in cash equal to 101% of the
aggregate principal amount thereof, plus
accrued and unpaid interest to the date of
purchase. Certain transactions with
affiliates of the Company may not be deemed
to be a Change of Control. See "Description
of Securities--Senior Notes--Mandatory
Offers to Purchase Senior Notes--Change of
Control" and "--Senior Notes--Certain
Definitions."
Ranking ................ The Senior Notes will be senior unsecured
obligations of the Company, ranking pari
passu in right of payment with all other
Senior Indebtedness (as defined) of the
Company and senior to all Subordinated
Indebtedness (as defined) of the Company,
and will effectively rank junior to any
secured Indebtedness (as defined) of the
Company and to all Indebtedness of the
Company's subsidiaries, including
Indebtedness incurred under the Credit
Agreement (as defined). As of September 30,
1996, on a pro forma basis after giving
effect to the Offerings and the application
of the net proceeds therefrom, the aggregate
principal amount of outstanding secured
Indebtedness of the Company and Indebtedness of
the Company's subsidiaries to which the Senior
Notes would have been effectively ranked
junior would have been approximately $8.0
million. In addition, the Company's
obligations under the Senior Notes are
subject to the terms of the BKC
Intercreditor Agreement (as defined). The
indenture pursuant to which the Senior Notes
will be issued (the "Indenture") will permit
the Company and its subsidiaries to incur
6
<PAGE>
additional Indebtedness, including secured
Indebtedness, subject to certain
limitations. See "Risk Factors--BKC
Intercreditor Agreement,"
"Business--Obligations to Burger King
Corporation" and "Description of
Securities--Senior Notes--BKC Intercreditor
Agreement," "--Certain Covenants" and
"Description of Certain Indebtedness."
Certain Covenants ...... The Indenture will contain certain covenants
that, among other things, limit the ability
of the Company and its Restricted
Subsidiaries (as defined) to pay dividends
or make certain other Restricted Payments
(as defined), including Restricted
Investments (as defined), to incur
additional Indebtedness, to encumber or sell
assets, to enter into transactions with
affiliates, to enter into certain guarantees
of Indebtedness, to merge or consolidate
with any other entity and to transfer or
lease all or substantially all of their
assets. In addition, under certain
circumstances, the Company will be required
to offer to purchase Senior Notes at a price
equal to 100% of the principal amount
thereof, plus accrued and unpaid interest to
the date of purchase, with the proceeds of
certain Asset Sales (as defined). See
"Description of Securities--Senior
Notes--Certain Covenants" and "--Senior
Notes--Mandatory Offers to Purchase Senior
Notes--Asset Sales."
Use of Proceeds ........ The proceeds from the Offerings will be used
to repay borrowings under the Credit
Agreement, to repay outstanding Subordinated
Debt (as defined) (including a prepayment
penalty and a warrant redemption payment),
to repay certain senior debt, to pay the
fees and expenses of the Offerings and for
general corporate purposes. See "Use of
Proceeds" and "Description of Certain
Indebtedness."
For a discussion of the terms of the Senior Notes, see "Description of
Securities--Senior Notes" and for a discussion of certain matters that should
be considered by prospective purchasers in connection with an investment in
the Senior Notes, see "Risk Factors."
CONCURRENT OFFERING
Concurrent with the Notes Offering, the Company is offering $30,000,000 of
Units, consisting of Senior Preferred Stock and Common Stock, to the public.
The Senior Preferred Stock will be exchangeable, at the option of the
Company, into the Company's % Subordinated Exchange Debentures due 2008
(the "Exchange Debentures"), subject to the ability of the Company to incur
such indebtedness under the Credit Agreement and the Indenture. The Notes
Offering is contingent upon the consummation of the Units Offering, and there
can be no assurance that the Units Offering will be consummated.
---------------
The Company was incorporated in the State of Delaware on August 17, 1994
as NRE Holdings, Inc. On May 10, 1996, the Company changed its name to
"AmeriKing, Inc." Its principal executive offices are located at 2215
Enterprise Drive, Suite 1502, Westchester, Illinois 60154, and its telephone
number is (708) 947-2150.
7
<PAGE>
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth certain unaudited pro forma financial and
operating data for the Company as of the dates and for the periods indicated.
The pro forma data (other than the balance sheet data) gives effect to the
following transactions as if each had occurred on January 1, 1995: (i) the
Offerings and the application of the estimated net proceeds therefrom as set
forth in "Use of Proceeds" and (ii) the acquisition of each of the 54 Burger
King restaurants acquired by the Company subsequent to January 1, 1995. The
pro forma balance sheet data has been adjusted to reflect the Offerings and
the application of the net proceeds therefrom as set forth in "Use of
Proceeds," as if each had occurred on September 30, 1996. The pro forma data
does not purport to represent what the consolidated results of operations or
financial position of the Company would actually have been had such
transactions actually occurred on such dates. The following information
should be read in conjunction with the "Pro Forma Consolidated Financial
Statements," "Selected Consolidated Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements of the Company and the notes thereto
and the Historical Schedules of Restaurant Contribution and the notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
---------------------------------------------------------------
NINE MONTHS ENDED TWELVE MONTHS
----------------------------- ENDED
FISCAL OCTOBER 2, SEPTEMBER 30, SEPTEMBER 30,
1995 1995 1996 1996
----------- ---------- ---------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Restaurant sales .................................... $195,692 $147,399 $153,427 $201,720
Restaurant operating expenses ....................... 172,053 129,606 135,618 178,065
---------- ----------- -------------- ---------------
Restaurant contribution ............................. 23,639 17,793 17,809 23,655
General and administrative expenses ................. 7,492 5,448 6,021 8,065
---------- ----------- -------------- ---------------
Operating income .................................... $ 16,147 $ 12,345 $ 11,788 $ 15,590
========== =========== ============== ===============
OTHER DATA:
EBITDA (1) .......................................... $ 24,817 $ 18,749 $ 19,115 $ 25,183
Capital expenditures:
Existing restaurants ............................... 2,065 1,812 1,007 1,260
New restaurant development ......................... 696 561 3,219 3,354
Other .............................................. 1,609 1,251 837 1,195
---------- ----------- -------------- ---------------
Total capital expenditures ....................... 4,370 3,624 5,063 5,809
RESTAURANT DATA:
Restaurants open at end of period ................... 176 176 183 183
Percentage change in comparable restaurant sales
(2). ................................................ 2.1% 3.7% 0.4% (0.3)%
Average sales per restaurant (3) .................... $ 1,113 $ 856 $ 858 $ 1,132
PRO FORMA RATIOS:
EBITDA/cash interest expense (4) .................... 2.3x
Net debt/EBITDA (5) ................................. 4.1
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
-------------------------
ACTUAL PRO FORMA
--------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents .......... $ 2,705 $ 5,055
Total assets ....................... 148,481 152,100
Total debt and capitalized leases . 126,363 108,613
Senior Exchangeable Preferred Stock -- 28,281
Total stockholders' equity ......... 8,105 1,982
</TABLE>
8
<PAGE>
- ------------
(1) EBITDA, on a pro forma basis, represents operating income plus
depreciation and amortization, management and director's fees, and
certain non-recurring items. For a description of management and
director's fees, see "Certain Transactions--The Jordan Company." The non-
recurring items consist of:
<TABLE>
<CAPTION>
PRO FORMA
---------------------------------------------------------------
NINE MONTHS ENDED TWELVE MONTHS
----------------------------- ENDED
FISCAL OCTOBER 2, SEPTEMBER 30, SEPTEMBER 30,
1995 1995 1996 1996
----------- ---------- ---------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Change in estimate of disputed invoices ............ $(60) $(110) $144 $ 194
Reduction of insurance premiums and long distance
costs ............................................. 420 314 377 483
Headcount reduction due to consolidated territories 396 243 393 546
-------- ----------- -------------- ---------------
Total addition to EBITDA ......................... $756 $ 447 $914 $1,223
======== =========== ============== ===============
</TABLE>
While EBITDA should not be construed as a substitute for operating
income or a better indicator of liquidity than cash flow from operating
activities, which are determined in accordance with generally accepted
accounting principles, EBITDA is included because management believes
that certain investors find it to be a useful tool for measuring the
ability of the Company to service its debt and because the Cash Flow
Coverage Ratio, when calculated on a Pro Forma Basis (each as defined
in the Indenture and the Exchange Debenture Indenture), is calculated
on a similar basis. EBITDA is not necessarily a measure of the
Company's ability to fund its cash needs. See the Consolidated
Statements of Cash Flows of the Company and the related notes to the
Consolidated Financial Statements thereto included herein.
(2) The Company includes in comparable restaurant sales only those
restaurants that have been in operation for a minimum of thirteen
months. The percentage change in comparable restaurant sales is
calculated as the percentage change from the comparable restaurant
sales in the previous period. For the twelve months ended October 28,
1996, the percentage increase in comparable restaurant sales was 0.5%.
(3) Reflects the results of only those restaurants operating for the entire
period.
(4) Cash interest expense represents total interest expense less
amortization of deferred financing costs and other non-cash interest
charges. The calculation of cash interest expense on a pro forma basis
assumes an interest rate of 10.5% on the Senior Notes. A one-eighth
percent change in the interest rate applicable to the Senior Notes
would result in a $125,000 change in cash interest expense on a pro
forma basis.
(5) Net debt represents total debt and capitalized leases less cash and
cash equivalents. The pro forma ratio of net debt to EBITDA was
calculated based on pro forma net debt as of September 30, 1996 of
$103.6 million.
9
E>
RISK FACTORS
Prospective purchasers of the Securities offered hereby should consider
carefully the following risk factors, in addition to the other information
set forth in this Prospectus, before purchasing any Securities. This
Prospectus contains certain forward-looking statements, including statements
containing the words "believes," "anticipates," "expects" and words of
similar import. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors
include, among others, the following: adverse changes in national or local
economic conditions, competition from quick-service and other restaurants,
changes in the availability, cost and terms of financing, changes in
operating expenses and other factors referenced in this Prospectus. Certain
of these factors are discussed in more detail elsewhere in this Prospectus,
including without limitation under the captions "Summary," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business." Given these uncertainties, prospective investors are cautioned
not to place undue reliance on such foward-looking statements. The Company
disclaims any obligation to update any such factors or to publicly announce
the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or development.
LEVERAGE AND COVERAGE
Upon consummation of the Offerings, the Company will have substantial
indebtedness and debt service obligations. At September 30, 1996, the
Company's total indebtedness and capital lease obligations, including current
portion, would have been approximately $108.6 million, outstanding Senior
Preferred Stock would have been $28.3 million and its total stockholders'
equity would have been $2.0 million, in each case on a pro forma basis after
giving effect to the Offerings and the application of the net proceeds
therefrom. In addition, subject to the restrictions under the Credit
Agreement and the Indenture, the Company and its subsidiaries may incur
additional indebtedness (including additional secured indebtedness and senior
indebtedness) from time to time. See "Use of Proceeds," "Capitalization" and
"Description of Securities."
The level of the Company's indebtedness could have important consequences
to holders of the Securities, including: (i) a substantial portion of the
Company's cash flow from operations must be dedicated to debt service and
will not be available for other purposes; (ii) the Company's ability to
obtain additional debt financing in the future for working capital, capital
expenditures, research and development or acquisitions may be limited; and
(iii) the Company's level of indebtedness could limit its flexibility in
reacting to changes in its operating environment and economic conditions
generally.
The Company's ability to pay principal and interest on the Senior Notes
and, if issued, the Exchange Debentures, to satisfy its other debt
obligations, and to pay cash dividends on the Senior Preferred Stock will
depend upon its future operating performance, which will be affected by
prevailing economic conditions and financial, business and other factors,
certain of which are beyond its control, as well as the availability of
revolving credit borrowings under the Credit Agreement. The Company
anticipates that its operating cash flow will be sufficient to meet its
operating expenses, to service its debt requirements as they become due and
to pay cash dividends on the Senior Preferred Stock to the extent required by
the Certificate of Designation related thereto. However, the Company may be
required to refinance a portion of the principal of the Senior Notes and, if
issued, the Exchange Debentures prior to their maturity and, if the Company
is unable to service its indebtedness, it will be forced to take actions such
as reducing or delaying capital expenditures, selling assets, restructuring
or refinancing its indebtedness, or seeking additional equity capital. There
can be no assurance that any of these remedies can be effected on
satisfactory terms, if at all. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Description of Securities."
RANKING OF SENIOR NOTES, SENIOR PREFERRED STOCK AND EXCHANGE DEBENTURES
The Senior Notes will be senior unsecured obligations of the Company and
will rank pari passu in right of payment with all Senior Indebtedness of the
Company. The Senior Notes will effectively rank
10
<PAGE>
junior to any secured Indebtedness of the Company and to any Indebtedness of
the Company's subsidiaries, including Indebtedness incurred under the Credit
Agreement. In addition, the Senior Preferred Stock will rank junior to all
Indebtedness and other obligations of the Company and its subsidiaries. The
Exchange Debentures will be unsecured obligations of the Company and will be
subordinated in right of payment to all existing and future Senior
Indebtedness of the Company. As of September 30, 1996, on a pro forma basis
after giving effect to the Offerings and the application of the net proceeds
therefrom, the aggregate principal amount of outstanding Indebtedness of the
Company and its subsidiaries to which the Senior Notes would have been
effectively junior would have been approximately $8.0 million, the aggregate
principal amount of outstanding Indebtedness of the Company and its subsidiaries
to which the Senior Preferred Stock would have been junior would have been
approximately $108.6 million and the aggregate principal amount of outstanding
Indebtedness of the Company and its subsidiaries to which the Exchange
Debentures would have been effectively junior would have been approximately
$108.0 million. The Indenture will permit the Company and its subsidiaries to
incur additional indebtedness, including secured indebtedness and indebtedness
of its subsidiaries, subject to certain limitations. See "Description of
Securities" and "Description of Certain Indebtedness."
BKC INTERCREDITOR AGREEMENT
Pursuant to the BKC Intercreditor Agreement, the Company's obligations
under the Senior Notes, the Senior Preferred Stock and, if issued, the
Exchange Debentures are subject to the prior payment in full of all
indebtedness, liabilities and other obligations of the Company and its
subsidiaries to BKC under the BKC franchise agreements, BKC leases and any
other indebtedness of the Company and its subsidiaries to BKC, whenever and
however arising, whether primary or secondary, absolute or contingent, and
including charges and costs of collection. In the event that the Company
defaults in any such obligation to BKC, the Company will be prohibited from
making any payments in respect of the Senior Notes, the Senior Preferred
Stock and the Exchange Debentures. See "Business--Obligations to Burger King
Corporation."
HOLDING COMPANY STRUCTURE; DEPENDENCE ON SUBSIDIARIES; LIMITATIONS ON ACCESS
TO CASH FLOW OF THE SUBSIDIARIES
The Company is structured as a holding company which owns all of the stock
of the Company's operating subsidiaries. The Company's operations are
conducted exclusively through its subsidiaries, and the Company's only
significant assets are the capital stock of its subsidiaries. As a holding
company, the Company is dependent on dividends or other intercompany
transfers of funds from its subsidiaries to meet the Company's debt service
and other obligations, including its obligations under the Senior Notes, the
Senior Preferred Stock and the Exchange Debentures. Under the terms of the
Indenture, the Company's subsidiaries may incur certain indebtedness pursuant
to agreements that may restrict the ability of such subsidiaries to make such
dividends or other intercompany transfers necessary to service the Company's
obligations, including its obligations under the Senior Notes, the Senior
Preferred Stock and the Exchange Debentures. Any failure by the Company to
satisfy its obligations with respect to the Senior Notes or the Exchange
Debentures at maturity (with respect to payments of principal) or prior
thereto (with respect to payments of interest or required repurchases) would
constitute a default under the Indenture or the Exchange Debenture Indenture,
as the case may be, and the Credit Agreement and could cause a default under
agreements governing other indebtedness of the Company and its subsidiaries.
Any failure by the Company to satisfy its obligations under the Senior
Preferred Stock would permit the holders thereof only to elect certain
directors to the Company's Board of Directors. The Senior Notes and the
Exchange Debentures will be obligations exclusively of the Company and will
not be guaranteed by any of the Company's subsidiaries. In addition, because
the Company conducts its business through its subsidiaries, all existing and
future liabilities and obligations of the Company's subsidiaries will be
effectively senior to the Senior Notes, and all indebtedness and other
obligations of the Company and its subsidiaries (including the Credit
Agreement) will be effectively senior to the Senior Preferred Stock and the
Exchange Debentures. Consequently, the Company's cash flow and ability to
service its debt, including the Senior Notes and the Exchange Debentures, and
to pay cash dividends on the Senior Preferred Stock are dependent upon the
earnings of its subsidiaries and the distribution of those earnings to the
Company, or upon loans, advances or other payments made by its subsidiaries
to the Company. See "Description of Securities."
11
<PAGE>
RESTRICTIVE COVENANTS
The Indenture will restrict, among other things, the Company's and its
Restricted Subsidiaries' ability to pay dividends or make certain other
Restricted Payments, including the payment of cash dividends on or the
redemption of the Senior Preferred Stock, to incur additional indebtedness,
to encumber or sell assets, to enter into transactions with affiliates, to
enter into certain guarantees of indebtedness, to make Restricted
Investments, to merge or consolidate with any other entity and to transfer or
lease all or substantially all of their assets. In addition, the Credit
Agreement contains other and more restrictive covenants and prohibits the
Company and its subsidiaries from prepaying other indebtedness, including the
Senior Notes and the Exchange Debentures. The Credit Agreement also requires
the Company to maintain specified financial ratios and satisfy certain
financial condition tests. The Company's ability to meet those financial
ratios and tests can be affected by events beyond its control, and there can
be no assurance that the Company will meet those tests. A breach of any of
these covenants could result in a default under the Credit Agreement, the
Indenture and/or the Exchange Debenture Indenture. Upon the occurrence of an
event of default under the Credit Agreement, the lenders thereunder could
elect to declare all amounts outstanding under the Credit Agreement, together
with accrued interest, to be immediately due and payable. If the Company were
unable to repay those amounts, such lenders could proceed against the
collateral granted to them to secure that indebtedness. If the Senior
Indebtedness were to be accelerated, there can be no assurance that the
assets of the Company would be sufficient to repay in full all Senior
Indebtedness, including the Senior Notes, or to redeem the Senior Preferred
Stock or repay the Exchange Debentures. Substantially all of the assets of
the Company's subsidiaries will be pledged as security under the Credit
Agreement. See "Description of Securities" and "Description of Certain
Indebtedness--Credit Agreement."
CHANGE OF CONTROL PROVISIONS
Upon the occurrence of a Change of Control, each holder of Senior Notes,
Senior Preferred Stock and, if issued, Exchange Debentures, will have the
right to require the Company to purchase all or part of such holder's Senior
Notes, Senior Preferred Stock or Exchange Debentures, as the case may be, at
a repurchase price equal to 101% of the aggregate principal amount or the
liquidation preference, as the case may be, plus accrued and unpaid interest
or dividends, as the case may be. The Company expects that the prepayment of
the Senior Notes, Senior Preferred Stock or, if issued, the Exchange
Debentures pursuant to a Change of Control would constitute a default under
the Credit Agreement. See "Description of Securities" and "Description of
Certain Indebtedness."
The Change of Control purchase feature of the Senior Notes, the Senior
Preferred Stock and the Exchange Debentures may in certain circumstances
discourage or make more difficult a sale or takeover of the Company and,
thus, the removal of incumbent management.
The Company's other indebtedness may contain prohibitions of certain
events which would constitute a Change of Control. In addition, the exercise
by the holders of the Senior Notes, the Senior Preferred Stock or the
Exchange Debentures of their right to require the Company to repurchase the
Senior Notes, the Senior Preferred Stock or the Exchange Debentures could
cause a default under such other indebtedness, even if the Change of Control
itself does not. Finally, the Company's ability to pay cash to the holders of
the Senior Notes, the Senior Preferred Stock and the Exchange Debentures upon
a repurchase may be limited by the Company's then existing financing
resources.
TAX CONSEQUENCES OF DISTRIBUTIONS WITH RESPECT TO THE SENIOR PREFERRED STOCK
AND EXCHANGE DEBENTURES
If the redemption price of the Senior Preferred Stock exceeds its issue
price by more than a de minimis amount, such excess may be treated as a
constructive distribution with respect to the Senior Preferred Stock of
additional stock over the term of the Senior Preferred Stock using a constant
interest rate method similar to that used for accruing original issue
discount. As a result of the allocation of a portion of the purchase price of
the Units to the Common Stock, the Senior Preferred Stock initially purchased
by holders may have a redemption price that exceeds its issue price by more
than a de minimis amount, resulting in such constructive distributions. In
addition, because the issue price of the Senior
12
<PAGE>
Preferred Stock distributed in lieu of payments of cash dividends will be
equal to the fair market value of the Senior Preferred Stock at the time of
distribution, it is possible, depending on its fair market value at that
time, that such Senior Preferred Stock will be issued with a redemption
premium large enough to be considered a dividend as described above. In such
event holders would be required to include such premium in income as a
distribution over some period in advance of receiving the cash attributable
to such income, and such Senior Preferred Stock might trade separately, which
might adversely affect the liquidity of the Senior Preferred Stock.
The Company may, at its option and under certain circumstances, exchange
Exchange Debentures for the Senior Preferred Stock. Any such exchange will be
a taxable event to holders of the Senior Preferred Stock. Furthermore, the
Exchange Debentures may in certain circumstances be treated as having been
issued with original issue discount ("OID") for federal income tax purposes.
In such event, holders of Exchange Debentures will be required to include
such OID (as ordinary income) in income over the life of the Exchange
Debentures, in advance of the receipt of the cash attributable to such
income.
BKC FRANCHISE AGREEMENT RESTRICTIONS; CONSENT TO RESTAURANT ACQUISITION AND
DEVELOPMENT AND FRANCHISE RENEWAL; RIGHT OF FIRST REFUSAL
The Company operates Burger King restaurants through its wholly owned
subsidiaries, each of which is party to a BKC franchise agreement. In
addition to the contractual restrictions imposed on the Company's
subsidiaries in the BKC franchise agreements, the Company and its
subsidiaries are subject to certain restrictions imposed by BKC policies and
procedures as in effect from time to time. These restrictions may have the
effect of limiting the Company's ability to pursue its business strategy.
Part of the Company's business strategy is to expand its operations
through both the acquisition and development of Burger King restaurants.
Pursuant to current BKC policies and procedures applicable to the Company,
BKC's approval is required for the acquisition of Burger King restaurants by
the Company from other Burger King franchisees and the development of new
Burger King restaurants by the Company. Pursuant to BKC's franchise
agreements, BKC's approval is also required for the renewal of existing
franchise agreements. BKC's consent to such renewals, acquisitions or
development may be withheld in BKC's sole discretion. Within five years of
September 30, 1996, 27 of the Company's current 183 franchise agreements with
BKC, which generated $28.3 million in total restaurant sales in the nine
months ended September 30, 1996, are scheduled to expire. BKC may also
condition its consent to any such renewal, acquisition or development on the
Company's agreement to take certain actions, such as making capital
expenditures on acquired restaurants, providing information to BKC's
management information systems, disposing of certain acquired restaurants and
maintaining specified financial ratios. For example, in connection with one
of the Company's acquisitions in 1995, the Company renewed its commitment to
sell up to 10 specified Burger King restaurants in the Chicago market to a
BKC designee. The Company believes that the sale of the 10 specified Burger
King restaurants will not have a material adverse effect on the Company's
financial condition or results of operations. In addition, BKC's franchise
agreements provide BKC with a right of first refusal to purchase all Burger
King restaurants that franchisees wish to sell. Accordingly, no assurances
can be made that BKC will (i) grant successor franchise agreements to the
Company with respect to the Company's existing Burger King restaurants, (ii)
consent to the Company's development of additional Burger King restaurants,
in each case without requiring the Company to incur substantial costs or
undertake certain other actions, or (iii) not exercise its right of first
refusal with respect to the sale of Burger King restaurants that the Company
seeks to acquire. See "Business--Franchise Agreements" and "Certain
Transactions."
BKC CONSENT TO CERTAIN CHANGES IN CAPITAL STRUCTURE AND CORPORATE GOVERNANCE
Current BKC policies and procedures require the Company and each of its
subsidiaries which is a franchisee to seek BKC's consent prior to making
certain changes to their capital structure and modifications to their
corporate governance documents, including changing the description of the
Company or the relevant subsidiary franchisee's purpose or authorized
activities, the designation of, or the procedures for designating, the
managing owner (the individual primarily in charge of implementing BKC's
policies and procedures) or the authority granted to the managing owner.
13
<PAGE>
BKC RESTRICTIONS ON MANAGEMENT STRUCTURE; OWNER TRANSFER OF SECURITIES
Current BKC policies and procedures place certain restrictions on the
management structure of Burger King franchisees. For example, in the event
Mr. Jaro, the Company's Chairman, Chief Executive Officer and managing owner,
were to terminate his relationship with the Company, the Company would be
required to seek BKC's approval to appoint a new managing owner, who would,
absent the consent of BKC, be subject to approval by BKC and be required to
hold a 5% voting equity interest in the Company and to personally guarantee
the Company's obligations to BKC. Absent BKC's waiver of the 5% equity
ownership and guarantee requirements, there can be no assurance that the
Company will be able to obtain a successor managing owner, which would cause
the Company's subsidiaries to be in default of their franchise agreements
with BKC. Furthermore, pursuant to the terms of BKC's franchise agreements,
Messrs. Jaro, Osborn and Hubert, who are named as owners under the franchisee
agreements, may not sell, encumber or otherwise transfer any portion of their
equity interests in the Company without first obtaining the consent of BKC.
Should the Company, the managing owner, or the owners fail to comply, as
applicable, with current BKC policies and procedures or any provision of
BKC's franchise agreements, BKC could, among other remedies, terminate its
franchise agreements with the Company's subsidiaries. In addition, BKC has
the right to terminate its franchise agreements with a franchisee if the
franchisee or the managing owner is convicted of a crime punishable by a term
of imprisonment in excess of one year or the franchisee or the managing owner
or any managing director engages in conduct that reflects unfavorably on the
franchisee or the Burger King system generally. Although not required under
their franchise agreements with BKC, the Company's subsidiaries may also, as
a practical matter, be required to adopt price discount programs instituted
by BKC which could have a material adverse effect on the Company's financial
condition and results of operations. See "Business--Franchise Agreements."
BKC CONSENT TO ISSUANCE OF SECURITIES; CHANGE OF CONTROL; OTHER AGREEMENTS
WITH BKC
Pursuant to BKC's franchise agreements, BKC's consent is required for
certain transfers or issuances by the Company of its equity securities or the
transfer or issuance to third parties of the equity securities of its
subsidiary franchises. In addition, transfers that result in a change of
control of the Company in connection with a public tender offer may require
BKC's consent. If BKC's required consent is not obtained in connection with
any such issuance or transfer of the Company's or its subsidiary franchisee's
equity securities, including in connection with a public tender offer, BKC
could terminate its franchise agreements with the Company's subsidiaries,
which would have a material adverse effect on the Company's financial
condition and results of operations. In addition, the Company's financial
flexibility and ability to issue equity securities in connection with
acquiring future Burger King restaurants could be limited by BKC. Any such
limitation would affect the Company's growth strategy and could have a
material adverse effect on the Company's financial condition and results of
operations. See "Description of Capital Stock--Anti-Takeover Effects of BKC
Franchise Agreements."
In connection with the Offerings, the Company will be required to enter
into an agreement with BKC pursuant to which the Company will (i) indemnify
BKC for any claims against BKC arising out of the Offerings, (ii) guarantee
the payment and performance obligations under each of the franchise and lease
agreements between BKC and its subsidiary franchisees and (iii) be
prohibited, absent BKC's consent, from appointing certain classes of persons,
including officers of competing quick-service hamburger restaurant concepts
and BKC employees and suppliers, from serving on the boards of directors of
the Company or its subsidiaries. See "Certain Transactions."
DEPENDENCE UPON BURGER KING CORPORATION
The Company's financial performance is directly related to the success of
the Burger King restaurant system, including the management and financial
condition of BKC as well as restaurants operated by other Burger King
franchisees. The inability of Burger King restaurants to compete effectively
with other quick-service restaurants would have a material adverse effect on
the Company's operations. The success of Burger King restaurants depends in
part on the effectiveness of BKC's marketing efforts, new product development
programs, quality assurance and other operational systems over which the
Company has no control. For example, adverse publicity involving BKC or one
or more Burger King franchisees could have an adverse effect on all Burger
King franchisees, including the Company. See "Business--Burger King
Corporation" and "--Competition."
RISKS OF EXPANSION AND DEVELOPMENT
The Company intends to expand rapidly in the future through the
development and acquisition of additional Burger King restaurants. This
expansion could significantly increase the number of restaurants
14
<PAGE>
operated by the Company. To date, the Company has had limited experience in
the development of Burger King restaurants and BKC exercises sole and
absolute discretion with respect to any development by its franchisees. The
Company's ability to achieve its expansion goals will depend on a number of
factors, including (i) the availability of existing franchises for sale and
suitable sites for new restaurant development, (ii) the availability of funds
for expansion, (iii) the consent of BKC, (iv) BKC not exercising its right of
first refusal on the sale of any franchise that the Company seeks to acquire,
(v) the hiring, training and retention of skilled management and other
restaurant personnel and (vi) the ability to obtain the necessary
governmental permits and approvals. No assurances can be made that the
Company's expansion plans will be achieved, that a new restaurant will be
operated profitably, that new restaurants (particularly acquired restaurants)
will be smoothly integrated into the Company's operations, or that such
expansion will not cannibalize sales at existing Company restaurants located
near newly opened restaurants. A substantial portion of the Company's capital
resources will be used for development and acquisitions of Burger King
restaurants. Consequently, the Company may require additional debt or equity
financing for future development and acquisitions, which additional financing
may not be available or, if available, may not be on terms that are
acceptable to the Company. In addition, the Credit Agreement contains
restrictions on, among other things, new acquisitions, capital expenditures
and the incurrence of additional indebtedness. Moreover, BKC may require
that, as a condition to approving a proposed restaurant development
opportunity or acquisition, the Company limit the amount of its proposed or
future debt financing. The failure to continue its expansion by the
development or acquisition of restaurants could have a material adverse
effect on the Company's performance. See "Business--Business Strategy."
LIMITED OPERATING HISTORY
The Company was formed on August 17, 1994 and has a limited operating
history. The board of directors of the Company (the "Board of Directors") and
its executive officers have overall responsibility for the management of the
Company. Although certain of the Company's executive officers and directors
have extensive experience in the acquisition, development, operation and
financing of Burger King restaurants prior to the commencement of the
Company's operations, no executive officer of the Company had significant
experience in operating a business of the size and geographic diversity of
the Company.
REGIONAL CONCENTRATION OF OPERATIONS
A substantial majority of the Company's Burger King restaurants are
located in the midwestern United States. Of the Company's 183 restaurants,
113 or 61.7% are located in the Chicago, Illinois area, thereby exposing the
Company to adverse developments in the Chicago region's economy, weather
conditions and demographic and population changes. While the Company intends
to expand into other regions of the United States, no assurances can be made
that the current geographic concentration of the Company's business will not
have a material adverse effect on the Company's financial condition and
results of operations.
COMPETITION
The quick-service restaurant industry is intensely competitive with
respect to price, product quality, variety and taste, speed of service,
convenience of location and restaurant cleanliness and upkeep. In each of its
markets, the Company's Burger King restaurants compete with large national
quick-service chains, some of which have greater financial and other
resources than the Company. McDonald's, Wendy's and Hardees are the Company's
principal competitors, and the Company's Burger King restaurants also compete
against locally-owned restaurants offering low-priced menus and
quick-service. To a lesser degree, the Company competes against quick-service
chains offering alternative menus such as Taco Bell, Pizza Hut and Kentucky
Fried Chicken as well as convenience stores and grocery stores that offer
menu items comparable to that of Burger King restaurants. To the extent that
a competitor of the Company offers items that are better priced or more
appealing to consumer tastes or if such competitor increases the number of
restaurants it operates in one of the Company's targeted markets, such events
could have a material adverse effect on the Company's financial condition and
results of operations. See "Business--Competition."
In addition, the Company faces competition in its expansion plans. The
Company's potential competitors in developing and acquiring Burger King
restaurants include BKC, which (i) controls the areas in which new Burger
King restaurant sites can be developed, (ii) has exercised its right of first
refusal
15
<PAGE>
with respect to previously proposed restaurant sales and (iii) may impose, as
a condition to its consent to any proposed development opportunity or
acquisition, conditions, limitations or other restrictions on the Company and
its activities. BKC has substantially greater financial resources than the
Company to fund restaurant development and acquisitions. There can be no
assurance that BKC will not (i) limit the areas in which the Company may
develop restaurants, (ii) exercise its right of first refusal with respect to
future restaurant acquisitions by the Company or (iii) impose significant or
unacceptable conditions, limitations or other restrictions on the Company and
its activities. Other potential competitors in acquiring and developing
Burger King restaurants include other investors and existing Burger King
franchisees. The Company also competes with other quick-service restaurant
operators and developers for the most desirable site locations. Many of the
Company's competitors have greater financial resources than the Company to
finance development and acquisition opportunities or may be willing to pay
higher prices for the same opportunities. See "Business--Competition."
DEPENDENCE UPON SENIOR MANAGEMENT
The Company is dependent on the personal efforts, relationships and
abilities of its senior management team. The loss of services of any of these
individuals would have a material adverse effect on the future performance of
the Company. In addition, pursuant to the terms of BKC's franchise
agreements, the Company must receive BKC's consent prior to replacing Mr.
Jaro as its managing owner. In addition, Messrs. Jaro, Osborn and Hubert are
personally liable to BKC for the Company's obligations under each of its
subsidiaries' franchise agreements and each of its leases where BKC is the
lessor. Following the completion of the Offerings, the Company intends to
seek the release of Messrs. Jaro, Osborn and Hubert from these personal
guarantees. To the extent BKC requires the Company's senior management to
continue to guarantee such obligations, it may be more difficult for the
Company to retain such executives or replace these executives in the future
with other qualified individuals. The Company believes that its success is
dependent on its ability to attract and retain additional qualified
employees, and the failure to recruit such other skilled personnel could have
a material adverse effect on the Company's financial condition and results of
operations. See "Business--Franchise Agreements," "--Employees" and
"Management--Employment Agreements."
CONTROL BY PRINCIPAL STOCKHOLDERS
Upon consummation of the Offerings, the Company's executive officers and
directors (and their respective affiliates, including The Jordan Company)
will own an aggregate of 49.3% of the Company's outstanding shares of Common
Stock (assuming the issuance of 30,650 shares of Common Stock in the Units
Offering) . Such stockholders, if voting together, will have sufficient
voting power to elect the entire Board of Directors, exercise control over
the business, policies and affairs of the Company and, in general, determine
the outcome of any corporate transaction or other matters submitted to the
stockholders for approval such as any amendment to the amended and restated
certificate of incorporation of the Company (the "Certificate of
Incorporation"), the authorization of additional shares of capital stock, and
any merger, consolidation, sale of all or substantially all of the assets of
the Company and could prevent or cause a change of control of the Company,
all of which may adversely affect the Company and its stockholders. In
addition, pursuant to the Stockholders Agreement (as defined), all of the
holders of Common Stock of the Company prior to the Offerings (the "Current
Holders"), have agreed to vote all of their shares of Common Stock for the
election of directors designated by certain stockholders. Further, the
Stockholders Agreement contains prohibitions and restrictions on the transfer
by the Current Holders of Common Stock of the Company including certain
co-sale rights and rights of first refusal for the Company and each Current
Holder to purchase the shares of Common Stock prior to transfer by any other
Current Holder, which could prevent or cause a change of control of the
Company. See "Principal Stockholders" and "Description of Capital
Stock--Stockholders Agreement."
GOVERNMENT REGULATION
The restaurant business is subject to extensive laws and regulations
relating to the development and operation of restaurants, including zoning,
the preparation and sale of food and employer/employee relationships. Any
substantial increases in the minimum wage (including those recently enacted
by the
16
<PAGE>
U.S. Government) or mandatory health care coverage could adversely affect the
Company's financial condition and results of operations. Violations of zoning
or building codes or regulations could delay new restaurant openings or the
acquisition of existing restaurants. See "Business--Government Regulation."
FACTORS AFFECTING OPERATIONS
A number of factors beyond the control of the Company may affect sales and
profitability of the Company, including, among other things, the strength of
regional economies where the Company operates, weather, gas prices and public
health concerns regarding certain foods served at quick-service restaurants.
Severe weather conditions in some of the Company's principal markets, such as
Chicago, Illinois, may have a negative impact on customer traffic, sales and
restaurant contribution. An economic downturn in any of the Company's
regional markets may also have a similar effect.
ABSENCE OF PUBLIC MARKET FOR THE SECURITIES
The Securities constitute new issues of securities and do not have
established trading markets. If trading markets do not develop or are not
maintained, holders of the Securities may experience difficulty in reselling
the Securities or may be unable to sell them at all. If a market for the
Securities develops, any such market may be discontinued at any time. The
Company does not intend to apply for listing of any of the Securities on any
securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System. Although the Underwriters have
advised the Company that they currently intend to make a market in the
Securities, they are not obligated to do so and may discontinue such market
making at any time without notice. In addition, such market making activity
will be subject to the limits imposed by the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Accordingly, there can be no assurance as to the development or liquidity of
any market for the Securities. See "Description of Securities."
FRAUDULENT TRANSFER CONSIDERATIONS
Under fraudulent transfer law, if a court were to find in a lawsuit by an
unpaid creditor or representative of creditors of the Company, that the
Company received less than fair consideration or reasonable equivalent value
for incurring the indebtedness represented by the Senior Notes and, if
issued, the Exchange Debentures, and, at the time of such incurrence, the
Company (i) was insolvent or was rendered insolvent by reason of such
incurrence, (ii) was engaged or about to engage in a business or transaction
for which its remaining property constituted unreasonably small capital or
(iii) intended to incur, or believed it would incur, debts beyond it ability
to pay as such debts mature, such court could, among other things, (a) void
all or a portion of the Company's obligations to the holders of Senior Notes
and, if issued, the Exchange Debentures and/or (b) subordinate the Company's
obligations to the holders of the Senior Notes and, if issued, the Exchange
Debentures to other existing and future indebtedness of the Company, the
effect of which would be to entitle such other creditors to be paid in full
before any payment could be made on the Senior Notes and, if issued, the
Exchange Debentures. The measure of insolvency for purposes of determining
whether a transfer is avoidable as a fraudulent transfer varies depending
upon the law of the jurisdiction which is being applied. Generally, however,
a debtor would be considered insolvent if the sum of all of its liabilities
were greater than the value of all of its property at a fair valuation, or if
the present fair salable value of the debtor's assets were less than the
amount required to repay its probable liability on its debts as they become
absolute and mature. There can be no assurance as to what standard a court
would apply in order to determine solvency. To the extent that proceeds from
the sale of the Senior Notes are used to repay indebtedness under the Credit
Agreement and the Subordinated Debt, a court may find that the Company did
not receive fair consideration or reasonably equivalent value for the
incurrence of the indebtedness represented thereby.
On the basis of its historical financial information, its recent operating
history and other factors, the Company believes that it is and will be
solvent, has and will have sufficient capital for the business in which it is
engaged and has not and will not have incurred debts beyond its ability to
pay such debts as they mature. There can be no assurance, however, that a
court would necessarily agree with these conclusions. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations.
17
<PAGE>
USE OF PROCEEDS
The proceeds to the Company from the Offerings are estimated to be
approximately $130.0 million before deducting estimated commissions and
expenses of the Offerings. The proceeds from the Offerings will be used to
repay borrowings under the Credit Agreement, to prepay the Senior Subordinated
Notes (including a prepayment penalty of $0.8 million and a warrant
redemption payment of approximately $2.7 million), the Subordinated Notes and
the Seller Notes (each as hereinafter defined and collectively referred to
herein as the "Subordinated Debt"), to repay certain senior debt, to pay the
fees and expenses of the Offerings and for general corporate purposes.
Reborrowings under the Credit Agreement, if any, will be used for general
corporate purposes. The Company is currently negotiating with several lenders
for a new bank credit agreement to replace the Credit Agreement under which
the Company expects to be able to borrow approximately $75 million to fund
acquisitions and provide working capital and for other general purposes.
Affiliates of the Company will receive a portion of the net proceeds from the
Offerings. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources," "Business,"
"Description of Certain Indebtedness" and "Certain Transactions."
The following table sets forth the estimated sources and uses of funds,
assuming the Offerings were consummated on September 30, 1996 (in millions).
<TABLE>
<CAPTION>
<S> <C>
SOURCES OF FUNDS:
Senior Notes due 2006 ................ $100.0
Units ................................ 30.0
--------
Total sources ...................... $130.0
========
USES OF FUNDS:
Repay Credit Agreement borrowings (1) $ 86.6
Repay other senior debt .............. 0.8
Prepay Subordinated Debt (2) ......... 33.9
Fees and expenses (3) ................ 6.4
Excess cash .......................... 2.3
--------
Total uses ......................... $130.0
========
</TABLE>
(1) Credit Agreement borrowings consist of (i) $44.3 million principal
amount of term loans that mature on January 31, 2002, and $39.8 million
principal amount of term loans that mature on January 31, 2004, and
(ii) $2.5 million principal amount of revolving credit loans that
mature on January 31, 2002. As of September 30, 1996, the weighted
average interest rate with respect to all Credit Agreement borrowings
was 8.60%.
(2) Subordinated Debt consists of: (i) $15.0 million principal amount of
Senior Subordinated Notes bearing interest at a rate of 12.5% per annum
with a scheduled maturity of January 31, 2005; (ii) $11.0 million
principal amount of Subordinated Notes bearing interest at a rate of
12.75% per annum with a scheduled maturity of August 31, 2005; (iii)
$4.4 million principal amount of Seller Notes bearing interest at a
rate of 12.75% per annum with a scheduled maturity of August 31, 2005;
and (iv) a $0.8 million prepayment penalty and a warrant redemption
payment of approximately $2.7 million in connection with the retirement
of the Senior Subordinated Notes and the repurchase of warrants issued
to the holder of the Senior Subordinated Notes.
(3) Includes estimated discounts and commissions and expenses to be
incurred in connection with the Offerings and the application of the
net proceeds therefrom, and fees payable to The Jordan Company. See
"Certain Transactions."
18
<PAGE>
CAPITALIZATION
The following table sets forth, as of September 30, 1996, (i) the
consolidated capitalization of the Company and (ii) the pro forma
consolidated capitalization of the Company after giving effect to the
Offerings and the application of the estimated net proceeds therefrom as
described in "Use of Proceeds." This table should be read in conjunction with
the Pro Forma Financial Statements and the notes thereto and the Consolidated
Financial Statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
---------------------
ACTUAL PRO FORMA
-------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents ...................... $ 2.7 $ 5.1
======== ===========
Long-term debt (including current portion):
Borrowings under the Credit Agreement ....... $ 86.6 --
% Senior Notes due 2006 ..................... -- $100.0
Subordinated Debt ............................ 31.0 0.6
Capital lease obligations .................... 0.2 0.2
Other long-term debt ......................... 8.6 7.8
-------- -----------
Total long-term debt ....................... 126.4 108.6
% Senior Exchangeable Preferred Stock due 2008 -- 28.3
Total stockholders' equity ..................... 8.1 2.0
-------- -----------
Total capitalization ..................... $134.5 $138.9
======== ===========
</TABLE>
DIVIDEND POLICY
The Company is not required to pay cash dividends on the Senior Preferred
Stock until after , 2001. The Company intends to retain future earnings,
if any, for use in its business and does not anticipate paying any cash
dividends on the Senior Preferred Stock for any period ending on or prior to
, 2001 or on the Common Stock. In addition, the terms of the Indenture
and the Credit Agreement limit the amount of cash dividends the Company may
pay with respect to the Senior Preferred Stock, the Common Stock and other
equity securities both before and after that date. See "Description of
Securities--Senior Notes--Certain Covenants," "--Senior Preferred
Stock--Dividends" and "Description of Certain Indebtedness."
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth certain historical financial and operating
data for the Company and restaurants formerly owned and operated by BKC (the
"BKC Restaurants") and entities controlled by certain members of the
Company's current management (the "Management Restaurants") (collectively,
the "Initial Acquisitions") and certain pro forma financial and operating
data for the Company as of the dates and for the periods indicated. Prior to
their acquisition by the Company on September 2, 1994, the BKC Restaurants
and the Management Restaurants were not under common control or management.
In addition, restaurant contribution for the BKC Restaurants and the
Management Restaurants, which reflects restaurant sales net of restaurant
operating expenses, does not reflect all costs of operating the BKC
Restaurants and Management Restaurants. Accordingly, restaurant sales,
restaurant operating expenses and restaurant contribution may not be
comparable to or indicative of post-acquisition results. The data presented
for the Company as of December 31, 1994 and for the period from September 2,
1994 through December 31, 1994, and for the 1995 fiscal year (actual) are
derived from the Company's audited financial statements appearing elsewhere
herein. The data presented for the Company for the nine months ended October
2, 1995 and September 30, 1996 and for the twelve months ended September 30,
1996, are derived from the unaudited financial statements of the Company,
appearing elsewhere herein, and in the opinion of management include all
adjustments (consisting only of normal recurring adjustments) that the
Company considers necessary for a fair presentation of the Company's results
of operations and financial condition for those periods. The data for the
nine and twelve months ended September 30, 1996 are not necessarily
indicative of results that may be expected for any other interim period or
for the fiscal year ending December 30, 1996. The Selected Consolidated
Financial Information should be read in conjunction with (i) "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
(ii) the audited Historical Schedules of Restaurant Contribution and the
notes thereto, (iii) the audited Consolidated Financial Statements for the
Company and the notes thereto and (iv) the Pro Forma Consolidated Financial
Statements, each included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THE INITIAL
ACQUISITIONS(1)(2) THE COMPANY
------------------------- --------------------------------------
FISCAL 1995
-------------------
JANUARY 1, 1994 SEPTEMBER 2, 1994
THROUGH THROUGH
FISCAL SEPTEMBER 1, DECEMBER 31, PRO
1993 1994 1994(3) ACTUAL FORMA(4)
--------- ---------------- ----------------- ------------ -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Restaurant sales ........... $82,895 $56,720 $33,931 $139,572 $195,692
Restaurant operating
expenses:
Cost of sales .............. 25,832 18,602 10,807 44,798 62,760
Restaurant labor and
related costs ............ 21,998 15,529 8,647 34,526 48,818
Depreciation and
amortization ............. 2,062 1,366 1,193 4,927 7,065
Occupancy and other
operating expenses ....... 26,405 17,854 9,229 38,930 53,410
------- ---------------- ----------------- -------- --------
Total restaurant
operating expenses ...... 76,297 53,351 29,876 123,181 172,053
------- ---------------- ----------------- -------- ---------
Restaurant contribution .... $ 6,598 $ 3,369 4,055 16,391 23,639
======= ================ ================= ======== ==========
General and administrative
expenses .................. 1,374 5,904 7,492
----------------- --------- ---------
Operating income ........... 2,681 10,487 16,147
Other income (expense):
interest expense .......... (1,925) (8,323) (11,402)
Other income (expense),
net ...................... (324) (437) (470)
----------------- --------- ---------
Total other income
(expense) ............... (2,249) (8,760) (11,872)
----------------- -------- ---------
Income (loss) before income
taxes ...................... 432 1,727 4,275
Provision (benefit) for
income taxes .............. 191 825 1,870
----------------- --------- ---------
Net income (loss) .......... $ 241 $ 902 $ 2,405
Preferred stock
dividends(5) .............. 4,200
Weighted average shares
number of outstanding (in
thousands)(6) ............. 1,031
Net income per share(6) .... $ (1.74)
OTHER DATA:
EBITDA(7) .................. $ 4,021 $ 16,142 $ 24,817
Capital expenditures:
Existing restaurants ....... 1,476 2,065
New restaurant
development .............. 696 696
Other ..................... 1,609 1,609
--------- ---------
Total capital
expenditures ........... 3,781 4,370
PRO FORMA RATIOS:
EBITDA/cash interest
expense(8) ................
Net debt/EBITDA(9) .........
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------------------------- TWELVE MONTHS ENDED
OCTOBER 2, 1995 SEPTEMBER 30, 1996 SEPTEMBER 30, 1996
-------------------- ----------------------- -------------------------
ACTUAL PRO FORMA(4) ACTUAL PRO FORMA(4) ACTUAL PRO FORMA(4)
------ ------------ ------ ------------ ------ ------------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C>
Restaurant sales $103,446 $147,399 $149,973 $153,427 $186,099 $201,720
Restaurant operating
expenses:
Cost of sales .............. 33,226 47,340 48,476 49,597 60,048 65,017
Restaurant labor and
related costs ............ 25,818 36,939 37,406 38,344 46,114 50,223
Depreciation and
amortization ............. 3,646 5,322 5,431 5,603 6,712 7,346
Occupancy and other
operating expenses ....... 28,650 40,005 41,050 42,074 51,330 55,479
-------- ---------- -------- ---------- -------- ----------
Total restaurant
operating expenses ...... 91,340 129,606 132,363 135,618 164,204 178,065
-------- ---------- -------- ---------- -------- ----------
Restaurant contribution .... 12,106 17,793 17,610 17,809 21,895 23,655
General and administrative
expenses .................. 4,202 5,448 5,907 6,021 7,609 8,065
-------- ---------- -------- ---------- -------- ----------
Operating income ........... 7,904 12,345 11,703 11,788 14,286 15,590
Other income (expense):
interest expense .......... (6,222) (8,570) (8,880) (8,509) (10,981) (11,341)
Other income (expense),
net ...................... (300) (330) (3,887) (495) (4,024) (635)
-------- ---------- -------- ---------- -------- ----------
Total other income
(expense) ............... (6,522) (8,900) (12,767) (9,004) (15,005) (11,976)
-------- ---------- -------- ---------- -------- ----------
Income (loss) before income
taxes ...................... 1,382 3,445 (1,064) 2,784 (719) 3,614
Provision (benefit) for
income taxes .............. 661 1,507 (426) 1,152 (262) 1,515
-------- ---------- -------- ---------- -------- ----------
Net income (loss) .......... $ 721 $ 1,938 $ (638) $ 1,632 $ (457) $ 2,099
Preferred stock
dividends(5) .............. 3,150 3,150 4,200
Weighted average shares
number of outstanding (in
thousands)(6) ............. 1,031 1,031 1,031
Net income per share(6) .... $ (1.18) $ (1.47) $ (2.03)
OTHER DATA:
EBITDA(7) .................. $12,088 $ 18,749 $ 17,933 $ 19,115 $ 21,987 $ 25,183
Capital expenditures:
Existing restaurants ....... 1,274 1,812 962 1,007 1,164 1,260
New restaurant
development .............. 561 561 3,219 3,219 3,354 3,354
Other ..................... 1,251 1,251 837 837 1,195 1,195
-------- ---------- -------- ---------- -------- ----------
Total capital
expenditures ........... 3,086 3,624 5,018 5,063 5,713 5,809
PRO FORMA RATIOS:
EBITDA/cash interest
expense(8) ................ 2.3x
Net debt/EBITDA(9) ......... 4.1
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
THE INITIAL
ACQUISITIONS(1)(2) THE COMPANY
------------------------- --------------------------------------
FISCAL 1995
-------------------
JANUARY 1, 1994 SEPTEMBER 2, 1994
THROUGH THROUGH
FISCAL SEPTEMBER 1, DECEMBER 31, PRO
1993 1994 1994(3) ACTUAL FORMA(4)
--------- ---------------- ----------------- ------------ -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Restaurants open at end of
period .................. 82 82 121 140 176
Percentage change in
comparable restaurant
sales(10) ............... (0.1)% 2.1%
Average sales per
restaurant(11) .......... $1,011 $1,125 $1,113
Ratio of earnings to fixed
charges(12) ............. 1.1x 1.3x
Ratio of earnings to fixed
charges and preferred
stock dividends(12) ...... 1.1 1.2
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------------------------- TWELVE MONTHS ENDED
OCTOBER 2, 1995 SEPTEMBER 30, 1996 SEPTEMBER 30, 1996
-------------------- ----------------------- -------------------------
ACTUAL PRO FORMA(4) ACTUAL PRO FORMA(4) ACTUAL PRO FORMA(4)
------ ------------ ------ ------------ ------ ------------
<S> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Restaurants open at end of
period.................... 127 176 183 183 183 183
Percentage change in
comparable restaurant
sales(10)................ 1.4% 3.7% 1.8% 0.4% 0.6% (0.3)%
Average sales per
restaurant(11) .......... $852 $856 $862 $858 $1,135 $1,132
Ratio of earnings to fixed
charges(12) ............. 1.2x 1.3x 0.9x 1.2x 1.0x 1.2x
Ratio of earnings to fixed
charges and preferred
stock dividends(12) ...... 1.1 1.2 0.9 1.2 1.0 1.2
</TABLE>
<TABLE>
<CAPTION>
THE INITIAL ACQUISITIONS
-------------------------
JANUARY 1,
1994 THROUGH
FISCAL SEPTEMBER 1,
1993 1994
--------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
SUPPLEMENTAL DATA(13)(14):
RESTAURANT SALES:
BKC Restaurants ............... $70,667 $47,762
Management Restaurants:
Jaro restaurants ............. 10,115 7,400
Osborn restaurants ........... 2,113 1,558
--------- --------------
Total for Initial
Acquisitions ............... $82,895 $56,720
========= ==============
RESTAURANT OPERATING EXPENSES:
BKC Restaurants ............... $65,263 $45,257
Management Restaurants:
Jaro restaurants ............. 9,166 6,718
Osborn restaurants ........... 1,868 1,376
--------- --------------
Total for Initial
Acquisitions ............... $76,297 $53,351
========= ==============
RESTAURANT CONTRIBUTION:
BKC Restaurants .............. $ 5,404 $ 2,505
Management Restaurants:
Jaro restaurants ............ 949 682
Osborn restaurants .......... 245 182
--------- --------------
Total for Initial
Acquisitions ............... $ 6,598 $ 3,369
========= ==============
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------
PRO
ACTUAL FORMA(15)
--------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ......... $ 2,705 $ 5,055
Total assets ...................... 148,481 152,100
Total debt and capitalized leases 126,363 108,613
Senior Exchangeable Preferred
Stock ............................ -- 28,281
Total stockholders' equity ....... 8,105 1,982
</TABLE>
- ------------
(1) The Initial Acquisitions consist of the 68 BKC Restaurants and the 14
Management Restaurants acquired by the Company on September 2, 1994
from BKC and from entities formerly controlled by certain members of
the Company's current management. The information set forth under
"Initial Acquisitions" reflects the combined historical financial
results of the BKC Restaurants and Management Restaurants for the
indicated period during which time the restaurants were owned and
operated by BKC and management-controlled entities. The results of
the Initial Acquisitions for fiscal 1993 and the period from January
1, 1994 through September 1, 1994 may not be reflective of the
ongoing operations of the Company under its current ownership
structure.
(2) Due to the inability of the Company to determine certain expenses for
the Initial Acquisitions prior to their acquisition by the Company on
a meaningful and consistent basis, net income is not comparable and
is not presented for the Initial Acquisitions.
(3) Reflects the historical results of the Company, including the Initial
Acquisitions subsequent to their acquisition by the Company on
September 2, 1994. Also includes limited expenses of the Company
during the period August 17, 1994 (date of incorporation) to
September 2, 1994, during which period the Company had no operations.
(4) Pro forma to give effect to the following transactions as if each had
occurred on January 1, 1995: (i) the transactions contemplated by the
Offerings and the application of the net proceeds therefrom as set
forth in "Use of Proceeds" and (ii) the acquisition of each of the 54
Burger King restaurants acquired by the Company subsequent to January
1, 1995. See "Use of Proceeds" and "Pro Forma Consolidated Financial
Statements." The pro forma statements of operations do not give
effect to an extraordinary pre-tax charge that the Company expects to
incur immediately following the closing of the Offerings. If such
pre-tax charge were taken at the beginning of fiscal 1995, such
charge would have been approximately $7.3 million (approximately
$4.3 million on an after-tax basis), consisting of (i) an approximate
$6.6 million (approximately $3.9 million on an after-tax basis)
write-off of deferred financing costs related to the repayment of the
Subordinated Debt and indebtedness under the Credit Agreement and
(ii) an approximate $0.8 million (approximately $0.4 million on an
after-tax basis) prepayment penalty incurred in connection with the
repayment of the Senior Subordinated Notes.
21
<PAGE>
(5) Preferred stock dividends include dividends on the existing 6%
preferred stock of the Company and dividends on the Senior Preferred
Stock at an assumed rate of 12.5%. See "Description of Capital
Stock--Preferred Stock" and "Description of Securities--Senior
Preferred Stock--Dividends."
(6) Net income per share was computed using the weighted average number
of shares of Common Stock outstanding assuming the issuance of 30,650
shares of Common Stock in the Units Offering in connection with the
consummation of the Offerings.
(7) EBITDA represents operating income plus depreciation and
amortization, management and director's fees. For a description of
management and director's fees, see "Certain Transactions--The Jordan
Company." On a pro forma basis, EBITDA is adjusted for certain
non-recurring items, which consist of:
<TABLE>
<CAPTION>
PRO FORMA
------------------------------------------------------
TWELVE MONTHS
NINE MONTHS ENDED ENDED
--------------------------- ---------------
FISCAL OCTOBER 2, SEPTEMBER 30, SEPTEMBER 30,
1995 1995 1996 1996
-------- ----------- -------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Change in estimate of disputed invoices ............ $(60) $(110) $144 $ 194
Reduction of insurance premiums and long distance
costs ............................................. 420 314 377 483
Headcount reduction due to consolidated territories 396 243 393 546
-------- ----------- -------------- ---------------
Total addition to EBITDA ......................... $756 $ 447 $914 $1,223
======== =========== ============== ===============
</TABLE>
While EBITDA should not be construed as a substitute for operating
income or a better indicator of liquidity than cash flow from operating
activities, which are determined in accordance with generally accepted
accounting principles, EBITDA is included because management believes
that certain investors find it to be a useful tool for measuring the
ability of the Company to service its debt and because the Cash Flow
Coverage Ratio, when calculated on a Pro Forma Basis (each as defined in
the Indenture and the Exchange Debenture Indenture), is calculated on a
similar basis. EBITDA is not necessarily a measure of the Company's
ability to fund its cash needs. See the Consolidated Statements of Cash
Flows of the Company and the related notes to the Consolidated Financial
Statements thereto included herein.
(8) Cash interest expense represents total interest expense less
amortization of deferred financing costs and other non-cash interest
charges. The calculation of cash interest expense assumes on a pro
forma basis an interest rate of 10.5% on the Senior Notes. A one
eighth percent change in the interest rate applicable to the Senior
Notes would result in a $125,000 change in cash interest expense on a
pro forma basis.
(9) Net debt represents total debt and capitalized leases less cash and
cash equivalents. The pro forma ratio of net debt to EBITDA was
calculated based on pro forma net debt as of September 30, 1996 of
$103.6 million.
(10) The Company includes in comparable restaurant sales only those
restaurants that have been in operation for a minimum of thirteen
months. The percentage change in comparable restaurant sales is
calculated as the percentage change from the comparable restaurant
sales in the previous period. For the twelve months ended October 28,
1996 the percentage increase in comparable restaurant sales was 0.5%.
(11) Reflects the results of only those restaurants operating for the
entire period.
(12) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings before income taxes, plus fixed
charges. Fixed charges consist of interest expense on all
indebtedness and capitalized interest, amortization of deferred
financing costs and rental expense on operating leases, representing
that portion of rental expense deemed by the Company to be
attributable to interest. For the nine months ended September 30,
1996, earnings were insufficient to cover fixed charges by
approximately $1.1 million. For the nine and twelve months ended
September 30, 1996, earnings were insufficient to cover fixed charges
and preferred stock dividends by approximately $1.1 million and
approximately $0.7 million, respectively.
(13) Sets forth for the Initial Acquisitions the components constituting
aggregate restaurant sales, restaurant operating expenses and
restaurant contributions for the indicated periods. See the
Historical Schedules of Restaurant Contribution and the notes thereto
with respect to the Initial Acquisitions.
(14) Jaro restaurants consist of the 11 Management Restaurants acquired
from entities owned or controlled by Lawrence Jaro, the Company's
current Chief Executive Officer and Chairman of the Company's Board
of Directors. Osborn restaurants consist of the three Management
Restaurants acquired from entities owned or controlled by William
Osborn, the current Vice Chairman of the Company's Board of
Directors.
(15) Pro forma to give effect to the Offerings and the application of the
net proceeds therefrom as set forth in "Use of Proceeds" and
adjustments of $5.1 million ($3.0 million net of applicable taxes)
for the write-off of the unamortized balance of deferred financing
costs relating to repayment of certain indebtedness under the Credit
Agreement and all of the Subordinated Debt (as defined) and the
write-off of $0.8 million ($0.4 million net of applicable taxes) related
to a prepayment penalty in connection with the prepayment of the Senior
Subordinated Notes and a warrant redemption payment of approximately
$2.7 million in connection with the redemption of warrants issued to the
holder of the Senior Subordinated Notes.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is the second largest independent Burger King franchisee in
the United States with 183 restaurants located primarily in eleven Midwestern
and Southern states. The Company has acquired 175 Burger King restaurants
since its incorporation, including the acquisition of the 68 BKC Restaurants
and the 14 Management Restaurants in 1994, 39 additional restaurants in 1994,
18 restaurants in 1995 and 36 restaurants in 1996. In addition, the Company
has developed eight Burger King restaurants. For the twelve months ended
September 30, 1996, the Company generated pro forma restaurant sales and
EBITDA (as defined) of $201.7 million and $25.2 million, respectively.
The Company operates Burger King restaurants through its wholly owned
subsidiaries, each of which is a party to a BKC franchise agreement. BKC
franchise agreements require a one-time franchise fee (currently $40,000), a
monthly royalty fee of 3.5% of each restaurant's gross sales and a monthly
advertising contribution of 4.0% of gross sales. Most franchise agreements
provide for a term of 20 years, and, at the option of the franchise and BKC,
a renewal franchise agreement may be granted by BKC upon payment of the then
current franchise fee provided that the restaurant meets BKC's operating
standards applicable at that time and the franchisee is not in default under
the relevant franchise agreement.
As the Company acquires additional Burger King restaurants, it capitalizes
the value of franchise agreements based on the number of years remaining on
the terms of the agreement and the franchise fee in effect at the time of
acquisition (currently, $40,000 over a 20 year term or $2,000 per year) and
it capitalizes excess cost over fair value of the other net assets acquired
and amortizes for financial statement purposes the goodwill expense over a
35-year period. The Company generally purchases assets and is able to deduct
goodwill amortization expense for tax purposes over a 15-year period.
Restaurant sales include food sales and merchandise sales. Merchandise
sales include convenience store sales at the Company's dual-use facilities
(of which the Company currently has five), as well as sales of promotional
products at the Company's restaurants. Historically, merchandise sales have
contributed less than 2.5% to restaurant sales. Promotional products, which
account for the majority of merchandise sales, are generally sold at or near
the Company's costs.
Restaurant contribution is defined as restaurant sales less restaurant
operating expenses other than general and administrative expenses such as
office overhead and non-restaurant supervisory management. As a result,
restaurant contribution does not include all of the Company's costs of doing
business.
EBITDA represents operating income plus depreciation and amortization,
management and director's fees. While EBITDA should not be construed as a
substitute for operating income or a better indicator of liquidity than cash
flow from operating activities, which are determined in accordance with
generally accepted accounting principles, EBITDA is included because
management believes that certain investors find it to be a useful tool for
measuring the ability of the Company to service its debt and because the Cash
Flow Coverage Ratio, when calculated on a Pro Forma Basis (each as defined in
the Indenture), is calculated on a similar basis. EBITDA is not necessarily a
measure of the Company's ability to fund its cash needs. See the Consolidated
Statements of Cash Flows of the Company and the related notes to the
Consolidated Financial Statements included herein.
The Company includes in the comparable restaurant sales analysis discussed
below only those restaurants that have been in operation for a minimum of
thirteen months. For a restaurant not operating for the entire prior annual
period, the sales for the interim period in the prior year are compared to
that for the comparable interim period in the indicated year.
On August 1, 1995, the Company converted its fiscal year to a 52/53 week
fiscal year. Due to the conversion, the 1995 fiscal year ended January 1,
1996 and included 366 days of operating activity. All fiscal years discussed
herein had a length of approximately 52 weeks.
RECENT DEVELOPMENTS
Based on preliminary unaudited results, for the four-week period, the
four-month period and the twelve month period ended October 28, 1996, the
Company's comparable restaurant sales increased by 10.7%, 1.5% and 0.5%,
respectively, over the same period for the prior fiscal year on a pro forma
basis. The
23
<PAGE>
Company has experienced strong operating results for the four-week period
ending October 28, 1996 due in part to a nationwide 99 cents Whopper
promotion implemented by BKC for three of the four weeks during this period
(which in 1995 had been implemented during September).
RESULTS OF OPERATIONS
Prior to their acquisition by the Company on September 2, 1994, the 68 BKC
Restaurants and the 14 Management Restaurants (which constitute the Initial
Acquisitions) were not under common control or management. The table set
forth below combines the results of operations for the BKC Restaurants and
the Management Restaurants for the period from January 1, 1994 through
September 1, 1994 with the results of operations of the Company from
September 2, 1994 through December 31, 1994. The results of operations for
the Company also include limited expenses of the Company during the period
August 17, 1994 (date of incorporation) to September 2, 1994, during which
period the Company had no operations. Prior to September 1, 1994, the BKC
Restaurants and the Management Restaurants were operated under a different
management and capitalization structure than that of the Company.
Accordingly, the information set forth below with respect to the Initial
Acquisitions and the "Combined" results for the Initial Acquisitions and the
Company for fiscal 1994 is provided for the purposes of analysis only and may
not be comparable to or indicative of post-acquisition results. In addition,
the results with respect to the Initial Acquisitions and the "Combined"
results may not be representative of what the Company's results of operations
would have been if the Company had owned the BKC Restaurants and Management
Restaurants for all of fiscal 1993 and fiscal 1994.
<TABLE>
<CAPTION>
INITIAL INITIAL
ACQUISITIONS ACQUISITIONS THE COMPANY
-------------- ---------------- ----------------
SEPTEMBER 2,
JANUARY 1, 1994 1994
THROUGH THROUGH
SEPTEMBER 1, DECEMBER 31,
FISCAL 1993 1994 1994
--------------- ----------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Restaurant sales ....................... $82,895 $56,720 $33,931
Restaurant operating expenses:
Cost of sales ......................... 25,832 18,602 10,807
Restaurant labor and related costs ... 21,998 15,529 8,647
Depreciation and amortization ......... 2,062 1,366 1,193
Occupancy and other operating expenses 26,405 17,854 9,229
-------------- ---------------- ----------------
Total restaurant operating expenses .. 76,297 53,351 29,876
-------------- ---------------- ----------------
Restaurant contribution ................ $ 6,598 $ 3,369 $ 4,055
============== ================ ================
EBITDA ................................. $ -- $ -- $ 4,021
============== ================ ================
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
COMBINED THE COMPANY
---------- -----------------------------------------
NINE MONTHS ENDED
-------------------------
FISCAL FISCAL OCTOBER 2, SEPTEMBER 30,
1994 1995 1995 1996
---------- ---------- ------------ -----------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C>
Restaurant sales ....................... $90,651 $139,572 $103,446 $149,973
Restaurant operating expenses:
Cost of sales ......................... 29,409 44,798 33,226 48,476
Restaurant labor and related costs ... 24,176 34,526 25,818 37,406
Depreciation and amortization ......... 2,559 4,927 3,646 5,431
Occupancy and other operating expenses 27,083 38,930 28,650 41,050
---------- ---------- ------------ ---------------
Total restaurant operating expenses .. 83,227 123,181 91,340 132,363
---------- ---------- ------------ ---------------
Restaurant contribution ................ $ 7,424 $ 16,391 $ 12,106 $ 17,610
========== ========== ============ ===============
EBITDA ................................. $ -- $ 16,142 $ 12,088 $ 17,933
========== ========== ============ ===============
</TABLE>
24
<PAGE>
The following table sets forth, for the periods indicated, operating
results as a percentage of restaurant sales.
<TABLE>
<CAPTION>
INITIAL INITIAL
ACQUISITIONS ACQUISITIONS THE COMPANY
-------------- ---------------- ----------------
SEPTEMBER 2,
JANUARY 1, 1994 1994
THROUGH THROUGH
SEPTEMBER 1, DECEMBER 31,
FISCAL 1993 1994 1994
--------------- ----------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Restaurant sales ....................... 100.0% 100.0% 100.0%
Restaurant operating expenses:
Cost of sales ......................... 31.2 32.8 31.8
Restaurant labor and related costs ... 26.5 27.4 25.5
Depreciation and amortization ......... 2.5 2.4 3.5
Occupancy and other operating expenses 31.9 31.5 27.2
-------------- ---------------- ----------------
Total restaurant operating expenses .. 92.1 94.1 88.0
-------------- ---------------- ----------------
Restaurant contribution ................ 7.9% 5.9% 12.0%
============== ================ ================
EBITDA ................................. -- -- 15.5%
============== ================ ================
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
COMBINED THE COMPANY
---------- -----------------------------------------
NINE MONTHS ENDED
-------------------------
FISCAL FISCAL OCTOBER 2, SEPTEMBER 30,
1994 1995 1995 1996
---------- ---------- ------------ -----------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Restaurant sales ....................... 100.0% 100.0% 100.0% 100.0%
Restaurant operating expenses:
Cost of sales ......................... 32.4 32.1 32.1 32.3
Restaurant labor and related costs ... 26.7 24.7 25.0 24.9
Depreciation and amortization ......... 2.8 3.6 3.5 3.6
Occupancy and other operating expenses 29.9 27.9 27.7 27.5
--------- --------- -------- ---------
Total Restaurant operating expenses ... 91.8 88.3 88.3 88.3
Restaurant contribution ................ 8.2% 11.7% 11.7% 11.7%
========= ========= ======== =========
EBITDA ................................. -- 11.6% 11.7% 12.0%
========= ========= ======== =========
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED OCTOBER 2,
1995
Restaurant Sales. Restaurant sales increased $46.5 million or 45.0%
during the nine months ended September 30, 1996, to $149.9 million from $103.4
million in the nine months ended October 2, 1995, due primarily to the inclusion
of the 18 restaurants purchased in 1995 and the 36 restaurants purchased in
1996. In addition, the Company developed one new restaurant in 1995 and seven
new restaurants in 1996. The inclusion of the newly acquired restaurants
accounted for $42.8 million of the total increase in restaurant sales, while new
restaurant development accounted for $3.2 million of the increase in sales.
Sales at the 121 comparable restaurants owned by the Company at September 30,
1996 increased 0.6%. Restaurant menu prices remained stable during the period.
Restaurant Operating Expenses. Total restaurant operating expenses
increased $41.0 million, or 44.8% during the nine months ended September 30,
1996, to $132.3 million from $91.3 million in the nine months ended October 2,
1995. As a percentage of restaurant sales, restaurant operating expenses in the
nine months ended September 30, 1996 and in the nine months ended October 2,
1995 remained constant at 88.3%.
[/R]
Cost of sales increased $15.2 million during the nine months ended
September 30, 1996, and increased 0.2% as a percentage of restaurant sales to
32.3% in the nine months ended September 30, 1996 from 32.1% in the nine
months ended October 2, 1995.
Restaurant labor and related expenses increased $11.6 million during the
nine months ended September 30, 1996, but decreased 0.1% as a percentage of
restaurant sales to 24.9% in the nine months ended September 30, 1996 from
25.0% in the nine months ended October 2, 1995.
Depreciation and amortization increased $1.8 million during the nine
months ended September 30, 1996, to $5.4 million from $3.6 million in the
nine months ended October 2, 1995. As a percentage of restaurant sales,
depreciation and amortization expense increased 0.1% to 3.6% in the nine
months ended September 30, 1996 from 3.5% in the nine months ended October 2,
1995. The increase was due primarily to the increase in goodwill amortization
resulting from the purchase method of accounting for newly acquired
restaurants.
Occupancy and other expenses increased $12.4 million during the nine
months ended September 30, 1996, but decreased 0.2% as a percentage of
restaurant sales to 27.5% in the nine months ended September 30, 1996 from
27.7% in the nine months ended October 2, 1995. Occupancy expense increased
$4.4 million but decreased 0.5% as a percentage of sales to 10.6% in the nine
months ended September 30, 1996 from 11.1% in the nine months ended October
2, 1995, due primarily to lower effective rental rates as a result of higher
restaurants sales and lower property taxes as a percentage of sales for newly
acquired restaurants. Other operating expenses increased $7.9 million during
the nine months ended 1996, or 0.1%
25
<PAGE>
as a percentage of restaurant sales to 16.7% in the nine months ended
September 30, 1996 from 16.6% in the nine months ended October 2, 1995. This
decrease is due primarily to a reduction in operating supplies as a result of
improved budget controls, offset by a 0.5% increase in local advertising
expense.
Restaurant Contribution. Restaurant contribution increased $5.5 million or
46.2% to $17.6 million in the nine months ended September 30, 1996 from $12.1
million in the nine months ended October 2, 1995. As a percentage of
restaurant sales, restaurant contribution was 11.7% in the nine months ended
September 30, 1996 and in the nine months ended of October 2, 1995.
EBITDA. EBITDA increased $5.8 million or 48.4%, to $17.9 million in the
nine months September 30, 1996 from $12.1 million in the nine months ended
October 2, 1995. As a percentage of restaurant sales, EBITDA increased 0.3%,
to 12.0% in the nine months ended September 30, 1996 from 11.7% for the nine
months ended October 2, 1995.
FISCAL 1995 COMPARED TO FISCAL 1994
Restaurant Sales. Restaurant sales increased $48.9 million or 54.0% during
fiscal 1995, to $139.6 million from $90.7 million in fiscal 1994, due
primarily to the inclusion of a full year of operations for the 39
restaurants purchased in December 1994, and a partial year of operations for
the five restaurants purchased in September 1995, the two restaurants
purchased in October 1995 and the 11 restaurants purchased in November 1995.
The inclusion of these newly acquired restaurants accounted for $46.4 million
of the total increase in restaurant sales. In addition, the Company developed
one new restaurant in August 1995. Sales at comparable restaurants for all
139 restaurants owned by the Company at the end of fiscal 1995 declined 0.1%,
primarily as a result of the discontinuation of extensive promotional
couponing at the 39 restaurants acquired in December 1994. Comparable
restaurant sales for the 82 restaurants owned by the Company since its
inception increased 1.7%. Restaurant menu prices remained stable during the
year.
Restaurant Operating Expenses. Total restaurant operating expenses
increased $40.0 million or 48.0% during fiscal 1995, to $123.2 million from
$83.2 million in fiscal 1994. As a percentage of restaurant sales, restaurant
operating expenses declined 3.5% to 88.3% in fiscal 1995 from 91.8% in fiscal
1994.
Cost of sales increased $15.4 million during fiscal 1995, but decreased
0.3% as a percentage of restaurant sales to 32.1% in fiscal 1995 from 32.4%
in fiscal 1994 due primarily to a 1.0% decline in food and paper costs as a
percentage of restaurant sales created by improved distribution efficiencies
from restaurant acquisitions. This decline was partially offset by a 0.7%
increase in the cost of promotional merchandise.
Restaurant labor and related expenses increased $10.4 million during
fiscal 1995, but decreased 2.0% as a percentage of restaurant sales to 24.7%
in fiscal 1995 from 26.7% in fiscal 1994, due primarily to improvements in
group insurance costs being applied over the larger restaurant base. In
addition, the successful application of the Company's information systems
technology within the restaurant base increased scheduling efficiency and
further reduced labor costs as a percentage of restaurant sales.
Depreciation and amortization increased $2.4 million during fiscal 1995,
to $4.9 million in fiscal 1995 from $2.5 million in fiscal 1994. As a
percentage of restaurant sales, depreciation and amortization expense
increased 0.8% to 3.6% in fiscal 1995 from 2.8% in fiscal 1994, due primarily
to the increase in goodwill amortization resulting from the purchase method
of accounting for the newly acquired restaurants.
Occupancy and other expenses increased $11.8 million during fiscal 1995,
but decreased 2.0% as a percentage of restaurant sales to 27.9% in fiscal
1995 from 29.9% in fiscal 1994. Occupancy expense increased $4.5 million, but
decreased 1.0% as a percentage of sales to 11.1% in fiscal 1995 from 12.1% in
fiscal 1994, due primarily to the negotiation of more favorable lease terms
under the Company's existing lease agreements. Other operating expenses
increased $7.3 million during fiscal 1995, but decreased 1.0% as a percentage
of restaurant sales to 16.8% in fiscal 1995 from 17.8% in fiscal 1994, due
primarily to the result of more favorable terms negotiated for general
liability insurance policies covering the Company's larger restaurant base.
26
<PAGE>
Restaurant Contribution. Restaurant contribution increased $9.0 million or
120.8% to $16.4 million in fiscal 1995 from $7.4 million in fiscal 1994. As a
percentage of restaurant sales, restaurant contribution increased 3.5%, to
11.7% in fiscal 1995 from 8.2% in fiscal 1994, due primarily to the
improvements as described above.
FISCAL 1994 COMPARED TO FISCAL 1993
Restaurant Sales. Restaurant sales increased $7.8 million or 9.4% during
fiscal 1994 to $90.7 million from $82.9 million in fiscal 1993. This increase
was due in part to the acquisition of the 39 restaurants purchased in
December 1994 which accounted for 50% of the increase in total sales. In
addition, sales at comparable restaurants for all 121 restaurants owned by
the Company at the end of fiscal 1994 increased 4.4% as a result of the
impact of the introduction of Value Meals(Registered Trademark) in the
Company's restaurants.
Restaurant Operating Expenses. Total restaurant operating expenses
increased $6.9 million, or 9.1%, during fiscal 1994, to $83.2 million from
$76.3 million in fiscal 1993. As a percentage of restaurant sales, restaurant
operating expenses declined 0.2% to 91.8% in fiscal 1994 from 92.0% in fiscal
1993.
Cost of sales increased $3.6 million during fiscal 1994 and increased 1.2%
as a percentage of restaurant sales to 32.4% from 31.2% in fiscal 1993, due
primarily to a 0.9% increase in food and paper costs as a percentage of
restaurant sales, created by the introduction of Value Meals(Registered
Trademark) in the Company's restaurants. In addition, merchandise costs
increased 0.3% as a percentage of restaurant sales due to the increase in
promotional activities by the Company.
Restaurant labor and related expenses increased $2.2 million during fiscal
1994 and increased 0.2% as a percentage of restaurant sales to 26.7% from
26.5% in fiscal 1993, due primarily to an increase in direct labor costs.
This increase was partially offset by improvements in group insurance costs
being applied over the newly acquired restaurant base.
Depreciation and amortization increased $0.5 million during fiscal 1994 to
$2.6 million from $2.1 million in fiscal 1993. As a percentage of restaurant
sales, depreciation and amortization expense increased 0.3% to 2.8% in fiscal
1994 from 2.5% in fiscal 1993, due primarily to the increase in goodwill
amortization resulting from the purchase method of accounting for the newly
acquired restaurants.
Occupancy and other expenses increased $0.7 million during fiscal 1994,
but decreased 1.9% as a percentage of restaurant sales to 29.9% from 31.8% in
fiscal 1993. Occupancy expense decreased 0.6% as a percentage of sales and
other expenses decreased 1.3% as a percentage of restaurant sales, due
primarily to increased sales at comparable restaurants and increased sales
leverage over a larger restaurant base.
Restaurant Contribution. Restaurant contribution increased $0.8 million or
12.5% to $7.4 million in fiscal 1994 from $6.6 million in fiscal 1993. As a
percentage of restaurant sales, restaurant contribution increased 0.2%, to
8.2% from 8.0% in fiscal 1993, due primarily to the improvements described
above.
27
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company does not have significant receivables or inventory and
receives trade credit based upon negotiated terms in purchasing food products
and other supplies. Therefore, the Company's business has not required
significant working capital to meet its operating requirements. The Company
requires capital primarily for the acquisition and development of Burger King
restaurants and has historically financed these activities from capital
contributions by its stockholders, loans made under the Credit Agreement and
cash generated from operations. During fiscal 1995, the Company's operations
generated approximately $4.2 million in cash, compared with approximately
$7.7 million in the September 2, 1994 through December 31, 1994 period. The
Company had capital expenditures, associated primarily with new restaurant
development and acquisitions, during fiscal 1995 and the September 2, 1994
through December 31, 1994 period of approximately $15.1 million and
approximately $82.6 million, respectively.
During the first nine months of 1996, the Company's operations generated
approximately $10.9 million in cash, compared with approximately $2.9 million
during the first nine months of 1995. The increase in cash generated is
related to the impact of the acquisition of 36 restaurants during 1996. The
Company had capital expenditures, associated primarily with new restaurant
development and acquisitions, during the first nine months of 1996 and first
nine months of 1995 of approximately $43.6 million and $5.4 million,
respectively.
At January 1, 1996, the Company had $1.9 million in cash and cash
equivalent balances, compared to $7.7 million at December 31, 1994. At
September 30, 1996, the Company had $2.7 million in cash and cash equivalent
balances compared to $2.9 million at October 2, 1995. The Credit Agreement
requires that a specified percentage of the Company's excess cash flow be
applied to repay amounts outstanding under its outstanding term loans within
100 days of the end of the immediately preceding fiscal year.
The Company's Credit Agreement currently provides for up to $100 million
of senior secured debt, consisting of (i) a $45 million term loan, (ii) a $40
million term loan, and (iii) a $15 million revolving credit facility. On
September 30, 1996, the outstanding principal balance under the revolving
credit facility was $2.5 million, leaving $12.5 million of revolving credit
availability. The interest rate on each of the three facilities under the
Credit Agreement is variable, and as of September 30, 1996 the weighted
average interest rate of all three facilities was approximately 8.60%. The
Company has entered into an interest rate protection agreement in connection
with the Credit Agreement which currently covers up to $25.6 million in
borrowings. Amounts outstanding under the revolving credit facility are
payable in full by January 31, 2002. The Company is currently negotiating
with several lenders for a new bank credit agreement to replace the Credit
Agreement pursuant to which the Company expects to be able to borrow up to
approximately $75 million under a revolving line of credit to fund
acquisitions and provide working capital and for other general corporate
purposes. The Company expects that the new credit agreement will be for a
term of six years and that the agreement will be secured by a first priority
security interest on substantially all of the Company's assets, including a
pledge of all of the stock of the Company's subsidiaries. Closing of the
Offerings is not conditioned upon the closing of the new credit agreement.
The Company's primary cash requirements following the Offerings will be to
finance additional acquisitions, capital expenditures in connection with the
development of new restaurants, upgrades of acquired and existing restaurants
and general working capital needs. The Company has budgeted approximately
$355,000 for the development of each of its new restaurants. The Company
anticipates it will spend approximately an additional $3.0 to $5.0 million
annually for other capital expenditures. The actual amount of the Company's
cash requirements for capital expenditures depends on, among other things,
the number of new restaurants opened or acquired and the costs associated
with such restaurants and the number of franchises subject to renewal and the
costs associated with bringing the related restaurants up to BKC's
then-current design specifications in connection with these franchise
renewals. See "Business--Business Strategy."
The cost of developing a restaurant (exclusive of land acquisition and
building costs, as the Company leases each of its properties) is
approximately $355,000 (including the $40,000 franchise fee). In order to
increase the number of restaurants to be developed or to fund additional
acquisitions, the Company may require additional debt or equity financing,
which may not be available to the Company or, if available,
28
<PAGE>
may not be on terms acceptable to the Company. Any such equity financing will
also be subject to BKC's consent. See "Risk Factors--BKC Franchise Agreement
Restrictions; Consent to Restaurant Acquisition and Development and Franchise
Renewal; Right of First Refusal."
The Company believes that the proceeds from the Offerings, together with
borrowings under the Credit Agreement and the Company's cash on hand, will be
sufficient to cover its working capital, capital expenditures, planned
development and debt service requirements for the foreseeable future. The
Company expects that additional financing will be required in connection with
any significant acquisitions in the future.
INCOME TAXES
The Company completed fiscal 1995 with a net operating loss carry-forward
for tax purposes of approximately $8.7 million. Substantially all of the
Company's acquisitions completed to date have been structured as asset
purchases. As a result, the Company is able to deduct goodwill amortization
expense for income tax purposes over a 15 year period. The Company has not
been a cash taxpayer since its inception.
INFLATION
While inflation can have a significant impact on food, paper, labor and
other operating costs, the Company has historically been able to minimize the
effect of inflation through periodic price increases, and believes it will be
able to offset future inflation with price increases, if necessary.
RECENT ACCOUNTING PRONOUNCEMENTS
New accounting standards have been issued by the Financial Accounting
Standards Board that will apply to the Company in fiscal 1996. Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets," requires a review of long term tangible and intangible
assets (such as property, plant and equipment and goodwill) for impairment of
recorded value and resulting write downs if value is impaired.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), establishes accounting and disclosure
requirements using a fair value based method of accounting for stock-based
employee compensation plans. Under SFAS 123, the Company may either adopt the
new fair value based method or provide pro forma disclosure of net income
(loss) as if the accounting provisions of SFAS 123 had been adopted. The
Company intends to elect the intrinsic method of accounting for stock-based
employee compensation plans and provide the required pro forma disclosure.
These statements are not expected to have a material effect on the
Company's financial position or results of operations.
EXTRAORDINARY LOSS
Upon the prepayment of the Subordinated Debt and repayment of borrowings
under the Credit Agreement, concurrent with the Offerings, the Company will
record an extraordinary loss of approximately $6.1 million, net of taxes,
reflecting a prepayment penalty, as well as the write-off of deferred
financing costs.
SEASONAL AND QUARTERLY COMPARISONS
The Company's operating results may fluctuate from period to period, as a
result of, among other things, sales associated with each new restaurant, the
costs associated with opening new restaurants, the timing of new restaurant
openings and acquisitions and the timing of new product introduction by BKC
and promotional programs sponsored by the Company. In addition, the Company's
business typically varies with general seasonal trends that are
characteristic of the quick-service restaurant industry. The Company has
historically experienced its strongest operating results during the summer
months (the
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<PAGE>
second and third quarter of its fiscal year), while operating results are
somewhat lower during the winter months (the first and fourth quarters of its
fiscal year). As the Company continues to make acquisitions and develop new
restaurants, quarterly results may fluctuate more significantly. The
following table sets forth by fiscal quarter the Company's income statement
data for fiscal 1995 and the first three quarters of fiscal 1996.
<TABLE>
<CAPTION>
1995
-------------------------------
FIRST SECOND THIRD
QUARTER QUARTER QUARTER
--------- --------- ---------
(90 DAYS) (91 DAYS) (94 DAYS)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Restaurant sales ... $30,967 $35,375 $37,104
Restaurant operating
expenses ........... 28,338 30,989 32,012
Restaurant
contribution ....... 2,629 4,386 5,092
General and
administrative
expenses ........... 1,203 1,359 1,641
--------- --------- ---------
Operating income ... $ 1,426 $ 3,027 $ 3,451
========= ========= =========
EBITDA .............. $ 2,775 $ 4,416 $ 4,897
========= ========= =========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1996
------------------------------------------
FOURTH FIRST SECOND THIRD
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
(91 DAYS) (91 DAYS) (91 DAYS) (91 DAYS)
<S> <C> <C> <C> <C>
Restaurant sales ... $36,126 $43,103 $53,543 $53,327
Restaurant operating
expenses ........... 31,842 38,862 46,774 46,640
Restaurant
contribution ....... 4,284 4,241 6,769 6,687
General and
administrative
expenses ........... 1,701 1,932 2,152 1,910
--------- --------- --------- ---------
Operating income ... $ 2,583 $ 2,309 $ 4,617 $ 4,777
========= ========= ========= =========
EBITDA .............. $ 4,054 $ 4,189 $ 6,783 $ 6,960
========= ========= ========= =========
</TABLE>
30
<PAGE>
BUSINESS
GENERAL
AmeriKing is the second largest independent Burger King franchisee in the
United States with 183 restaurants located primarily in eleven Midwestern and
Southern states. The Company's strategy is to capitalize on its significant
presence in targeted markets, the predictable operating performance of Burger
King restaurants and management's extensive experience to (i) make fill-in
acquisitions and develop new restaurants in existing markets to enhance its
operating leverage and (ii) make acquisitions in new markets that offer
significant potential and provide the critical mass necessary to achieve
operating efficiencies. For the twelve months ended September 30, 1996, the
Company generated pro forma restaurant sales and EBITDA (as defined) of
$201.7 million and $25.2 million, respectively.
The Company believes its successful operating strategy, combined with the
attractive economics of Burger King restaurants, minimizes the risks of new
restaurant development and future acquisitions. Management believes the
operating cash flow of its Burger King restaurants is highly predictable and
consistent due to the proven success of the Burger King concept and the
stringent evaluation criteria adhered to by the Company in assessing new
development opportunities and acquisitions. On a pro forma basis, the
Company's comparable restaurant sales have increased each fiscal year since
1992. For the twelve months ended September 30, 1996 on a pro forma basis,
the Company generated average restaurant sales of $1,132,000 and average
restaurant operating cash flow of $174,000 (15.4% margin). For the same
period, approximately 98% of the Company's restaurants generated on a pro
forma basis positive operating cash flow. The Company believes that each of
its currently owned restaurants will generate positive operating cash flow in
fiscal 1997. Furthermore, the Company currently leases each of its
properties, minimizing its cost to develop restaurants. The Company has
budgeted approximately $355,000 to develop each new Burger King restaurant in
fiscal 1997. Based on the results of the restaurants developed by the
Company, management expects its newly developed restaurants to generate
cash-on-cash-returns in excess of 35% in the first year of operations.
AmeriKing was formed in 1994 by a group consisting of Burger King
franchisees, former BKC executives and The Jordan Company to take advantage
of significant acquisition and related new restaurant development
opportunities. Since inception, the Company has acquired 175 Burger King
restaurants and developed eight new Burger King restaurants. The Company's
senior management, which owns on a fully diluted basis over 30% of the
Company's Common Stock (prior to giving effect to the Offerings), has
extensive experience in the Burger King system as either former executives of
BKC or as independent Burger King franchisees. Each of the top four members
of the Company's senior management has over 10 years of experience within the
Burger King system operating, developing and acquiring restaurants. In
addition, most of the Company's regional managing directors, district
managers and restaurant managers have substantial experience within the
Burger King system and/or the quick-service restaurant industry.
BUSINESS STRATEGY
AmeriKing's business strategy is to continue to increase revenues,
restaurant contribution and EBITDA. The Company's strategy is based on the
following elements:
Develop New Burger King Restaurants in Existing Markets. The Company seeks
to develop new Burger King restaurants in existing markets where it has
established a significant presence, enabling the Company to enhance its
operating leverage and increase overall margins and profitability. Management
believes that the underpenetration of the Burger King system relative to
other quick-service hamburger concepts provides the Company with significant
new development opportunities. Furthermore, management believes the Company's
new restaurant development risk is substantially reduced due to: (i) the
proven success of the Burger King concept; (ii) the predictability of
development costs and restaurant profitability compared to that of newer
restaurant concepts; and (iii) management's extensive experience within the
Burger King system. The Company currently leases each of its properties,
minimizing its cost to develop new restaurants.
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<PAGE>
To date, the Company has developed eight new restaurants. Prior to
developing a new restaurant, the Company's senior management conducts an
extensive site selection process with significant input from BKC's
development field personnel, including an analysis of projected development
costs and anticipated profitability on a per location basis. The Company also
uses regional and local developers, as well as former Burger King restaurant
owners with significant knowledge of local markets, to assist in site
selection and in reviewing zoning requirements and other regulatory matters
related to the construction of new Burger King restaurants.
Pursue Strategic Acquisitions of Burger King Restaurants. The Company
intends to selectively pursue strategic acquisitions in the highly
fragmented, growing Burger King system. Since 1994, the Company has
successfully completed 175 restaurant acquisitions for an aggregate purchase
price of approximately $138 million. The Company evaluates each prospective
acquisition using a set of stringent criteria, including the potential for
future fill-in acquisitions and new restaurant development in targeted
markets and the overall attractiveness of market demographics. The Company
seeks to enter new geographic markets through acquisitions that provide the
critical mass necessary to realize operating efficiencies. Six of the
Company's nine acquisitions to date have been of large, regional operations,
each consisting of more than 10 restaurants. AmeriKing seeks to augment new
market acquisitions with fill-in acquisitions, which enable the Company to:
(i) achieve greater restaurant penetration within existing markets; (ii)
capitalize on its significant operating leverage; and (iii) increase
operating margins and profitability.
The Company's key criteria when evaluating new market acquisitions are the
future opportunities for fill-in acquisitions, potential for new restaurant
development in the area, the overall attractiveness of the market from a
demographic perspective and the acquisition price relative to historical and
expected financial performance of these restaurants. Typically, key operating
personnel of acquired restaurants are retained to oversee the operation with
the added benefit of the Company's sophisticated management information
systems and other corporate resources.
The Company's fill-in acquisitions typically involve smaller, local
operations in areas in, or contiguous to, the Company's existing operations.
An example of a typical fill-in acquisition is the Company's acquisition in
September 1995 of five additional restaurants in Denver, Colorado. An example
of a larger fill-in acquisition is the Company's acquisition in November 1994
of 39 additional restaurants in the Chicago market.
The table below summarizes each of the Company's acquisitions,
representing 175 restaurants, since its inception.
<TABLE>
<CAPTION>00
NUMBER OF RESTAURANTS
ACQUISITION DATE STATE ACQUIRED TYPE OF SELLER
- -------------------- --------------------------- ------------------------- --------------
<S> <C> <C> <C>
September 1994 Illinois/Indiana 68 BKC
September 1994 Texas/Colorado 11 Management
September 1994 Colorado 3 Management
November 1994 Illinois/Wisconsin 39 Franchisee
September 1995 Colorado 5 Franchisee
October 1995 Illinois 2 BKC
November 1995 Tennessee/Georgia 11 Franchisee
February 1996 Virginia/North Carolina 24 Franchisee
February 1996 Kentucky/Ohio/Indiana 12 Franchisee
</TABLE>
Achieve Operating Efficiencies. The Company's large number of restaurants,
centralized management structure and advanced management information systems
enable the Company to: (i) tightly control restaurant and corporate level
costs; (ii) capture economies of scale by leveraging its existing corporate
overhead structure; and (iii) continuously monitor point-of-sale data to more
efficiently manage its restaurant operations. The Company has experienced
both restaurant-level and corporate-level savings as a result of its size and
related bargaining power, particularly with respect to food and paper
purchasing and distribution, restaurant maintenance services and general
liability insurance. For example, the Company achieved significant operating
improvements in the 68 restaurants it acquired from BKC in September 1994.
From the twelve month period ending July 31, 1994, prior to the close of the
acquisition, to the twelve month period ending September 30, 1996, restaurant
operating cash flow for these restaurants increased 48% from $7.4 million to
$11.1 million, or from 10.4% of sales to 15.1% of sales.
32
<PAGE>
Capitalize on Strong Support from Burger King Corporation. The Company
believes that it realizes significant benefits from its affiliation with BKC
as a result of: (i) the widespread recognition of the Burger King name and
products; (ii) BKC's management of the proven, successful Burger King
concept, including new product development, quality assurance and strategic
planning; (iii) the size and market penetration of BKC's current $200 million
annual media budget; and (iv) the expected continued growth of the Burger
King system. During BKC's fiscal year ended September 30, 1995, a record
number of 657 new restaurants were added to the Burger King system.
Leverage Sophisticated Management Information System. The Company's
customized integrated management information system, REMACs, typically not
affordable by smaller Burger King franchisees and other smaller quick-service
restaurant chains, provides management with the ability to identify and
quickly capitalize on restaurant sales enhancement and profit opportunities.
The Company utilizes its management information system to: (i) minimize
shrinkage and control labor costs; (ii) efficiently schedule labor; (iii)
effectively manage inventory; (iv) analyze product mix and various
promotional programs using point-of-sale information; and (v) quickly
integrate accounting systems following acquisitions.
Consistently Provide High Quality Products and Superior Customer Service.
As the number of restaurants that the Company owns in a particular market
increases, the Company has a greater ability to (i) ensure overall customer
satisfaction in that market through consistency in food quality, service and
restaurant appearance and (ii) coordinate and influence local Burger King
advertising and promotional programs and pricing policies. In addition, the
large number of restaurants that the Company owns and the corresponding
professional development opportunities permit the Company to attract and
retain strong regional, district and individual restaurant management. Most
of these managers receive significant incentive compensation based on
compliance with Burger King's restaurant operating guidelines and restaurant
profitability.
BURGER KING CORPORATION
Overview. The Company believes that it realizes significant benefits from
its affiliation with BKC as a result of, among other things, the widespread
recognition of the Burger King name and products, the size and market
penetration of BKC's media budget (which was approximately $200 million for
its fiscal year ended September 30, 1995, according to LNA/Arbitron
Multi-Media Service), BKC's overall management of the Burger King concept,
including new product development, quality assurance and strategic planning,
and the continuing growth of the Burger King system. According to information
publicly filed by Grand Met, the parent corporation of BKC, BKC is the second
largest restaurant franchisor in the world, with system-wide restaurant sales
of $8.4 billion for its fiscal year ended September 30, 1995. There are more
than 8,000 Burger King restaurants worldwide, of which over 90% are operated
by approximately 1,500 independent franchise groups. Management believes
that, based upon publicly available information, the five largest franchisees
in the Burger King system operate less than 12% of all domestic Burger King
restaurants. The Burger King system has experienced considerable success in
recent years, as evidenced by the 30% growth in the number of Burger King
restaurants from 1991 to 1995. In addition, Burger King's share of the
quick-service hamburger restaurant market grew from 16% in 1993 to 18% in
1995. Furthermore, according to market surveys conducted for BKC by National
Adult Tracking in 1996, consumers preferred Burger King to all other
quick-service hamburger brands. As is the case for all Burger King
franchisees, the Company is required to comply with BKC guidelines as to menu
and operations, restaurant configurations and marketing and promotion.
Menu and Operations. The Burger King system philosophy is characterized by
its "Have It Your Way" service, flame-broiling, generous portions and
competitive prices. Each of the Company's Burger King restaurants offers a
standard menu containing a variety of traditional and innovative food items.
Burger King restaurants feature flame-broiled hamburgers, the most popular of
which is The Whopper(Registered Trademark) sandwich. The Whopper is a large,
flame-broiled hamburger on a toasted bun garnished with combinations of
lettuce, onions, pickles, tomatoes and mayonnaise. At present, the standard
menu of all Burger
33
<PAGE>
King restaurants consists primarily of hamburgers, cheeseburgers, chicken
sandwiches, fish sandwiches, breakfast items, french fried potatoes, salads,
shakes, desserts, soft drinks, milk and coffee. In addition, promotional menu
items are introduced periodically for limited times.
The Company's Burger King restaurants are typically open seven days per
week with minimum operating hours from 7:00 AM to 11:00 PM. Burger King
restaurants are of distinctive design and are generally located in
high-traffic areas throughout the United States. The Company believes that
convenience of location, speed of service, quality of food and price/value of
food served are the primary competitive advantages of Burger King
restaurants. The Company believes that it will continue to realize
significant benefits from its affiliation with BKC as a result of the
widespread recognition of the Burger King brand, the effectiveness of BKC's
national marketing programs and the overall management of the Burger King
system, including product development, quality assurance and strategic
planning.
The Company participates in a variety of Burger King programs designed to
increase restaurant revenues and profitability. In October 1993, BKC
implemented the first stages of a nationwide Value Menu Program. The program
consisted of discounted combination meals and menu items designed to give the
consumer greater value while increasing customer traffic and profitability.
BKC has also focused its efforts on a back-to-basics marketing strategy by
eliminating over 30 items from its menu and emphasizing its core hamburgers,
french fries and soft drinks. In addition, as part of its "Bigger, Better
Burgers" campaign, BKC increased its standard hamburger patty size to 2.8
ounces, which is 75% larger than McDonald's current standard size of 1.6
ounces.
Restaurant Configurations. The Company's Burger King restaurants consist
of one of several building types with various layouts, seating capacities and
engineering specifications. BKC's traditional restaurant contains
approximately 2,500 square feet, seats 86 customers and offers interior
design flexibility. BKC also features alternative restaurant formats ranging
in size from 500 to 4,000 square feet and seating capacities ranging up to
over 100 customers. BKC has developed a number of standard and
non-traditional restaurant formats which enable maximum seating capacities
from available square footage in such facilities as airports, hospitals,
college campuses, gas stations and retail shopping centers. Substantially all
of the Company's restaurants are traditional free-standing restaurants with
seating capacities of at least 50 and which contain drive-thru windows.
According to BKC, over 50% of all restaurant sales in the Burger King system
are generated from drive-thru windows.
National Marketing and Promotion. The Burger King brand has been in
existence for over 40 years. BKC currently has an annual advertising and
promotional budget of over $200 million to heighten brand awareness. BKC's
advertising campaigns are generally carried on television, radio and in mass
circulation print media (national and regional newspapers and magazines). BKC
franchisees are required to contribute 4.0% of monthly gross sales from
restaurant operations to a BKC advertising fund, which contributions are
generally utilized by BKC for its advertising and promotional programs and
public relations activities. BKC has also entered into selective partnership
arrangements to help promote its products. Recently, BKC's national
promotional partners have included the NCAA and the Coca-Cola Company.
QUICK-SERVICE RESTAURANT INDUSTRY
Since the introduction of quick-service restaurants in the mid-1950s, the
percentage of the average family's food budget spent on meals consumed "away
from home" has grown significantly from approximately 25% of the food budget
in 1955 to approximately 46% in 1995, according to the National Restaurant
Association. Concurrently, the quick-service restaurant industry has expanded
to include hamburger, pizza, chicken, Mexican food, ice cream/yogurt, donuts
and various types of sandwiches. The National Restaurant Association
estimates that sales at these quick-service restaurants will reach
approximately $100 billion in 1996, representing an inflation-adjusted growth
rate of 4.2% over 1995, more than double the 2.0% projected growth rate of
full-service restaurants. According to Technomic Information Services, an
independent research organization, domestic revenues from quick-service
hamburger restaurants were approximately $37.6 billion in 1995, representing
the biggest share of the quick-service restaurant industry and a 5.1%
compounded annual growth rate since 1990.
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<PAGE>
The recent growth in the quick-service restaurant segment is attributable
to consumers' desire for value and convenience, such as bundled value meals,
drive-thru windows, carry-out and delivery. In 1995, off-premise services
generated by drive-thru windows, pickup and home delivery comprised 64% of
the quick-service traffic, according to the National Restaurant Association.
COMPANY OPERATIONS
Management Structure. All executive management, finance, marketing and
operations support functions are conducted centrally at the Company's
Westchester, Illinois headquarters. In each of its six regions (Chicago,
Virginia, Colorado, Texas, Tennessee and Cincinnati), the Company has a
regional managing director who is responsible for the operations of all
Company Burger King restaurants within the assigned region. Each of these
managing directors must be approved by BKC. Supporting the managing director
in Chicago are two directors of operations (who each oversee an average of 58
restaurants), who supervise 17 district managers (who directly supervise five
to nine restaurants each). The five other managing directors are also
supported by district managers. The district managers are responsible for
direct oversight of the day-to-day operations of the Company's Burger King
restaurants. Typically, district managers have previously served as
restaurant managers within the Burger King system. A typical Company
restaurant is staffed with a full-time manager, one to three assistant
managers and full-and part-time hourly employees.
Management Incentives and Retention. Managing directors, directors of
operations, district managers and most restaurant managers are compensated
with a fixed salary plus a bonus based upon the performance of the
restaurants under their supervision. Evaluation criteria include compliance
with Burger King's restaurant operating guidelines and restaurant
profitability. Senior management believes that the Company's larger size and
regional focus provide significant professional development opportunities for
the Company's management and operating personnel not available to smaller
franchisees. The Company believes that its compensation structure and
professional development opportunities are significant advantages in
attracting and retaining qualified management personnel.
Training. The Company maintains a comprehensive training and development
program for all of its personnel. This program emphasizes the Burger King
system-wide operating procedures, food preparation methods and customer
service standards. The management training program features an intensive five
week hands-on restaurant training period, followed by two weeks of classroom
instruction (one week of simulated restaurant management activities and one
week of food sanitation). Special emphasis is placed on quality food
preparation, service standards and total customer satisfaction. Upon
certification, new managers work closely with experienced managers to
solidify their skills and expertise. The Company's existing restaurant
managers regularly participate in the Company's ongoing training efforts,
including classroom programs and in-restaurant programs. In addition, BKC's
training and development programs are also available to the Company.
MANAGEMENT INFORMATION SYSTEM
The Company's customized management information system, REMACs, provides
daily tracking and reporting of customer traffic counts, sales, average check
values, menu item sales, inventory variances, key labor measures and other
detailed information in comparative form, by individual restaurant and for
the Company as a whole. The Company's integrated management information
system, typically installed in its restaurants within 60 to 90 days of
acquisition, transmits data on a daily basis to Company headquarters. This
information is available by 6:00 AM the following day and can be accessed by
district managers on a remote basis using a laptop computer. The Company's
sophisticated management information system, typically not affordable by
smaller Burger King franchisees and other smaller quick-service restaurant
chains, provides management with the ability to identify and quickly
capitalize on restaurant sales enhancement and profit opportunities. The
Company utilizes its management information system to: (i) minimize shrinkage
and control labor costs; (ii) monitor point-of-sale order taking; (iii)
effectively manage inventory; and (iv) quickly integrate accounting systems
following acquisitions. Customized exception reporting is used to focus
operations on high priority issues and opportunities. The Company also
utilizes the system to increase sales revenues by assisting restaurant
managers in optimally scheduling
35
<PAGE>
the restaurant work force during any particular shift at the restaurant work
stations for which they are best qualified. In addition, the system enables
the Company to analyze various promotional programs using product mix
information.
FRANCHISE AGREEMENTS
The Company operates Burger King restaurants through its wholly owned
subsidiaries, each of which is a party to a BKC franchise agreement. The BKC
franchise agreements do not grant any franchisee exclusive rights to a
defined territory; however, the Company, based upon its review of BKC's
Uniform Franchise Offering Circular and its experience with BKC, believes
that BKC generally seeks to ensure that newly granted franchises do not
materially affect the operations of existing Burger King restaurants.
Acceptance as a franchisee is based upon several factors including management
experience, qualifications, financial status and net worth. The franchise
agreements require, among other things, that all restaurants be of
standardized design and operated in a prescribed manner, including
utilization of the standard Burger King menu. Most franchise agreements
provide for a term of 20 years, and, at the option of the franchisee and BKC,
a renewal (successor) franchise agreement may be granted by BKC provided that
the restaurant meets BKC's operating standards applicable at that time and
the franchisee is not in default under the relevant franchise agreement. The
BKC franchise agreements are noncancelable except for failure to abide by the
terms thereof and in certain other limited circumstances.
BKC franchise agreements generally are renewable for an additional term
based upon the form of franchise agreement applicable at that time, provided
that the franchisee (i) pays a successor franchise fee equal to the franchise
fee applicable at that time, (ii) has demonstrated an ability to operate the
business consistent with the standards set forth in the franchise agreement,
(iii) agrees to make capital improvements to the subject restaurant to bring
the restaurant up to BKC's image standards applicable at that time and (iv)
is not then currently in default with respect to any other obligations to
BKC, including pursuant to other franchise agreements. The Company, through
its district managers, closely supervises the operation of all of its
restaurants to ensure that operating policies are followed and that the
requirements of the franchise agreements are met. The amount of capital
expenditures that may be required to bring a restaurant up to BKC's current
standards at any given time varies widely depending upon the magnitude of the
required changes and the degree to which the franchisee has made interim
changes to the restaurant. Within five years of September 30, 1996, 27 of the
Company's subsidiaries' current 183 franchise agreements with BKC, which
contributed $28.3 million in restaurant sales in fiscal 1995, are scheduled
to expire. The Company believes that it will satisfy BKC's requirements for
renewal of franchise agreements and, accordingly, that successor franchise
agreements will be granted in due course by BKC upon the expiration of the
franchise agreements.
The Company intends to expand its operations of Burger King restaurants
through both new restaurant development and acquisitions. Pursuant to the BKC
franchise agreements, BKC's approval is required for the renewal of the
Company's subsidiaries' existing franchise agreements. Pursuant to current
BKC policies and procedures applicable to the Company, BKC's approval is
required for the development of new Burger King restaurants by the Company
and the acquisition of Burger King restaurants by the Company from other
Burger King franchisees. BKC's consent to such renewals, acquisitions or
development may be withheld in BKC's sole discretion. See "Risk Factors--BKC
Franchise Agreement Restrictions; Consent to Restaurant Acquisition and
Development and Franchise Renewal; Right of First Refusal" and "Certain
Transactions."
Current BKC policies and procedures also place certain restrictions on the
management structure of the Company and its subsidiary franchisees. For
example, a managing owner and an owner must be named in each franchise
agreement. Under the franchise agreements, as amended in connection with the
Offerings, Mr. Jaro is named as managing owner and Messrs. Jaro, Osborn and
Hubert are named as owners. The managing owner has the authority to bind the
franchisee in its dealings with BKC and to direct any action necessary to
ensure compliance with the franchise agreements and related documents,
including leases with BKC. In addition, the managing owner is personally
liable to BKC for the franchisee's obligations under such agreements. Also,
each franchise agreement requires that a managing director be designated to
ensure that the day-to-day operation of the relevant franchised restaurant
36
<PAGE>
complies with BKC's standards. BKC has the right to terminate its franchise
agreement with a franchisee if (i) the franchisee or the managing owner is
convicted of a crime punishable by a term of imprisonment in excess of one
year or (ii) the franchisee, the managing owner or a managing director
engages in conduct which reflects unfavorably on the franchisee or Burger
King system generally. Managing owners cannot be replaced without receiving
the consent of BKC. In addition, absent BKC's prior written consent, managing
owners are required to hold a 5% voting interest in a corporate franchise and
to personally guarantee the franchisee's obligations to BKC. Furthermore, no
managing owner or owner may sell, encumber or otherwise transfer any portion
of his equity interest in the Company without first obtaining the consent of
BKC. After the transfer of its equity interest, managing owners remain
personally obligated to BKC under the franchise agreements and any other
agreements between the franchisee and BKC, unless such obligation has been
fully satisfied or waived by BKC.
Pursuant to the BKC franchise agreements, BKC may terminate all the
franchise agreements with the Company's subsidiary franchisees or the
applicable subsidiary franchisee if, as applicable, any person serving on the
board of directors of the Company or the applicable subsidiary franchisee is
(i) an employee of BKC, (ii) an owner (subject to certain exceptions), board
member or principal or employee of any business that is then approved by BKC
as a supplier to the Burger King system or (iii) an owner (subject to certain
exceptions), board member or principal or employee of any hamburger
restaurant business other than the Burger King restaurant business.
OBLIGATIONS TO BURGER KING CORPORATION
BKC franchise agreements provide for a one-time franchise fee (currently
$40,000), a monthly royalty fee of 3.5% of each restaurant's gross sales and
a monthly advertising contribution of 4.0% of gross sales. During fiscal
1995, the Company paid BKC an aggregate of $4.8 million in royalty fees and
$5.7 million in advertising contributions. In connection with obtaining BKC's
consent to the Offerings, the Company has agreed to guarantee the payment and
performance obligations under each of the franchise agreements between BKC
and its subsidiary franchisees.
BKC is the lessor on approximately 60% of the Company's currently leased
properties, primarily as a result of the Company's initial acquisition of
Burger King restaurants from BKC. The Company guarantees all of the
obligations of its subsidiaries under these leases. Under certain lease
agreements with BKC affiliates, the Company's subsidiaries made rent payments
aggregating $9.7 million during fiscal 1995. In connection with the execution
of the lease agreements, the Company guaranteed the payment and performance
obligations of each of its subsidiaries.
As required by BKC regulations, the Company's obligations under the Senior
Notes, the Senior Preferred Stock and, if issued, the Exchange Debentures
will be subject to the BKC Intercreditor Agreement pursuant to which the
Company's obligations in respect of such securities are subject to the prior
payment in full of all indebtedness, liabilities and other obligations of the
Company and its subsidiaries to BKC under the BKC franchise agreements, BKC
leases and any other indebtedness of the Company and its subsidiaries to BKC,
whenever and however arising, whether primary or secondary, absolute or
contingent, and including charges and costs of collection. See "Risk
Factors--BKC Intercreditor Agreement," "Description of Securities--Senior
Notes--BKC Intercreditor Agreement," "--Senior Preferred Stock--BKC
Intercreditor Agreement" and "--Exchange Debentures--BKC Intercreditor
Agreement."
ADVERTISING AND PROMOTION
The Company believes that one of the major advantages of being a Burger
King franchisee is the marketing support and brand promotion it realizes from
the marketing activities of BKC. In addition to the benefits derived by the
Company from BKC's current $200 million annual advertising budget, the
Company supplements BKC's advertising and promotional activities with local
advertising and promotions, including purchasing additional television, radio
and print advertising and running promotional programs that support national
programs with local tie-ins to other consumer brands. These local tie-ins
have included cross promotions with the Colorado Rockies, Fannie May Candies
and Northwestern University, among others. Other promotional programs include
coupons and price discounts, which are
37
<PAGE>
tailored by the Company to appeal to its customer base depending on
demographics and other factors, thereby creating flexible and directed
marketing programs. For fiscal 1995, the Company spent approximately $600,000
on supplemental local advertising and promotions, and plans to continue its
local advertising and promotional programs at comparable levels in the
future.
SUPPLIES AND DISTRIBUTION
The Company is a member of a national purchasing cooperative created by
and for the Burger King system known as Restaurant Services, Inc. ("RSI").
RSI is an independent, member-owned, non-profit cooperative which provides
services on behalf of, and for the benefit of, Burger King restaurant
operators. RSI negotiates the lowest cost for the Burger King system while
improving quality, enhancing competitiveness and ensuring the best possible
value. RSI has the sole and exclusive responsibility for negotiating
purchasing arrangements for the Burger King system with respect to certain
paper goods, restaurant supplies, food and drink products, certain equipment
and many other items mutually agreed to by Burger King franchisees for use in
the Burger King system. The Company uses its purchasing power to negotiate
directly with certain other vendors, as well as each of its distributors, to
obtain favorable pricing and terms for the distribution of its products.
Currently, the Company's primary distributor of foodstuffs and supplies is
ProSource Distribution Services, Inc. ("ProSource").
All BKC-approved suppliers are required by BKC to purchase all foodstuffs
and supplies from BKC-approved manufacturers and purveyors. BKC is
responsible for quality control and supervision of these manufacturers and
purveyors, and BKC monitors all BKC-approved manufacturers and purveyors of
its foodstuffs. BKC regularly visits these manufacturers and purveyors to
observe the preparation of the foodstuffs and conducts various tests to
ensure that only high quality foodstuffs are sold to BKC-approved suppliers,
distributors and franchisees. In addition, BKC coordinates and supervises
audits of approved suppliers and distributors to determine continuing product
specification compliance and to ensure that manufacturing plant and
distribution center standards are met.
The Company believes that reliable alternative sources for virtually all
restaurant supplies are readily available at competitive prices should the
arrangements with ProSource or any other existing supplier or distributor
change.
QUALITY ASSURANCE
The Company's operations are focused on achieving a high level of customer
satisfaction, with speed, accuracy and quality of service closely monitored.
The Company's senior management and restaurant management staff are
principally responsible for ensuring compliance with the Company's and BKC's
operating procedures. The Company and BKC have uniform operating standards
and specifications relating to the quality, preparation and selection of menu
items, maintenance and cleanliness of the premises and employee conduct.
Detailed reports from the Company's own management information system and
surveys conducted by the Company or BKC are tabulated and distributed to
management on a regular basis to help maintain compliance. In addition to
customer satisfaction, these reports track comparable sales and customer
counts, labor and food costs, inventory levels, waste losses and cash
balances.
All Burger King franchisees operate subject to a comprehensive regimen of
quality assurance standards set by BKC, as well as standards set by Federal,
state and local governmental laws and regulations. These standards include
food preparation rules regarding, among other things, minimum cooking times
and temperatures, sanitation and cleanliness. In addition, BKC has set
maximum time standards for holding unsold prepared food. For example,
sandwiches and french fries are required to be discarded after ten minutes
and seven minutes following preparation, respectively. The "conveyor belt"
cooking system utilized in all Burger King restaurants, which is calibrated
to carry hamburgers through the flame broiler at regulated speeds, is one of
the safest cooking systems among major quick-service restaurants and helps to
ensure that the standardized minimum times and temperatures for cooking are
met.
38
<PAGE>
The Company closely supervises the operation of all of its restaurants to
help ensure that standards and policies are followed and that product
quality, customer service and cleanliness of the restaurants are maintained.
In addition, BKC may conduct unscheduled inspections of Burger King
restaurants throughout the nationwide system.
COMPETITION
The restaurant industry is intensely competitive with respect to price,
service, location and food quality. The industry is mature and competition
can be expected to increase. The Company's Burger King restaurants compete
with a large number of national and regional restaurant chains, as well as
locally-owned restaurants offering low-priced and medium-priced food.
Convenience stores, grocery stores, delicatessens, food counters, cafeterias
and other purveyors of moderately priced and quickly prepared foods also
compete with the Company. In the Company's markets, McDonald's, Wendy's and
Hardees provide the most significant competition.
McDonald's operates more restaurants than the Company in all but one of
the Company's current markets and is the Company's largest competitor.
According to publicly available information, as of December 31, 1995, the
McDonald's system comprised 18,380 restaurants and total system-wide revenues
for McDonald's for the year ended December 31, 1995 were $29.9 billion. The
Company believes that product quality and taste, name recognition,
convenience of location, speed of service, menu variety, price, and ambiance
are the most important competitive factors in the quick-service restaurant
industry and that its Burger King restaurants effectively compete in each
category.
The Company faces competition in its expansion plans. Potential Burger
King development and acquisition competitors include BKC, which has exercised
its right of first refusal with respect to previously proposed restaurant
sales, controls the areas in which new Burger King restaurant sites can be
developed and may impose, as a condition to its consent to any proposed
acquisition or development opportunity, conditions, limitations or other
restrictions on the Company and its activities. Other potential competitors
in acquiring and developing Burger King restaurants include other investors
and existing Burger King franchisees. The Company also competes with other
quick-service restaurant operators and developers for the most desirable site
locations. See "--Business Strategy."
GOVERNMENT REGULATION
The Company is subject to various Federal, state and local laws affecting
its business, including various health, sanitation, fire and safety
standards. Newly constructed or remodeled restaurants are subject to state
and local building code and zoning requirements. In connection with the
remodeling and alteration of the Company's Burger King restaurants, the
Company may be required to expend funds to meet certain Federal, state and
local regulations, including regulations requiring that remodeled or altered
restaurants be accessible to persons with disabilities. The Company is also
subject to Federal and state environmental regulations, although such
regulations have not had a material effect on the Company's operations taken
as a whole. Difficulties or failures in obtaining the required licenses or
approvals could delay or prevent the opening of a new restaurant in a
particular area.
The Company is also subject to the Fair Labor Standards Act and various
state laws governing such matters as minimum wage requirements, overtime and
other working conditions and citizenship requirements. A significant number
of the Company's food service personnel are paid at rates related to the
Federal minimum wage and increases in the minimum wage, including those
recently enacted by the U.S. Government, would increase the Company's labor
costs.
The Company is also subject to various local, state and Federal laws
regulating the discharge of pollutants into the environment. The Company
believes that it conducts its operations in substantial compliance with
applicable environmental laws and regulations. In an effort to prevent and,
if necessary, to correct environment problems, the Company conducts
environmental audits of proposed restaurant sites in order to determine
whether there is any evidence of contamination prior to purchasing or
entering into a lease with respect to such restaurant.
39
<PAGE>
The Company believes that it conducts its operations in substantial
compliance with applicable laws and regulations governing its operations.
PROPERTIES
As of the date of this Prospectus, the Company operated all of its
restaurants on locations where it leases the land and the buildings. BKC is
the lessor on approximately 60% of such properties, primarily as a result of
the Company's initial acquisition of Burger King restaurants from BKC. Most
of the Company's leases are coterminous with the related franchise agreements
and require the Company to pay property taxes, insurance, maintenance and
other operating costs of the properties. Generally, the terms of the leases
require lease payments equal to the greater of a fixed minimum annual rent or
8.5% of annual gross sales. The Company believes that it generally will be
able to renew all of its restaurant leases at commercially reasonable rates
as they expire.
Within five years of September 30, 1996, 27 of the Company's 183 current
restaurant leases are due to expire. The Company believes that it will be
able to renew expiring leases at reasonable rates in the future. During
fiscal 1995, the Company renewed each of its three leases expiring during
such fiscal year on terms generally consistent with those of the expiring
leases.
The Company's headquarters are located in an approximately 16,000 square
foot leased office space in Westchester, Illinois. The term of the present
lease expires on September 30, 1998. The Company believes that its existing
central office provides sufficient space to support its expected expansion
over the next several years.
EMPLOYEES
As of September 30, 1996, the Company employed 571 full-time salaried
employees and approximately 5,500 full-time and part-time hourly employees.
Of the Company's full-time employees, 35 are involved in overseeing
restaurant operations, 474 are involved in the management of individual
restaurants, and the remainder are responsible for corporate administration.
None of the Company's employees are covered by a collective bargaining
agreement. The Company believes that the dedication of its employees is
critical to its success, and that its relations with its employees are good.
LITIGATION
The Company is not a party to any pending legal proceeding the resolution
of which, the management of the Company believes, would have a material
adverse effect on the Company's results of operations or financial condition,
nor to any other pending legal proceedings other than ordinary, routine
litigation incidental to its business.
40
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth the names and ages of the Company's directors and
executive officers and the positions they will hold upon the consummation of
the Offerings:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ----------------------- ----- ---------------------------------------------------
<S> <C> <C>
Lawrence E. Jaro ....... 53 Managing Owner, Chairman and Chief Executive Officer
William C. Osborn ...... 48 Vice Chairman and Director
Gary W. Hubert ......... 44 Chief Operating Officer and Director
Joel D. Aaseby ......... 38 Chief Financial Officer and Corporate Secretary
Scott E. Vasatka ....... 43 Vice President-Human Resources
A. Richard Caputo, Jr. 30 Vice President and Director
Thomas H. Quinn ........ 49 Director
John W. Jordan, II .... 49 Director
David W. Zalaznick .... 42 Director
</TABLE>
Set forth below is a brief description of the business experience of each
director and executive officer of the Company.
MR. JARO has served as the Company's Managing Owner, Chief Executive
Officer and as a Director since the Company's inception, and currently serves
as its Chairman. Mr. Jaro has over 15 years of experience as a Burger King
restaurant franchisee. Prior to joining the Company, Mr. Jaro was the
President and Chief Executive Officer of Jaro Enterprises, Inc., an operator
of 12 Burger King restaurants in Colorado and Texas.
MR. OSBORN has previously served as one of the Company's Managing Owners
and currently serves as a Director. Mr. Osborn also served as the Company's
President until May 10, 1996 at which time he was appointed the Company's
Vice Chairman. Mr. Osborn has over 10 years of experience as a Burger King
restaurant franchisee as well as a franchisee of other restaurant concepts.
Prior to joining the Company, Mr. Osborn owned and operated three Burger King
restaurants in Colorado.
MR. HUBERT has served as the Company's Senior Vice President and as a
Director since the Company's inception, and currently serves as Chief
Operating Officer. Mr. Hubert has over 20 years of experience with BKC in
restaurant operations and franchise management. Prior to joining the Company,
Mr. Hubert was a Vice President with BKC in both the Franchise and Corporate
Operations divisions and served as the Area Operations Manager for BKC's
Chicago region from 1985 to 1989.
MR. AASEBY has served as the Company's Vice President--Finance and
Corporate Secretary since the Company's inception, and currently serves as
Chief Financial Officer. Mr. Aaseby has over 21 years of experience with BKC
in various finance, accounting and operations positions, including Midwest
Sector Controller from 1989 to 1994.
MR. VASATKA has served as the Company's Vice President-Human Resources
since the Company's inception. Mr. Vasatka has over 26 years of experience in
the restaurant industry. Prior to joining the Company, Mr. Vasatka was
employed by Davgar Restaurants from 1969 until 1994, and held various senior
management positions including District Manager, Director of Training and
Division President.
MR. CAPUTO has served as a Vice President and Director of the Company
since its inception. Mr. Caputo is a partner of The Jordan Company, which he
has been associated with since 1990. Mr. Caputo is also a director of Jackson
Products, Inc. as well as other privately held companies.
MR. QUINN has served as a Director of the Company since its inception.
Since 1988, Mr. Quinn has been President, Chief Operating Officer and a
director of Jordan Industries, Inc., a diversified industrial holding
company. Mr. Quinn is also the Chairman of the Board and Chief Executive
Officer of American Safety Razor Company and Welcome Home, Inc. as well as
other privately held companies.
41
<PAGE>
MR. JORDAN has served as a Director of the Company since its inception.
Mr. Jordan is a managing partner of The Jordan Company, a private merchant
banking firm which he founded in 1982. Mr. Jordan is also a director of
Jordan Industries, Inc., American Safety Razor Company, Jackson Products,
Inc., Carmike Cinemas, Inc., Welcome Home, Inc. and Apparel Ventures, Inc. as
well as other privately held companies.
MR. ZALAZNICK has served as a Director of the Company since its inception.
Since 1982, Mr. Zalaznick has been a managing partner of The Jordan Company.
Mr. Zalaznick is also a director of Jordan Industries, Inc., Carmike Cinemas,
Inc., American Safety Razor Company, Jackson Products, Inc., Marisa
Christina, Inc. and Apparel Ventures, Inc. as well as other privately held
companies.
Each of the Company's directors was nominated to the Board of Directors
pursuant to the Stockholders Agreement, which required the stockholders named
therein to vote for such nominees.
In 1983, Mr. Jaro, along with his former employers, E.F. Hutton & Company,
Inc. and Bache Halsey Stuart, Shields Incorporated, were defendants in an
action alleging various claims involving the improper handling of an
individual's securities account from 1978 to 1981. In 1986, an arbitration
panel found in favor of the defendants on all counts; however, for procedural
reasons, the arbitration decision was vacated and the plaintiff was granted a
jury trial in state court. In 1991, a jury awarded the plaintiff an aggregate
of $266,500 (of which $121,800 was allocated to Mr. Jaro) plus pre-judgment
interest and costs. The Company understands that although Mr. Jaro and the
employer co-defendants believed that they had a strong legal basis to appeal
the judgment, they chose not to appeal due to the relatively small amount of
the damages awarded and the substantial time and expense that would result
from continued appeals and litigation.
BOARD OF DIRECTORS
Liability Limitation. The Certificate of Incorporation provides that a
director of the Company shall not be personally liable to it or its
stockholders for monetary damages to the fullest extent permitted by Delaware
Corporation Law. In accordance with Delaware Corporation Law, the Certificate
of Incorporation does not eliminate or limit the liability of a director for
acts or omissions that involve intentional misconduct by a director or a
knowing violation of law by a director for voting or assenting to an unlawful
distribution, or for any transaction from which the director will personally
receive a benefit in money, property, or services to which the director is
not legally entitled. Delaware Corporation Law does not affect the
availability of equitable remedies such as an injunction or rescission based
upon a director's breach of his duty of care. Any amendment to these
provisions of the Delaware Corporation Law will automatically be incorporated
by reference into the Certificate of Incorporation and the Bylaws, without
any vote on the part of its stockholders, unless otherwise required.
Director Compensation. Directors who are not employees of the Company
receive $10,000 per year for serving as a director of the Company. In
addition, the Company reimburses directors for their travel and other
expenses incurred in connection with attending meetings of the Board of
Directors.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
The Board of Directors does not maintain a Compensation Committee. During
fiscal 1995, however, Messrs. Caputo, Jaro, Jordan and Quinn participated in
deliberations of the Board of Directors concerning executive officer
compensation. See "Certain Transactions."
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth a summary of certain information regarding
compensation paid or accrued by the Company during fiscal 1995 to each of the
Company's chief executive officer and other executive officers whose total
annual salary and bonus exceeded $100,000 during such period (collectively,
the "Named Executives").
42
<PAGE>
FISCAL 1995 SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------------------------
FISCAL OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) COMPENSATION
- ----------------------------- -------- ---------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Lawrence E. Jaro
Managing Owner and Chief
Executive Officer ........... 1995 $215,000 $64,500 $0 $0
William C. Osborn
Managing Owner and President 1995 215,000 64,500 0 10,000(3)
Gary W. Hubert
Chief Operating Officer and
Senior Vice President ....... 1995 215,000 64,500 0 0
Joel D. Aaseby
Chief Financial Officer and
Corporate Secretary ......... 1995 110,000 32,000 0 0
Scott E. Vasatka
Vice President--
Human Resources ............. 1995 105,000 31,000 0 0
</TABLE>
(1) The Company provides bonus compensation based on an individual's
achievement of certain specified objectives, including achieving the
Company's stated earnings before interest, taxes, depreciation and
amortization. Employees are eligible to receive from 10% to 60% of their
annual compensation as a bonus.
(2) No executive named in the table above received any Other Annual
Compensation in an amount in excess of either $50,000 or 10% of Salary
and Bonus reported for him in the two preceding columns.
(3) Represents the amount of life insurance premiums paid by the Company on
the life of Mr. Osborn with death benefits designated by Mr. Osborn.
Option Exercises in Fiscal 1995 and Fiscal Year-end Values
The following table shows stock options exercised by each of the Named
Executives during fiscal 1995, including the aggregate value of gains on the
date of exercise. In addition, this table includes the number of shares
covered by both exercisable and non-exercisable stock options as of fiscal
year-end, and the values for unexercised options. Except as listed in the
table, no other Named Executive exercised any Company stock options or
beneficially owned unexercised Company stock options.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON
STOCK
UNDERLYING UNEXERCISED OPTIONS VALUE OF UNEXERCISED
AT IN-THE-MONEY OPTIONS
JANUARY 1, 1996 AT JANUARY 1, 1996(1)
------------------------------ ------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------- --------------- ------------- ---------------
<S><C>
Scott E. Vasatka 2,810 2,810 $0 $0
</TABLE>
(1) Based upon the difference between the estimated fair market value of the
Company's Common Stock on January 1, 1996 (as determined by the Board of
Directors) of $0.10 per share and the option exercise price of $0.10 per
share. The above valuation may not reflect the actual value of
unexercised options as the value of unexercised options will fluctuate
over time.
RETIREMENT AND 401(K) PLANS
The Company offers all of its employees the option to participate in a
401(k) plan, upon fulfillment of certain requirements. The Company has the
option, but not the obligation, to match contributions
43
<PAGE>
made by its employees under the 401(k) plan. In addition, the Company
provides disability insurance to certain key executives. The insurance covers
all salary payments to the executives during the entire period of disability.
EMPLOYMENT AGREEMENTS
Effective September 1, 1994, Enterprises entered into an employment
agreement with Lawrence E. Jaro (the "Jaro Employment Agreement"). Pursuant
to the terms of the Jaro Employment Agreement, Mr. Jaro agreed to serve as
Chief Executive Officer and Co-Managing Owner of the Company and Enterprises
for a five-year period ending on August 31, 1999 with automatic one-year
renewals thereafter, provided that neither Mr. Jaro nor Enterprises has
provided the other with a notice of termination 120 days prior to the
expiration date of the Jaro Employment Agreement. Mr. Jaro also agreed not to
compete against Enterprises throughout the term of his employment and for one
year thereafter, and not to disclose any confidential information during and
after the term of his employment. In exchange for his services and covenants,
Enterprises agreed to compensate Mr. Jaro with a base salary of $215,000 per
annum (subject to an annual cost of living adjustment), an automobile
allowance of $800 per month and reimbursement of up to $6,000 per annum for
automobile-related costs. In the event Mr. Jaro no longer provides services
to Enterprises due to (i) his death or physical or mental disability or (ii)
his dismissal without Cause (as defined in the Jaro Employment Agreement) or
as a result of a material reduction in his authority, then Mr. Jaro is
entitled to receive his base compensation from the date of his termination
through the first anniversary of such termination or through the remaining
term of his employment agreement, respectively.
Effective September 1, 1994, Enterprises entered into an employment
agreement with William C. Osborn (the "Osborn Employment Agreement").
Pursuant to the terms of the Osborn Employment Agreement, Mr. Osborn agreed
to serve as President and Co-Managing Owner of the Company and Enterprises
for a five-year period ending on August 31, 1999 with automatic one-year
renewals thereafter, provided that neither Mr. Osborn nor Enterprises has
provided the other with a notice of termination 120 days prior to the
expiration date of the Osborn Employment Agreement. Mr. Osborn also agreed
not to compete against Enterprises throughout the term of his employment and
for one year thereafter, and not to disclose any confidential information
during and after the term of his employment. In exchange for his services and
covenants, Enterprises agreed to compensate Mr. Osborn with a base salary of
$215,000 per annum (subject to an annual cost of living adjustment), an
automobile allowance of $800 per month and reimbursement of up to $6,000 per
annum for automobile-related costs. In the event Mr. Osborn no longer
provides services to Enterprises due to (i) his death or physical or mental
disability or (ii) his dismissal without Cause (as defined in the Osborn
Employment Agreement) or as a result of a material reduction in his
authority, then Mr. Osborn is entitled to receive his base compensation from
the date of his termination through the first anniversary of such termination
or through the remaining term of his employment agreement, respectively.
Effective May 10, 1996, the Company and Mr. Osborn agreed that Mr. Osborn
would resign as President to become Vice Chairman of the Company.
Effective September 1, 1994, Enterprises entered into an employment
agreement with Gary W. Hubert (the "Hubert Employment Agreement"). Pursuant
to the terms of the Hubert Employment Agreement, Mr. Hubert agreed to serve
as Senior Vice President and Managing Director of the Company and Enterprises
for a five-year period ending on August 31, 1999 with automatic one-year
renewals thereafter, provided that neither Mr. Hubert nor Enterprises has
provided the other with notice of termination 120 days prior to the
expiration of the Hubert Employment Agreement. Mr. Hubert also agreed not to
compete against Enterprises throughout the term of his employment and for one
year thereafter, and not to disclose any confidential information during and
after the term of his employment. In exchange for his services and covenants,
Enterprises agreed to compensate Mr. Hubert with a base salary of $215,000
per annum (subject to an annual cost of living adjustment), an automobile
allowance of $800 per month and reimbursement of up to $6,000 per annum for
automobile-related costs. In the event Mr. Hubert no longer provides services
to Enterprises due to (i) his death or physical or mental disability or (ii)
his dismissal without Cause (as defined in the Hubert Employment Agreement)
or as a
44
<PAGE>
result of a material reduction in his authority, then Mr. Hubert is entitled
to receive his base compensation from the date of his termination through the
first anniversary of such termination or through the remaining term of his
employment agreement, respectively.
Effective September 1, 1994, Enterprises entered into an employment
agreement with Joel D. Aaseby (the "Aaseby Employment Agreement"). Pursuant
to the terms of the Aaseby Employment Agreement, Mr. Aaseby agreed to serve
as Vice President--Finance of Enterprises for a five-year period ending on
August 31, 1999 with automatic one-year renewals thereafter, provided that
neither Mr. Aaseby nor Enterprises has provided the other with notice of
termination 120 days prior to the expiration of the Aaseby Employment
Agreement. Mr. Aaseby also agreed not to compete with Enterprises throughout
the term of his employment and for one year thereafter, and not to disclose
any confidential information during and after the term of his employment. In
exchange for his services and covenants, Enterprises agreed to compensate Mr.
Aaseby with a base salary of $110,000 per annum (subject to an annual cost of
living adjustment), an automobile allowance of $500 per month and
reimbursement of up to $6,000 per annum for automobile-related costs. In the
event Mr. Aaseby no longer provides services to Enterprises due to (i) his
death or physical or mental disability or (ii) his dismissal without Cause
(as defined in the Aaseby Employment Agreement) or as a result of a material
reduction in his authority, then Mr. Aaseby is entitled to receive his base
compensation from the date of his termination through the first anniversary
of such termination or through the remaining term of his employment
agreement, respectively.
Effective September 1, 1994, Enterprises entered into an employment
agreement with Scott E. Vasatka (the "Vasatka Employment Agreement").
Pursuant to the terms of the Vasatka Employment Agreement, Mr. Vasatka agreed
to serve as Vice President--Human Resources of Enterprises for a five-year
period ending on August 31, 1999 with automatic one-year renewals thereafter,
provided that neither Mr. Vasatka nor Enterprises has provided the other with
notice of termination 120 days prior to the expiration of the Vasatka
Employment Agreement. Mr. Vasatka also agreed not to compete against
Enterprises throughout the term of his employment and for one year
thereafter, and not to disclose any confidential information during and after
the term of his employment. In exchange for his services and covenants,
Enterprises agreed to compensate Mr. Vasatka with a base salary of $105,000
per annum (subject to an annual cost of living adjustment), an automobile
allowance of $500 per month and reimbursement of up to $6,000 per annum for
automobile-related costs. In the event Mr. Vasatka no longer provides
services to Enterprises due to (i) his death or physical or mental disability
or (ii) his dismissal without Cause (as defined in the Vasatka Employment
Agreement) or as a result of a material reduction in his authority, then Mr.
Vasatka is entitled to receive his base compensation from the date of his
termination through the first anniversary of such termination or through the
remaining term of his employment agreement, respectively.
Effective simultaneously with the closing of the Offerings, the Company
intends to enter into a new employment agreement with Mr. Osborn (the "New
Osborn Employment Agreement"). Pursuant to the terms of the New Osborn
Employment Agreement, Mr. Osborn will (i) continue to serve as Vice Chairman
of the Company, (ii) be entitled to annual compensation of $225,000 and (iii)
be subject to non-competition and confidentiality provisions similar to Mr.
Osborn's existing employment agreement. The term of the New Osborn Employment
Agreement will be three years
STOCK OPTIONS
The Company has granted two employees options to purchase an aggregate of
11,240 shares of Common Stock at an exercise price of $0.10 per share. These
options vested at a rate of 50% per year, are currently fully exercisable and
expire at the earlier of December 31, 2004 or 90 days after termination of
employment with the Company.
45
<PAGE>
PRINCIPAL STOCKHOLDERS
The table below sets forth as of September 30, 1996, certain information
regarding beneficial ownership of Common Stock held by (i) each director and
each of the Named Executives who own shares of the Company's equity
securities, (ii) all directors and executive officers of the Company as a
group, and (iii) each person known by the Company to own beneficially more
than 5% of the Company's Common Stock. Each individual or entity named has
sole investment and voting power with respect to shares of Common Stock
indicated as beneficially owned by them, except where otherwise noted.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
PRIOR TO THE
OFFERINGS(1)
-----------------------
PERCENTAGE OF
BENEFICIAL OWNERSHIP
AFTER THE
NUMBER PERCENTAGE OFFERINGS(1)
--------- ------------ --------------------
<S> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Lawrence E. Jaro (2) ............................. 227,098 22.7% 22.0%
William C. Osborn (3) ............................ 93,949 9.4 9.1
Gary W. Hubert ................................... 33,710 3.4 3.3
Joel D. Aaseby ................................... 11,240 1.1 1.1
Thomas H. Quinn (4) .............................. 33,705 3.4 3.3
John W. Jordan, II (5) ........................... 44,348 4.4 4.3
A. Richard Caputo, Jr. (6) ....................... 14,606 1.5 1.4
David W. Zalaznick (7) ........................... 44,348 4.4 4.3
Scott E. Vasatka ................................. 5,620 0.6 0.5
All directors and executive officers as a group
(9 persons) (8) ................................. 508,624 50.9 49.3
OTHER PRINCIPAL STOCKHOLDERS:
MCIT PLC ("MCIT") (9) ............................ 285,310 28.5% 27.7%
Leucadia Investors, Inc. (10) .................... 71,327 7.1 6.9
BancBoston Investments Inc. ("BancBoston") (11) . 112,360 10.1 9.8
PMI Mezzanine Fund, L.P. ("PMI") (12) ............ 71,720 6.7 0.0
</TABLE>
(1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage
owned by such person, but not deemed outstanding for the purpose of
calculating the percentage owned by each other person listed. In
connection with the Offerings, the Company intends to repurchase from PMI
immediately exercisable warrants to purchase 71,720 shares of Common
Stock with the net proceeds of the Offerings. As of September 30, 1996,
the Company had 1,000,010 shares of Common Stock issued and outstanding.
The table gives effect to the Recapitalization and assumes that 30,650
shares of Common Stock will be issued in connection with the Units
Offering. See "Description of Capital Stock--The Recapitalization" and
"--Non-Voting Common Stock."
(2) Includes 193,388 shares of Common Stock beneficially owned by various
affiliates of Mr. Jaro. Mr. Jaro and his affiliates also own 915 shares
of Class A(2 Preferred Stock and 305 shares of Class B Preferred Stock.
Mr. Jaro's address is c/o the Company, 2215 Enterprise Drive, Suite 1502,
Westchester, Illinois 60154.
(3) Includes 60,239 shares of Common Stock beneficially owned by various
affiliates of Mr. Osborn. Mr. Osborn and his affiliates also own 285
shares of Class A(2 Preferred Stock and 95 shares of Class B Preferred
Stock. Mr. Osborn's address is c/o the Company, 2215 Enterprise Drive,
Suite 1502, Westchester, Illinois 60154.
(4) Mr. Quinn is President and Chief Operating Officer of Jordan Industries,
Inc., a company affiliated with The Jordan Company, an entity with which
Messrs. Caputo, Jordan and Zalaznick are also affiliated.
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(5) Includes 44,348 shares of Common Stock held by John W. Jordan II
Revocable Trust, of which Mr. Jordan is trustee. Mr. Jordan also owns
96.25 shares of non-voting Class B Preferred Stock. Mr. Jordan's address
is c/o The Jordan Company, 9 West 57th Street, New York, New York 10019.
See "Description of Capital Stock--Preferred Stock."
(6) Mr. Caputo is a partner of The Jordan Company, an entity with which
Messrs. Jordan and Zalaznick are also affiliated.
(7) Mr. Zalaznick also owns 96.25 shares of Class B Preferred Stock. Mr.
Zalaznick's address is c/o The Jordan Company, 9 West 57th Street, New
York, New York 10019. See "Description of Capital Stock--Preferred
Stock."
(8) Includes all shares owned directly or beneficially by directors and
executive officers, including shares beneficially owned by affiliates of
Messrs. Jaro and Osborn.
(9) MCIT also owns 3,000 shares of Class A Preferred Stock and 500 shares of
Class B Preferred Stock. The principal address of MCIT is c/o The Jordan
Company, 9 West 57th Street, New York, New York 10019. See "Description
of Capital Stock--Preferred Stock."
(10) Leucadia also owns 125 shares of Class B Preferred Stock. The principal
address of Leucadia is 315 Park Avenue South, New York, New York 10010.
See "Description of Capital Stock--Preferred Stock."
(11) Represents immediately exercisable warrants to purchase 112,360 shares
of Non-Voting Common Stock (as defined). BancBoston also owns 1,425
shares of Class A(1 Preferred Stock and 475 shares of Class B Preferred
Stock. The principal address of BancBoston is 100 Federal Street,
Boston, Massachusetts 02110. See "Description of Capital
Stock--Non-Voting Common Stock" and "--Preferred Stock."
(12) Represents immediately exercisable warrants to purchase 71,720 shares of
Common Stock. The address of PMI is 610 Newport Center Drive, Suite
1100, Newport Beach, California 92660. The Company intends to repurchase
these warrants for approximately $2.7 million with the net proceeds of
the Offerings. See "Use of Proceeds" and "Certain Transactions."
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DESCRIPTION OF SECURITIES
SENIOR NOTES
GENERAL
The Senior Notes will be issued pursuant to the Indenture between the
Company and Fleet National Bank, as trustee (the "Trustee"). The terms of the
Senior Notes include those stated in the Indenture, the form of which has
been filed as an exhibit to the Registration Statement of which this
Prospectus is a part, and those made part of the Indenture by reference to
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), as
in effect on the date of original issuance of the Senior Notes. The Senior
Notes are subject to all such terms, and holders of the Senior Notes are
referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of the material provisions of the Indenture
does not purport to be complete and is qualified in its entirety by reference
to the Indenture, including the definitions therein of certain terms used
below.
As of the date of the Indenture, all of the Company's Subsidiaries will be
Restricted Subsidiaries. However, under certain circumstances, the Company
will be able to designate each of its existing Subsidiaries, Subsidiaries
formed by the Company or Subsidiaries acquired by the Company after the
original issuance of the Senior Notes as Non-Restricted Subsidiaries.
Non-Restricted Subsidiaries will not be subject to many of the restrictive
covenants set forth in the Indenture.
The Senior Notes will be limited to $100,000,000 in aggregate principal
amount and will mature on , 2006. The Senior Notes will bear interest
at the rate set forth on the front cover of this Prospectus. Interest on the
Senior Notes is payable semi-annually in cash in arrears on and in
each year, commencing , 1997, to holders of record of Senior Notes at the
close of business on the or immediately preceding such interest
payment date. Interest on the Senior Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
the date of original issuance. Interest will be computed on the basis of a
360-day year of twelve 30-day months. The Senior Notes will be issued in
denominations of $1,000 and integral multiples thereof.
Principal of, premium, if any, and interest on the Senior Notes will be
payable, and the Senior Notes may be presented for registration of transfer
or exchange, at the office of the Paying Agent and Registrar in New York, New
York. Holders of Senior Notes must surrender their Senior Notes to the Paying
Agent to collect principal payments, and the Company may pay principal and
interest by check and may mail checks to a holder's registered address;
provided that all payments with respect to Global Senior Notes and
Certificated Senior Notes, the holders of which have given wire transfer
instructions to the Company, will be required to be made by wire transfer of
immediately available funds to the accounts specified by the holders thereof.
The Registrar may require payment of a sum sufficient to cover any transfer
tax or similar governmental charge payable in connection with certain
transfers or exchanges. See "--Transfer and Exchange." The Trustee will
initially act as Paying Agent and Registrar. The Company may change the
Paying Agent or Registrar without prior notice to holders of Senior Notes,
and the Company or any of its Subsidiaries may act as Paying Agent or
Registrar.
The Senior Notes will be senior unsecured obligations of the Company, will
rank senior in right of payment to all Subordinated Indebtedness of the
Company, and will rank pari passu in right of payment with all Senior
Indebtedness of the Company. The Senior Notes will effectively rank junior to
all secured Indebtedness of the Company and to any Indebtedness of the
Company's subsidiaries, including borrowings under the Credit Agreement. As
of September 30, 1996, on a pro forma basis after giving effect to the
Offerings and the application of the net proceeds therefrom, the aggregate
principal amount of outstanding secured Indebtedness of the Company and
Indebtedness of the Company's subsidiaries to which the Senior Notes would have
been effectively junior would have been approximately $8.0 million. In addition,
the Company's obligations under the Senior Notes will be subject to the BKC
Intercreditor Agreement. See "--BKC Intercreditor Agreement." The Indenture
will permit the Company and its Subsidiaries to incur additional
Indebtedness, including secured Indebtedness, subject to certain limitations.
In addition, under the terms of the Indenture, the Company's Subsidiaries may
incur certain Indebtedness pursuant
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to agreements that may restrict the ability of such Subsidiaries to make
dividends or other intercompany transfers to the Company necessary to service
the Company's obligations, including its obligations under the Senior Notes.
The Indenture also will not limit the Company's incurrence of new obligations
under franchise, royalty and lease obligations with BKC. Any failure by the
Company to satisfy its obligations with respect to the Senior Notes at
maturity (with respect to payments of principal) or prior thereto (with
respect to payments of interest or required repurchases) would constitute a
default under the Indenture and the Credit Agreement and could cause a
default under agreements governing other indebtedness of the Company and its
Subsidiaries. See "Risk Factors--Holding Company Structure; Dependence on
Subsidiaries; Limitations on Access to Cash Flow of the Subsidiaries,"
"--Certain Covenants" and "Description of Certain Indebtedness." The maximum
principal amount of indebtedness which the Company's subsidiaries may incur
under the Credit Agreement as in effect on the date of the original issuance
of the Senior Notes is $75,000,000. See "Risk Factors--Ranking of Senior
Notes, Senior Preferred Stock and Exchange Debentures" and "Description of
Certain Indebtedness."
BKC INTERCREDITOR AGREEMENT
Pursuant to the BKC Intercreditor Agreement, the Company's obligations
under the Senior Notes are subject to the prior payment in full of all
indebtedness, liabilities and other obligations of the Company and its
Subsidiaries to BKC under the BKC franchise agreements, BKC leases and any
other indebtedness of the Company and its Subsidiaries to BKC, whenever and
however arising, whether primary or secondary, absolute or contingent, and
including charges and costs of collection. In the event the Company defaults
in any such obligation to BKC, the Company will be prohibited from making any
payments in respect of the Senior Notes. See "Risk Factors--Holding Company
Structure; Dependence on Subsidiaries; Limitations on Access to Cash Flow of
the Subsidiaries" and "--BKC Intercreditor Agreement."
REDEMPTION OF SENIOR NOTES
Optional Redemption. The Senior Notes may not be redeemed at the option of
the Company prior to , 2001 other than out of the net proceeds of one or
more Equity Offerings, as and to the extent described below. During the
12-month period beginning on of the years indicated below, the Senior
Notes will be redeemable, at the option of the Company, in whole or in part,
on at least 30 but not more than 60 days' notice to each holder of Senior
Notes to be redeemed, at the redemption prices (expressed as percentages of
the principal amount) set forth below, plus any accrued and unpaid interest
to the redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2001 .................... %
2002 .................... %
2003 .................... %
2004 and thereafter .... 100%
</TABLE>
Notwithstanding the foregoing, prior to , 1999, the Company may (but
shall not have the obligation to) redeem up to 35% of the original aggregate
principal amount of the Senior Notes at a redemption price of % of the
principal amount thereof, plus accrued and unpaid interest to the redemption
date, with the net proceeds of one or more Equity Offerings; provided that at
least 65% of the aggregate principal amount of Senior Notes originally issued
remain outstanding immediately after the occurrence of any such redemption;
and provided, further, that any such redemption shall occur within 60 days of
the date of the closing of any such Equity Offering. The restrictions on
optional redemptions contained in the Indenture do not limit the Company's
right to separately make open market, privately negotiated or other purchases
of Senior Notes from time to time.
Mandatory Redemption. Except as set forth below under "--Mandatory Offers
to Purchase Senior Notes--Change of Control" and "--Asset Sales," the Company
is not required to make any mandatory redemption, purchase or sinking fund
payments with respect to the Senior Notes.
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MANDATORY OFFERS TO PURCHASE SENIOR NOTES
Change of Control. Upon the occurrence of a Change of Control (such date
being the "Change of Control Trigger Date"), each holder of Senior Notes
shall have the right to require the Company to purchase all or any part
(equal to $1,000 or an integral multiple thereof) of such holder's Senior
Notes pursuant to an Offer (as defined) at a purchase price in cash equal to
101% of the aggregate principal amount thereof, plus any accrued and unpaid
interest to the date of purchase. The Company shall furnish to the Trustee,
at least two Business Days before notice of an Offer is mailed to all holders
of Senior Notes pursuant to the procedures described below under
"--Procedures for Offers," notice that the Offer is being made. Transactions
constituting a Change of Control are not limited to hostile takeover
transactions not approved by the current management of the Company. Except as
described under "--Change of Control," the Indenture does not contain
provisions that permit the holders of Senior Notes to require the Company to
purchase or redeem the Senior Notes in the event of a takeover,
recapitalization or similar restructuring, including an issuer
recapitalization or similar transaction with management.
The Company expects that prepayment of the Senior Notes following a Change
of Control would, and the exercise by holders of Senior Notes of the right to
require the Company to purchase Senior Notes may, constitute a default under
the Credit Agreement or other indebtedness of the Company. The Indenture will
provide that, prior to the mailing of the notice referred to below, but in
any event within 30 days following any Change of Control Trigger Date, the
Company covenants to (i) repay in full and terminate all commitments under
Indebtedness under the Credit Agreement and all other Senior Indebtedness the
terms of which require repayment upon a Change of Control or offer to repay
in full and terminate all commitments under all Indebtedness under the Credit
Agreement and all other such Senior Indebtedness and to repay the
Indebtedness owed to each lender which has accepted such offer or (ii) obtain
the requisite consents under the Credit Agreement and all such other Senior
Indebtedness to permit the repurchase of the Senior Notes as provided below.
The Company shall first comply with the covenant in the immediately preceding
sentence before it shall be required to repurchase Senior Notes pursuant to
the provisions described below. The Company's failure to comply with this
covenant shall constitute an Event of Default described in clause (c) and not
in clause (b) under "--Events of Default" below. In the event a Change of
Control occurs, the Company will likely be required to refinance the
Indebtedness outstanding under the Credit Agreement and the Senior Notes. If
there is a Change of Control, any Indebtedness under the Credit Agreement
could be accelerated. There is no limitation in the Indenture which prohibits
the Company from using the proceeds from the offering of the Senior Notes to
finance mandatory purchases of Senior Notes upon a Change of Control.
Moreover, there can be no assurance that sufficient funds will be available
at the time of any Change of Control to make any required repurchases of the
Senior Notes given the Company's high leverage. The financing of the
purchases of Senior Notes could additionally result in a default under the
Credit Agreement or other indebtedness of the Company. The occurrence of a
Change of Control may also have an adverse impact on the ability of the
Company to obtain additional financing in the future. The ability of holders
of Senior Notes to require that the Company purchase Senior Notes upon a
Change of Control may deter persons from effecting a takeover of the Company.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the holders of Senior Notes to
require that the Company purchase or redeem the Senior Notes in the event of
a takeover, recapitalization or similar restructuring. See "Risk
Factors--Leverage and Coverage" and "--Holding Company Structure; Dependence
on Subsidiaries; Limitations on Access to Cash Flow of the Subsidiaries."
Asset Sales. The Indenture provides that the Company may not, and may not
permit any Restricted Subsidiary to, directly or indirectly, consummate an
Asset Sale (including the sale of any of the Capital Stock of any Restricted
Subsidiary) providing for Net Proceeds in excess of $2,500,000 unless at
least 75% of the Net Proceeds from such Asset Sale are applied (in any manner
otherwise permitted by the Indenture) to one or more of the following
purposes in such combination as the Company shall elect: (a) an investment in
another asset or business in the same line of business as, or a line of
business similar to that of, the line of business of the Company and its
Restricted Subsidiaries at the time of the Asset Sale; provided that such
investment occurs on or prior to the 365th day following the date of such
Asset Sale (the "Asset Sale Disposition Date"), (b) to reimburse the Company
or its Subsidiaries for expenditures
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made, and costs incurred, to repair, rebuild, replace or restore property
subject to loss, damage or taking to the extent that the Net Proceeds consist
of insurance proceeds received on account of such loss, damage or taking, (c)
the purchase, redemption or other prepayment or repayment of outstanding
Senior Indebtedness of the Company or Indebtedness of the Company's
Restricted Subsidiaries on or prior to the 365th day following the Asset Sale
Disposition Date or (d) an Offer expiring on or prior to the Purchase Date
(as defined herein). The Indenture also provides that the Company may not,
and may not permit any Restricted Subsidiary to, directly or indirectly,
consummate an Asset Sale unless at least 75% of the consideration thereof
received by the Company or such Restricted Subsidiary is in the form of cash,
cash equivalents or marketable securities; provided that, solely for purposes
of calculating such 75% of the consideration, the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet or in the notes thereto, excluding contingent
liabilities and trade payables) of the Company or any Restricted Subsidiary
(other than liabilities that are by their terms subordinated to the Senior
Notes) that are assumed by the transferee of any such assets and (y) any
notes or other obligations received by the Company or any such Restricted
Subsidiary from such transferee that are promptly, but in no event more than
30 days after receipt, converted by the Company or such Restricted Subsidiary
into cash (to the extent of the cash received), shall be deemed to be cash
and cash equivalents for purposes of this provision. Any Net Proceeds from
any Asset Sale that are not applied or invested as provided in the first
sentence of this paragraph shall constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $5,000,000 (such date
being an "Asset Sale Trigger Date"), the Company shall make an Offer to all
holders of Senior Notes to purchase the maximum principal amount of the
Senior Notes then outstanding that may be purchased out of Excess Proceeds,
at an offer price in cash in an amount equal to 100% of principal amount
thereof plus any accrued and unpaid interest to the Purchase Date in
accordance with the procedures set forth in the Indenture. Notwithstanding
the foregoing, to the extent that any or all of the Net Proceeds of an Asset
Sale is prohibited or delayed by applicable local law from being repatriated
to the United States, the portion of such Net Proceeds so affected will not
be required to be applied as described in this or the preceding paragraph,
but may be retained for so long, but only for so long, as the applicable
local law prohibits repatriation to the United States.
To the extent that any Excess Proceeds remain after completion of an
Offer, the Company may use such remaining amount for general corporate
purposes. If the aggregate principal amount of Senior Notes surrendered by
holders thereof exceeds the amount of Excess Proceeds, the Trustee shall
select the Senior Notes to be purchased on a pro rata basis. Upon completion
of an Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
Although the Credit Agreement will permit dividends from the Company's
Subsidiaries to the Company for the purpose of paying interest on the Senior
Notes, dividends for other purposes, such as repurchases of Senior Notes by
the Company upon an Asset Sale, will not be permitted under the terms of the
Credit Agreement. Accordingly, the Company would need to seek the consent of
its lenders under the Credit Agreement in order to repurchase Senior Notes
with the Net Proceeds of an Asset Sale. See "Risk Factors--Holding Company
Structure; Dependence on Subsidiaries; Limitation on Access to Cash Flow of
the Subsidiaries."
Procedures for Offers. Within 30 days following any Change of Control
Trigger Date or Asset Sale Trigger Date, subject to the provisions of the
Indenture, the Company shall mail a notice to each holder of Senior Notes at
such holder's registered address a notice stating: (a) that an offer (an
"Offer") is being made pursuant to a Change of Control or an Asset Sale
Trigger Date, as the case may be, the length of time the Offer shall remain
open and the maximum principal amount of Senior Notes that will be accepted
for payment pursuant to such Offer, (b) the purchase price, the amount of
accrued and unpaid interest as of the purchase date, and the purchase date
(which shall be no earlier than 30 days and no later than 40 days from the
date such notice is mailed (the "Purchase Date")), and (c) such other
information required by the Indenture and applicable law and regulations.
On the Purchase Date for any Offer, the Company will, to the extent
required by the Indenture and such Offer, (1) in the case of an Offer
resulting from a Change of Control, accept for payment all Senior
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Notes or portions thereof tendered pursuant to such Offer and, in the case of
an Offer resulting from an Asset Sale Trigger Date, accept for payment the
maximum principal amount of Senior Notes or portions thereof tendered
pursuant to such Offer that can be purchased out of Excess Proceeds, (2)
deposit with the Paying Agent the aggregate purchase price of all Senior
Notes or portions thereof accepted for payment and any accrued and unpaid
interest on such Senior Notes as of the Purchase Date, and (3) deliver or
cause to be delivered to the Trustee all Senior Notes tendered pursuant to
the Offer. The Paying Agent shall promptly mail to each holder of Senior
Notes or portions thereof accepted for payment an amount equal to the
purchase price for such Senior Notes plus any accrued and unpaid interest
thereon, and the Trustee shall promptly authenticate and mail (or cause to be
transferred by book-entry) to such holder of Senior Notes accepted for
payment in part a new Senior Note equal in principal amount to any
unpurchased portion of the Senior Notes and any Senior Note not accepted for
payment in whole or in part shall be promptly returned to the holder thereof.
The Company will publicly announce the results of the Offer on or as soon as
practicable after the Purchase Date.
The Company will comply with any tender offer rules under the Exchange Act
which may then be applicable, including Rule 14e-1, in connection with an
offer required to be made by the Company to repurchase the Senior Notes as a
result of a Change of Control or an Asset Sale Trigger Date. To the extent
that the provisions of any securities laws or regulations conflict with
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the Indenture by virtue thereof.
Selection and Notice. In the event of a redemption or purchase of less
than all of the Senior Notes, the Senior Notes to be redeemed or purchased
will be chosen by the Trustee pro rata, by lot or by any other method that
the Trustee considers fair and appropriate and, if the Senior Notes are
listed on any securities exchange, by a method that complies with the
requirements of such exchange; provided that, if less than all of a holder's
Senior Notes are to be redeemed or accepted for payment, only principal
amounts of $1,000 or multiples thereof may be selected for redemption or
accepted for payment. On and after any redemption or purchase date, interest
shall cease to accrue on the Senior Notes or portions thereof called for
redemption or accepted for payment. Notice of any redemption or offer to
purchase will be mailed at least 30 days but not more than 60 days before the
redemption or purchase date to each holder of Senior Notes to be redeemed or
purchased at such holder's registered address.
CERTAIN COVENANTS
The Indenture contains, among other things, the following covenants:
Limitation on Restricted Payments. The Indenture provides that the Company
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, (i) declare or pay any dividend or make any distribution on
account of the Company's or such Restricted Subsidiary's Capital Stock or
other Equity Interests (other than dividends or distributions payable in
Capital Stock or other Equity Interests (other than Disqualified Stock) of
the Company and dividends or distributions payable by a Restricted Subsidiary
to a Restricted Subsidiary or to the Company); (ii) purchase, redeem or
otherwise acquire or retire for value any Capital Stock or other Equity
Interests of the Company or any of its Restricted Subsidiaries (other than
any such Equity Interest purchased from the Company or any Restricted
Subsidiary for fair market value (as determined by the Board of Directors in
good faith)); (iii) voluntarily prepay any Subordinated Indebtedness of the
Company, whether any such Subordinated Indebtedness is outstanding on, or
issued after, the date of original issuance of the Senior Notes except as
specifically permitted by the covenants of the Indenture as described herein;
or (iv) make any Restricted Investment (all such dividends, distributions,
purchases, redemptions, acquisitions, retirements, prepayments and Restricted
Investments being collectively referred to as "Restricted Payments"), if, at
the time of such Restricted Payment:
(a) a Default or Event of Default shall have occurred and be continuing
or shall occur as a consequence thereof; or
(b) immediately after such Restricted Payment and after giving effect
thereto on a Pro Forma Basis, the Company shall not be able to issue $1.00
of additional Indebtedness pursuant to the first sentence of the
"Limitation on Incurrence of Indebtedness" covenant; or
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(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made after the date of original issuance of the Senior
Notes, without duplication, exceeds the sum of: (1) 50% of the aggregate
Consolidated Net Income (including, for this purpose, gains from Asset
Sales and, to the extent not included in Consolidated Net Income, any gain
from a sale or disposition of a Restricted Investment) of the Company (or,
in case such aggregate is a loss, 100% of such loss) for the period (taken
as one accounting period) from the beginning of the first fiscal quarter
commencing immediately after the date of original issuance of the Senior
Notes and ended as of the Company's most recently ended fiscal quarter at
the time of such Restricted Payment; plus (2) 100% of the aggregate net
cash proceeds and the fair market value of any property or securities (as
determined by the Board of Directors in good faith) received by the
Company from the issue or sale of Capital Stock or other Equity Interests
of the Company subsequent to the date of original issuance of the Senior
Notes (other than (x) Capital Stock or other Equity Interests issued or
sold to a Restricted Subsidiary and (y) the issuance or sale of
Disqualified Stock); plus (3) $5,000,000; plus (4) the amount by which the
principal amount of and any accrued interest on either (A) Senior
Indebtedness of the Company or (B) any Indebtedness of any Restricted
Subsidiary is reduced on the Company's consolidated balance sheet upon the
conversion or exchange other than by a Restricted Subsidiary subsequent to
the date of original issuance of the Senior Notes of any Indebtedness of
the Company or any Restricted Subsidiary (not held by the Company or any
Restricted Subsidiary) for Capital Stock or other Equity Interests (other
than Disqualified Stock) of the Company (less the amount of any cash, or
the fair market value of any other property or securities (as determined
by the Board of Directors in good faith), distributed by the Company or
any Restricted Subsidiary (to persons other than the Company or any other
Restricted Subsidiary) upon such conversion or exchange); plus (5) if any
Non-Restricted Subsidiary is redesignated as a Restricted Subsidiary, the
value of the Restricted Payment that would result if such Subsidiary were
redesignated as a Non-Restricted Subsidiary at such time, as determined in
accordance with the second sentence of the "Designation of Restricted and
Non-Restricted Subsidiaries" covenant; provided, however, that for
purposes of this clause (5), the value of any redesignated Non-Restricted
Subsidiary shall be reduced by the amount that any such redesignation
replenishes or increases the amount of Restricted Investments permitted to
be made pursuant to clause (ii) of the next sentence.
Notwithstanding the foregoing, the Indenture shall not prohibit as
Restricted Payments:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration, such payment would
comply with all covenants of such Indenture (including, but not limited to,
the "Limitation on Restricted Payments" covenant);
(ii) making Restricted Investments at any time, and from time to time, in
an aggregate outstanding amount of $10,000,000 after the date of original
issuance of the Senior Notes (it being understood that if any Restricted
Investment after the date of original issuance of the Senior Notes pursuant
to this clause (ii) is sold, transferred or otherwise conveyed to any person
other than the Company or a Restricted Subsidiary, the portion of the net
cash proceeds or fair market value of securities or properties paid or
transferred to the Company and its Restricted Subsidiaries in connection with
such sale, transfer or conveyance that relates or corresponds to the
repayment or return of the original cost of such a Restricted Investment will
replenish or increase the amount of Restricted Investments permitted to be
made pursuant to this clause (ii), so that up to $10,000,000 of Restricted
Investments may be outstanding under this clause (ii) at any given time);
provided that, without otherwise limiting this clause (ii), any Restricted
Investment in a Subsidiary made pursuant to this clause (ii) is made for fair
market value (as determined by the Board of Directors in good faith);
(iii) the repurchase, redemption, retirement or acquisition of the
Company's stock from the executives, management, employees or consultants of
the Company or its Subsidiaries pursuant to the terms of any subscription,
stockholder or other agreement or plan, up to an aggregate amount not to
exceed $5,000,000;
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(iv) any loans, advances, distributions or payments from the Company to
its Restricted Subsidiaries, or any loans, advances, distributions or
payments by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary, in each case pursuant to intercompany Indebtedness, intercompany
management agreements and other intercompany agreements and obligations;
(v) the purchase, redemption, retirement or other acquisition of (a) any
Senior Indebtedness of the Company or any Indebtedness of a Restricted
Subsidiaries required by its terms to be purchased, redeemed, retired or
acquired with the net proceeds from asset sales (as defined in the instrument
evidencing such Senior Indebtedness or Indebtedness) or upon a change of
control (as defined in the instrument evidencing such Senior Indebtedness or
Indebtedness) and (b) the Senior Notes pursuant to the "--Change of Control"
or "--Asset Sales" provisions of the Indenture;
(vi) the payment of (a) consulting, financial and investment banking fees
under the TJC Agreement, provided, that no Default or Event of Default shall
have occurred and be continuing or shall occur as a consequence thereof, and
the Company's Obligations to pay such fees under the TJC Agreement shall be
subordinated expressly to the Company's Obligations in respect of the Senior
Notes, and (b) indemnities, expenses and other amounts under the TJC
Agreement;
(vii) the redemption, repurchase, retirement or other acquisition of any
Capital Stock or other Equity Interests of the Company or any Restricted
Subsidiary in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of other Capital
Stock or other Equity Interests of the Company (other than any Disqualified
Stock) or the redemption, repurchase, retirement or other acquisition of any
Capital Stock or other Equity Interests of any Restricted Subsidiary in
exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to the Company or a Subsidiary of the Company) of other Capital
Stock or other Equity Interests of such Restricted Subsidiary; provided that,
in each case, any net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition, and any Net Income
resulting therefrom, shall be excluded from clauses (c)(1) and (c)(2) of the
preceding paragraph;
(viii) the defeasance, redemption or repurchase of pari passu or
Subordinated Indebtedness with the net cash proceeds from an issuance of
permitted Refinancing Indebtedness or the substantially concurrent sale
(other than to a Subsidiary of the Company) of Capital Stock or other Equity
Interests of the Company (other than Disqualified Stock); provided that any
net cash proceeds that are utilized for any such defeasance, redemption or
repurchase, and any Net Income resulting therefrom, shall be excluded from
clauses (c)(1) and (c)(2) of the preceding paragraph;
(ix) Restricted Investments made or received in connection with the sale,
transfer or disposition of any business, properties or assets of the Company
or any Restricted Subsidiary, provided, that if such sale, transfer or
disposition constitutes an Asset Sale, the Company complies with the "Asset
Sale" provisions of the Indenture;
(x) any Restricted Investment constituting securities or instruments of a
person issued in exchange for trade or other claims against such person in
connection with a financial reorganization or restructuring of such person;
(xi) payments in connection with the application of the net proceeds of
the Offerings as described under "Use of Proceeds";
(xii) in the event that the Company elects to issue the Exchange
Debentures in exchange for the Senior Preferred Stock, any cash payments made
in lieu of the issuance of Exchange Debentures having a face amount of less
than $1,000 and any cash payments representing accrued and unpaid dividends
on the Preferred Stock at the time of the exchange;
(xiii) redemption or repurchase of the Senior Preferred Stock or the
Exchange Debentures in connection with an offer following a Change of
Control;
(xiv) payments of fees, expenses and indemnities to the directors of the
Company and its Restricted Subsidiaries; and
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(xv) the issuance of the Exchange Debentures in exchange for the Company's
Senior Preferred Stock in accordance with its terms, provided that the
Company is then permitted to incur the Indebtedness represented by the
Exchange Debentures. See "--Senior Preferred Stock--Exchange."
Limitation on Incurrence of Indebtedness. The Indenture provides that the
Company will not, and will not permit any Restricted Subsidiary to, issue any
Indebtedness (other than the Indebtedness represented by the Senior Notes)
unless the Company's Cash Flow Coverage Ratio for its four full fiscal
quarters next preceding the date such additional Indebtedness is issued would
have been at least 2.0 to 1 determined on a Pro Forma Basis (including, for
this purpose, any other Indebtedness incurred since the end of the applicable
four quarter period) as if such additional Indebtedness and any other
Indebtedness issued since the end of such four quarter period had been issued
at the beginning of such four-quarter period.
The foregoing limitations will not apply to the issuance of:
(i) Indebtedness of the Company and/or its Restricted Subsidiaries as
measured on such date of issuance in an aggregate principal amount
outstanding on any such date of issuance not exceeding $75,000,000
aggregate principal amount under the Credit Agreement; provided that the
aggregate principal amount of Indebtedness outstanding under this clause
(i) together with the aggregate principal amount of Indebtedness
outstanding under clause (iii) below shall not exceed $80,000,000 in
aggregate principal amount at any one time outstanding;
(ii) Indebtedness of the Company and its Restricted Subsidiaries in
connection with capital leases, sale and leaseback transactions, purchase
money obligations, capital expenditures or similar financing transactions
relating to: (A) their properties, assets and rights as of the date of
original issuance of the Senior Notes up to $5,000,000 in aggregate
principal amount, or (B) their properties, assets and rights acquired
after the date of original issuance of the Senior Notes, provided that the
aggregate principal amount of such Indebtedness under this clause (ii)(B)
does not exceed 100% of the cost of such properties, assets and rights;
(iii) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount up to $25,000,000 (all or
any portion of which may be issued as additional Indebtedness under the
Credit Agreement); provided that the aggregate principal amount of
Indebtedness outstanding under this clause (iii) together with the
aggregate principal amount of Indebtedness outstanding under clause (i)
above shall not exceed $80,000,000 in aggregate principal amount at any
one time outstanding; and
(iv) Other Permitted Indebtedness.
Notwithstanding the foregoing, no Restricted Subsidiary shall under any
circumstances issue a guarantee of any Indebtedness of the Company except for
guarantees issued by Restricted Subsidiaries pursuant to the "Limitation on
Guarantees of Company Indebtedness by Restricted Subsidiaries" covenant,
provided, however, that the foregoing will not limit or restrict guarantees
issued by Restricted Subsidiaries in respect of Indebtedness of other
Restricted Subsidiaries.
Limitation on Liens. The Indenture provides that the Company shall not,
and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume or suffer to exist any Lien (other than
Permitted Liens) upon any property or asset now owned or hereafter acquired
by them, or any income or profits therefrom, or assign or convey any right to
receive income therefrom; provided, however, that in addition to creating
Permitted Liens on its properties or assets, the Company and any of its
Restricted Subsidiaries may create any Lien upon any of their properties or
assets (including, but not limited to, any Capital Stock of its Subsidiaries)
if the Senior Notes are equally and ratably secured.
Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries. The Indenture provides that the Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective,
any encumbrance or restriction on the ability of any Restricted Subsidiary
to: (a) pay dividends or make any other distributions on its Capital Stock or
any other interest or participation in, or measured by, its profits,
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owned by the Company or any Restricted Subsidiary, or pay any Indebtedness
owed to, the Company or any Restricted Subsidiary, (b) make loans or advances
to the Company, or (c) transfer any of its properties or assets to the
Company, except for such encumbrances or restrictions existing under or by
reason of:
(i) applicable law,
(ii) Indebtedness permitted (A) under the first sentence of the first
paragraph of the "Limitation on Incurrence of Indebtedness" covenant, (B)
under clauses (i) and (iii) of the second paragraph of the "Limitation on
Incurrence of Indebtedness" covenant and clauses (i), (v), (vi), (vii),
(ix), (x) and (xi) of the definition of Other Permitted Indebtedness, or
(C) by agreements and transactions permitted under the "Limitation on
Restricted Payments" covenant,
(iii) customary provisions restricting subletting or assignment of any
lease or license of the Company or any Restricted Subsidiary,
(iv) (A) the terms of the BKC Intercreditor Agreement and any other BKC
Agreements, and (B) customary provisions of any other franchise,
distribution or similar agreement,
(v) any instrument governing Indebtedness or any other encumbrance or
restriction of a person acquired by the Company or any Restricted
Subsidiary at the time of such acquisition, which encumbrance or
restriction is not applicable to any person, or the properties or assets
of any person, other than the person, or the property or assets of the
person, so acquired,
(vi) Indebtedness or other agreements existing on the date of original
issuance of the Senior Notes,
(vii) any Refinancing Indebtedness permitted under the "Limitation on
Incurrence of Indebtedness" covenant and clauses (i), (v), (vi), (vii),
(ix), (x) and (xi) of the definition of Other Permitted Indebtedness;
provided that the encumbrances and restrictions created in connection with
such Refinancing Indebtedness are no more restrictive in any material
respect with regard to the interests of the holders of Senior Notes than
the encumbrances and restrictions in the refinanced Indebtedness,
(viii) any restrictions, with respect to a Restricted Subsidiary, imposed
pursuant to an agreement that has been entered into for the sale or
disposition of the stock, business, assets or properties of such
Restricted Subsidiary,
(ix) the terms of any Indebtedness of the Company incurred in connection
with the "Limitation on Incurrence of Indebtedness" covenant, provided
that the terms of such Indebtedness constitute no greater encumbrance or
restriction on the ability of any Restricted Subsidiary to pay dividends
or make distributions, make loans or advances or transfer properties or
assets than is otherwise permitted by this covenant, or
(x) the terms of purchase money obligations, but only to the extent such
purchase money obligations restrict or prohibit the transfer of the
property so acquired.
Nothing contained in this covenant shall prevent the Company from entering
into any agreement or instrument providing for the incurrence of Permitted
Liens or restricting the sale or other disposition of property or assets of
the Company or any of its Restricted Subsidiaries that are subject to
Permitted Liens.
Limitation on Transactions With Affiliates. The Indenture provides that
neither the Company nor any of its Restricted Subsidiaries may make any loan,
advance, guarantee or capital contribution to, or for the benefit of, or
sell, lease, transfer or dispose of any properties or assets to, or for the
benefit of, or purchase or lease any property or assets from, or enter into
any or amend any contract, agreement or understanding with, or for the
benefit of, an Affiliate (each such transaction or series of related
transactions that are part of a common plan are referred to as an "Affiliate
Transaction"), except in good faith and on terms that are no less favorable
to the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction on an arm's length basis from
an unrelated person.
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The Indenture further provides that the Company will not, and will not
permit any Restricted Subsidiary to, engage in any Affiliate Transaction
involving aggregate payments or other transfers by the Company and its
Restricted Subsidiaries in excess of $2,500,000 (including cash and non-cash
payments and benefits valued at their fair market value by the Board of
Directors of the Company in good faith) unless the Company delivers to the
Trustee:
(i) a resolution of the Board of Directors of the Company stating that
the Board of Directors (including a majority of the disinterested
directors, if any) has, in good faith, determined that such Affiliate
Transaction complies with the provisions of the Indenture, and
(ii) (A) with respect to any Affiliate Transaction involving the
incurrence of Indebtedness, a written opinion of a nationally recognized
investment banking or accounting firm experienced in the review of similar
types of transactions, (B) with respect to any Affiliate Transaction
involving the transfer of real property, fixed assets or equipment, either
directly or by a transfer of 50% or more of the Capital Stock of a
Restricted Subsidiary which holds any such real property, fixed assets or
equipment, a written appraisal from a nationally recognized appraiser,
experienced in the review of similar types of transactions or (C) with
respect to any Affiliate Transaction not otherwise described in (A) and
(B) above, a written certification from a nationally recognized
professional or firm experienced in evaluating similar types of
transactions, in each case, stating that the terms of such transaction are
fair to the Company or such Restricted Subsidiary, as the case may be,
from a financial point of view.
Notwithstanding the foregoing, this Affiliate Transactions covenant will
not apply to:
(i) transactions between the Company and any Restricted Subsidiary or
between Restricted Subsidiaries;
(ii) payments under the TJC Agreement;
(iii) any other payments or transactions permitted pursuant to the
"Limitation on Restricted Payments" covenant;
(iv) (A) payments and transactions under the Executive Employment
Agreements and (B) reasonable compensation paid to officers, employees or
consultants of the Company or any Subsidiary as determined in good faith
by the Company's Board of Directors or executives;
(v) payments and transactions under the Jaro Leases;
(vi) payments and transactions involving First National Bank of Boston
and its subsidiaries and affiliates in connection with the BBI Note, the
Credit Agreement and any other Indebtedness permitted by the "Limitation
on Incurrence of Indebtedness" covenant; and
(vii) payments and transactions in connection with the Offerings and the
application of the net proceeds therefrom as described under "Use of
Proceeds."
Limitation on Guarantees of Company Indebtedness by Restricted
Subsidiaries. The Company will not permit any Restricted Subsidiary, directly
or indirectly, to guarantee any Indebtedness of the Company other than the
Senior Notes (the "Other Company Indebtedness") unless (A) such Restricted
Subsidiary contemporaneously executes and delivers a supplemental indenture
to the Indenture providing for a guarantee of payment of the Senior Notes
then outstanding by such Restricted Subsidiary to the same extent as the
guarantee of payment (the "Other Company Indebtedness Guarantee") of the
Other Company Indebtedness (including waiver of subrogation, if any) and (B)
if the Other Company Indebtedness guaranteed by such Restricted Subsidiary is
(1) Senior Indebtedness, the guarantee for the Senior Notes shall be pari
passu in right of payment with the Other Company Indebtedness Guarantee and
(2) Subordinated Indebtedness, the guarantee for the Senior Notes shall be
senior in right of payment to the Other Company Indebtedness Guarantee;
provided that the foregoing will not limit or restrict guarantees issued by
Restricted Subsidiaries in respect of Indebtedness of other Restricted
Subsidiaries.
Each guarantee of the Senior Notes created by a Restricted Subsidiary
pursuant to the provisions described in the foregoing paragraph shall be in
form and substance satisfactory to the Trustee and shall
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provide, among other things, that it will be automatically and
unconditionally released and discharged upon (i) any sale, exchange or
transfer permitted by the Indenture of (a) all of the Company's Capital Stock
in such Restricted Subsidiary or (b) the sale of all or substantially all of
the assets of the Restricted Subsidiary and upon the application of the Net
Proceeds from such sale in accordance with the requirements of the "Asset
Sales" provisions described herein or (ii) the release or discharge of the
Other Company Indebtedness Guarantee that resulted in the creation of such
guarantee of the Senior Notes, except a discharge or release by or as a
result of direct payment under such Other Company Indebtedness Guarantee.
Designation of Restricted and Non-Restricted Subsidiaries. The Indenture
provides that, subject to the exceptions described below, from and after the
date of original issuance of the Senior Notes, the Company may designate any
existing or newly formed or acquired Subsidiary as a Non-Restricted
Subsidiary; provided that (i) either (A) the Subsidiary to be so designated
has total assets of $1,000,000 or less or (B) immediately before and after
giving effect to such designation on a Pro Forma Basis: (1) the Company could
incur $1.00 of additional Indebtedness pursuant to the first sentence of the
"Limitation on Incurrence of Indebtedness" covenant determined on a Pro Forma
Basis; and (2) no Default or Event of Default shall have occurred and be
continuing, and (ii) all transactions between the Subsidiary to be so
designated and its Affiliates remaining in effect are permitted pursuant to
the "Limitation on Transactions with Affiliates" covenant. Any Investment
made by the Company or any Restricted Subsidiary which is redesignated from a
Restricted Subsidiary to a Non-Restricted Subsidiary shall thereafter be
considered as having been a Restricted Payment (to the extent not previously
included as a Restricted Payment) made on the day such Subsidiary is
designated a Non-Restricted Subsidiary in the amount of the greater of (i)
the fair market value (as determined by the Board of Directors of the Company
in good faith) of the Equity Interests of such Subsidiary held by the Company
and its Restricted Subsidiaries on such date, and (ii) the amount of the
Investments determined in accordance with GAAP made by the Company and any of
its Restricted Subsidiaries in such Subsidiary.
A Non-Restricted Subsidiary may be redesignated as a Restricted
Subsidiary. The Company may not, and may not permit any Restricted Subsidiary
to, take any action or enter into any transaction or series of transactions
that would result in a Person becoming a Restricted Subsidiary (whether
through an acquisition, the redesignation of a Non-Restricted Subsidiary or
otherwise, but not including through the creation of a new Restricted
Subsidiary) unless, immediately before and after giving effect to such
action, transaction or series of transactions on a Pro Forma Basis, (a) the
Company could incur at least $1.00 of additional Indebtedness pursuant to the
first sentence of "Limitation on Incurrence of Indebtedness" and (b) no
Default or Event of Default shall have occurred and be continuing.
The designation of a Subsidiary as a Restricted Subsidiary or the removal
of such designation is required to be made by a resolution adopted by a
majority of the Board of Directors of the Company stating that the Board of
Directors has made such designation in accordance with the Indenture, and the
Company is required to deliver to the Trustee such resolution together with
an Officers' Certificate certifying that the designation complies with the
Indenture. Such designation will be effective as of the date specified in the
applicable resolution, which may not be before the date the applicable
Officers' Certificate is delivered to the Trustee.
MERGER OR CONSOLIDATION
The Indenture provides that the Company shall not consolidate or merge
with or into, or sell, lease, convey or otherwise dispose of all or
substantially all of its assets to, any person (any such consolidation,
merger or sale being a "Disposition") unless: (a) the successor corporation
of such Disposition or the corporation to which such Disposition shall have
been made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (b) the successor
corporation of such Disposition or the corporation to which such Disposition
shall have been made expressly assumes the Obligations of the Company,
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee, under the Indenture and the Senior Notes; (c) immediately after such
Disposition, no Default or Event of Default shall exist; and (d) the
corporation formed by or surviving any such Disposition, or the corporation
to which such Disposition shall have been made, shall (i) have
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Consolidated Net Worth (immediately after the Disposition but prior to giving
any pro forma effect to purchase accounting adjustments or Restructuring
Charges resulting from the Disposition) equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the Disposition,
(ii) be permitted immediately after the Disposition by the terms of the
Indenture to issue at least $1.00 of additional Indebtedness determined on a
Pro Forma Basis, and (iii) have a Cash Flow Coverage Ratio, for the four
fiscal quarters immediately preceding the applicable Disposition, and
determined on a Pro Forma Basis, equal to or greater than the actual Cash
Flow Coverage Ratio of the Company for such four quarter period. The
limitations in the Indenture on the Company's ability to make a Disposition
described in this paragraph do not restrict the Company's ability to sell
less than all or substantially all of its assets, such sales being governed
by the "Asset Sales" provisions of the Indenture as described herein.
Prior to the consummation of any proposed Disposition, the Company shall
deliver to the Trustee an Officers' Certificate to the foregoing effect and
an opinion of counsel stating that the proposed Disposition and such
supplemental indenture comply with the Indenture.
PROVISION OF FINANCIAL INFORMATION TO HOLDERS OF SENIOR NOTES
So long as the Senior Notes are outstanding, whether or not the Company is
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall submit for filing with the Commission the annual
reports, quarterly reports and other documents relating to the Company and
its Restricted Subsidiaries that the Company would have been required to file
with the Commission pursuant to Section 13 or 15(d) if the Company were
subject to such reporting requirements. The Company will also provide to all
holders of Senior Notes and file with the Trustee copies of such annual
reports, quarterly reports and other documents required to be furnished to
stockholders generally under the Exchange Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that an Event of Default is: (a) a default for 30
days in payment of interest on the Senior Notes; (b) a default in payment
when due of principal or premium, if any, with respect to the Senior Notes;
(c) the failure of the Company to comply with any of its other agreements or
covenants in, or provisions of, such Indenture or the Senior Notes
outstanding under such Indenture and the Default continues for the period, if
applicable, and after the notice specified in the next paragraph; (d) a
default by the Company or any Restricted Subsidiary under any mortgage,
indenture or instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness for money borrowed by the Company or
any Restricted Subsidiary (or the payment of which is guaranteed by the
Company or any Restricted Subsidiary), whether such Indebtedness or guarantee
now exists or shall be created hereafter, if (1) either (A) such default
results from the failure to pay principal of or interest on any such
Indebtedness (after giving effect to any extensions thereof) or (B) as a
result of such default the maturity of such Indebtedness has been accelerated
prior to its expressed maturity, and (2) the principal amount of such
Indebtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal or interest thereon, or,
because of the acceleration of the maturity thereof, aggregates in excess of
$5,000,000; (e) a failure by the Company or any Restricted Subsidiary to pay
final judgments (not covered by insurance) aggregating in excess of
$5,000,000 which judgments a court of competent jurisdiction does not
rescind, annul or stay within 45 days after their entry; and (f) certain
events of bankruptcy or insolvency involving the Company or any Significant
Subsidiary. In the case of any Event of Default pursuant to clause (a) or (b)
above occurring by reason of any willful action (or inactions) taken (or not
taken) by or on behalf of the Company with the intention of avoiding payment
of the premium that the Company would have to pay pursuant to a redemption of
Senior Notes as described under "--Redemption of Senior Notes--Optional
Redemption," an equivalent premium shall also become and be immediately, due
and payable to the extent permitted by law.
A Default or Event of Default under clause (c) (other than an Event of
Default arising under the "Merger or Consolidation" covenant which shall be
an Event of Default with the notice but without the passage of time specified
in this paragraph) is not an Event of Default under the Indenture until the
Trustee or the holders of at least 25% in principal amount of the Senior
Notes then outstanding notify the
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Company of the Default and the Company does not cure the Default within 30
days after receipt of the notice. A Default or Event of Default under clause
(f) of the preceding paragraph will result in the Senior Notes automatically
becoming due and payable without further action or notice.
Upon the occurrence of an Event of Default, the Trustee or the holders of
at least 25% in principal amount of the then outstanding Senior Notes may
declare all Senior Notes to be due and payable by notice in writing to the
Company and the Trustee specifying the respective Event of Default and that
it is a "notice of acceleration" (the "Acceleration Notice") and the same
shall become immediately due and payable. The holders of a majority in
principal amount of the Senior Notes then outstanding under the Indenture, by
notice to the Trustee, may rescind any declaration of acceleration of such
Senior Notes and its consequences (if the rescission would not conflict with
any judgment or decree) if all existing Events of Default (other than the
nonpayment of principal of or interest on such Senior Notes that shall have
become due by such declaration) shall have been cured or waived. Subject to
certain limitations, holders of a majority in principal amount of the Senior
Notes then outstanding under the Indenture may direct the Trustee in its
exercise of any trust or power. Holders of the Senior Notes may not enforce
the Indenture, except as provided therein. The Trustee may withhold from
holders of Senior Notes notice of any continuing Default or Event of Default
(except a Default or an Event of Default in payment of principal, premium, if
any, or interest) if the Trustee determines that withholding notice is in
their interest.
The holders of a majority in aggregate principal amount of the Senior
Notes then outstanding may on behalf of all holders of such Senior Notes
waive any existing Default or Event of Default under the Indenture and its
consequences, except a continuing Default in the payment of the principal of,
or premium, if any, or interest on, such Senior Notes, which may only be
waived with the consent of each holder of the Senior Notes affected.
Upon any payment or distribution of assets of the Company and its
subsidiaries in a total or partial liquidation, dissolution, reorganization
or similar proceeding, including a Default under clause (f) above involving
certain events of bankruptcy or insolvency of the Company or a Significant
Subsidiary, there may not be sufficient assets remaining to satisfy the
claims of any Holders of Senior Notes given the effective structural
subordination of the Senior Notes to the obligations of the Company under the
Credit Agreement and the BKC Intercreditor Agreement and to the obligations
of the Subsidiaries of the Company.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and upon an officer of the Company
becoming aware of any Default or Event of Default, a statement specifying
such Default or Event of Default.
NO PERSONAL LIABILITY OF OFFICERS, DIRECTORS, EMPLOYEES, STOCKHOLDERS AND
SUBSIDIARIES
No officer, employee, director, stockholder or Subsidiary of the Company
shall have any liability for any Obligations of the Company under the Senior
Notes or the Indenture, or for any claim based on, in respect of, or by
reason of, such Obligations or the creation of any such Obligation, except,
in the case of a Subsidiary, for an express guarantee or an express creation
of any Lien by such Subsidiary of the Company's Obligations under the Senior
Notes issued in accordance with the Indenture. Each holder of the Senior
Notes by accepting a Senior Note waives and releases all such liability, and
such waiver and release is part of the consideration for issuance of the
Senior Notes. The foregoing waiver may not be effective to waive liabilities
under the Federal securities laws and the Commission is of the view that such
a waiver is against public policy.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Company at any time may terminate all its obligations under the Senior
Notes and the Indenture ("legal defeasance option"), except for certain
obligations (including those with respect to the defeasance trust (as defined
herein) and obligations to register the transfer or exchange of the Senior
Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain
a registrar and paying agent in respect of the Senior Notes). The Company at
any time may terminate (1) its obligations under the "Change of Control" and
"Asset Sales" provisions described herein and the covenants described under
"Certain
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Covenants" and certain other covenants in the Indenture, (2) the operation of
clauses (c), (d), (e), and (f) contained in the first paragraph of the
"Events of Default and Remedies" provisions described herein and (3) the
limitations contained in clauses (c) and (d) under the "Merger or
Consolidation" provisions described herein (collectively, a "covenant
defeasance option").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises
its legal defeasance option, payment of the Senior Notes may not be
accelerated because of an Event of Default with respect thereto. If the
Company exercises its covenant defeasance option, payment of the Senior Notes
shall not be accelerated because of an Event of Default specified in clauses
(c), (d), (e) or (f) in the first paragraph under the "Events of Default and
Remedies" provisions described herein or because of the Company's failure to
comply with clauses (c) and (d) under the "Merger or Consolidation"
provisions described herein.
To exercise either defeasance option with respect to the Senior Notes
outstanding, the Company must irrevocably deposit in trust (the "defeasance
trust") with the Trustee money or U.S. Government Obligations (as defined in
the Indenture) for the payment of principal of, premium, if any, and unpaid
interest on the Senior Notes then outstanding to redemption or maturity, as
the case may be, and must comply with certain other conditions, including the
passage of 91 days and the delivery to the Trustee of an opinion of counsel
to the effect that holders of such Senior Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such deposit and
defeasance and will be subject to federal income tax on the same amount and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such opinion of counsel must be based on a ruling of the Internal
Revenue Service or other change in applicable federal income tax law).
TRANSFER AND EXCHANGE
Holders of Senior Notes may transfer or exchange their Senior Notes in
accordance with the Indenture, but the Registrar may require a holder, among
other things, to furnish appropriate endorsements and transfer documents, and
to pay any taxes and fees required by law or permitted by the Indenture, in
connection with any such transfer or exchange. Neither the Company nor the
Registrar is required to issue, register the transfer of, or exchange (i) any
Senior Note selected for redemption or tendered pursuant to an Offer, or (ii)
any Senior Note during the period between (a) the date the Trustee receives
notice of a redemption from the Company and the date the Senior Notes to be
redeemed are selected by the Trustee or (b) a record date and the next
succeeding interest payment date. The registered holder of a Senior Note will
be treated as its owner for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture may be amended or
supplemented with the consent of the holders of at least a majority in
principal amount of the Senior Notes then outstanding under such Indenture,
and any existing Default or Event of Default (other than a payment default)
or compliance with any provision may be waived with the consent of the
holders of a majority in principal amount of the Senior Notes then
outstanding under the Indenture. Without the consent of any holder of Senior
Notes, the Company and the Trustee may amend or supplement the Indenture or
the Senior Notes to cure any ambiguity, defect or inconsistency, to provide
for uncertificated Senior Notes in addition to or in place of certificated
Senior Notes, to provide for the assumption by a successor corporation of the
Company's obligations to the holders of Senior Notes in the case of a
Disposition, to comply with the Trust Indenture Act, or to make any change
that does not materially adversely affect the legal rights of any holder of
Senior Notes.
Without the consent of each holder of Senior Notes affected, the Company
may not (i) reduce the principal amount of Senior Notes whose holders must
consent to an amendment to the Indenture or a waiver under the Indenture;
(ii) reduce the rate of or change the interest payment time of the Senior
Notes, or alter the redemption provisions with respect thereto (other than
the provisions relating to the covenants described above under the caption
"--Mandatory Offers to Purchase Senior Notes--Change of
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Control" and "--Asset Sales") or the price at which the Company is required
to offer to purchase the Senior Notes; (iii) reduce the principal of or
change the fixed maturity of the Senior Notes; (iv) make the Senior Notes
payable in money other than stated in the Senior Notes; (v) make any change
in the provisions concerning waiver of Defaults or Events of Default by
holders of the Senior Notes, or rights of holders of the Senior Notes to
receive payment of principal or interest; or (vi) waive any default in the
payment of principal of, premium, if any, or unpaid interest on, and
Liquidated Damages, if any, with respect to the Senior Notes.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
if it becomes a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest (as
defined in the Trust Indenture Act) it must eliminate such conflict or
resign.
The holders of a majority in principal amount of the Senior Notes then
outstanding will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that if an Event of
Default occurs (and has not been cured), the Trustee will be required, in the
exercise of its power, to use the degree of care and skill of a prudent
person in similar circumstances in the conduct of its own affairs. Subject to
the provisions of the Indenture, the Trustee will be under no obligation to
exercise any of its rights or powers under its Indenture at the request of
any of the holders of the Senior Notes, unless such holders shall have
offered to the Trustee security and indemnity satisfactory to it.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Senior Notes to be resold
as set forth herein will initially be issued in the form of one Global Senior
Note (the "Global Senior Note"). The Global Senior Note will be deposited on
the date of the closing of the sale of the Senior Notes offered hereby (the
"Closing Date") with, or on behalf of, the Depositary and registered in the
name of Cede & Co., as nominee of the Depositary (such nominee being referred
to herein as the "Global Senior Note Holder").
Senior Notes that are issued as described below under "--Certificated
Senior Notes" will be issued in the form of registered definitive
certificates (the "Certificated Senior Notes"). Such Certificated Senior
Notes may, unless the Global Senior Note has previously been exchanged for
Certificated Senior Notes, be exchanged for an interest in the Global Senior
Note representing the principal amount of Senior Notes being transferred.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Underwriters), banks and trust companies, clearing
corporations and certain other organizations. Access to the Depositary's
system is also available to other entities such as banks, brokers, dealers
and trust companies (collectively, the "Indirect Participants" or the
"Depositary's Indirect Participants") that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
Persons who are not Participants may beneficially own securities held by or
on behalf of the Depositary only through the Depositary's Participants or the
Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Senior Note, the Depositary will
credit the accounts of Participants designated by the Underwriters with
portions of principal amount of the Global Senior Note and (ii) ownership of
the Senior Notes evidenced by the Global Senior Note will be shown on, and
the transfer of ownership thereof will be effected only through, records
maintained by the Depositary (with respect to the interests of the
Depositary's Participants), the Depositary's Participants and the
Depositary's Indirect Participants.
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Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer Senior Notes evidenced by the
Global Senior Note will be limited to such extent.
So long as the Global Senior Note Holder is the registered owner of any
Senior Notes, the Global Senior Note Holder will be considered the sole
holder under the Indenture of any Senior Notes evidenced by the Global Senior
Note. Beneficial owners of Senior Notes evidenced by the Global Senior Note
will not be considered the owners or holders thereof under the Indenture for
any purpose, including with respect to the giving of any directions,
instructions or approvals to the Trustee thereunder. Neither the Company nor
the Trustee will have any responsibility or liability for any aspect of the
records of the Depositary or for maintaining, supervising or reviewing any
records of the Depositary relating to the Senior Notes.
Payments in respect of the principal of, premium, if any, and interest on
Senior Notes registered in the name of the Global Senior Note Holder on the
applicable record date will be payable by the Trustee to or at the direction
of the Global Senior Note Holder in its capacity as the registered holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee may treat the persons in whose names Senior Notes, including the
Global Senior Note, are registered as the owners thereof for the purpose of
receiving such payments. Consequently, neither the Company nor the Trustee
has or will have any responsibility or liability for the payment of such
amounts to beneficial owners of Senior Notes. The Company believes, however,
that it is currently the policy of the Depositary to immediately credit the
accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Senior Notes will be governed by standing instructions
and customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
CERTIFICATED SENIOR NOTES
Subject to certain conditions, any person having a beneficial interest in
the Global Senior Note may, upon request to the Trustee, exchange such
beneficial interest for Senior Notes in the form of Certificated Senior
Notes. Upon any such issuance, the Trustee is required to register such
Certificated Senior Notes in the name of, and cause the same to be delivered
to, such person or persons (or the nominee of any thereof). In addition, if
(i) the Company notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance
of Senior Notes in the form of Certificated Senior Notes under the Indenture,
then, upon surrender by the Global Senior Note Holder of its Global Senior
Note, Senior Notes in such form will be issued to each person that the Global
Senior Note Holder and the Depositary identify as being the beneficial owner
of the related Senior Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Senior Note Holder or the Depositary in identifying the beneficial
owners of Senior Notes and the Company and the Trustee may conclusively rely
on, and will be protected in relying on, instructions from the Global Senior
Note Holder or the Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Senior Notes
represented by the Global Senior Note (including principal, premium, if any,
and interest) be made by wire transfer of immediately available funds to the
accounts specified by the Global Senior Note Holder. With respect to
Certificated Senior Notes, the Company will make all payments of principal,
premium, if any, and interest by wire transfer of immediately available funds
to the accounts specified by the holders thereof or, if no such account is
specified, by mailing a check to each such holder's registered address.
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CERTAIN DEFINITIONS
Set forth below are certain of the defined terms used in the Indenture.
Reference is made to the Indenture for the definition of all other terms used
in the Indenture.
"Affiliate" means any of the following: (i) any person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company, (ii) any spouse, immediate family member or other
relative who has the same principal residence as any person described in
clause (i) above, (iii) any trust in which any such persons described in
clause (i) or (ii) above has a beneficial interest, and (iv) any corporation
or other organization of which any such persons described above collectively
own 50% or more of the equity of such entity.
"Asset Sale" means the sale, lease, conveyance or other disposition by the
Company or a Restricted Subsidiary of assets or property whether owned on the
date of original issuance of the Senior Notes or thereafter acquired, in a
single transaction or in a series of related transactions; provided that
Asset Sales will not include such sales, leases, conveyances or dispositions
in connection with (i) the sale or disposition of any Restricted Investment,
(ii) any Equity Offering by (a) the Company or (b) any Restricted Subsidiary
if the proceeds therefrom are used to make mandatory prepayments of
Indebtedness under the Credit Agreement or Indebtedness of the Restricted
Subsidiaries or redeem Senior Notes as described above in "Optional
Redemption," (iii) the surrender or waiver of contract rights or the
settlement, release or surrender of contract, tort or other claims of any
kind, (iv) the sale of inventory in the ordinary course of business, (v) a
sale-leaseback of assets within one year following the acquisition of such
assets, (vi) the grant of any license of patents, trademarks, registration
therefor and other similar intellectual property, (vii) a transfer of assets
by the Company or a Restricted Subsidiary to the Company or a Restricted
Subsidiary, (viii) the designation of a Restricted Subsidiary as a
Non-Restricted Subsidiary pursuant to the "Designation of Restricted and
Non-Restricted Subsidiaries" covenant, (ix) the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company as
permitted under "--Merger or Consolidation," (x) the sale or disposition of
obsolete equipment or other obsolete assets, (xi) Restricted Payments
permitted by the "Limitations on Restricted Payments" covenant, (xii) the BKC
Designated Transfer, or (xiii) the exchange of assets for other non-cash
assets that (a) are useful in the business of the Company and its Restricted
Subsidiaries and (b) have a fair market value at least equal to the fair
market value of the assets being exchanged (as determined by the Board of
Directors in good faith).
"BKC" means Burger King Corporation and its successors and assigns.
"BKC Agreements" means the franchise, trademark, royalty, lease, sublease
and other agreements, obligations and liabilities of the Company and its
Subsidiaries with or to BKC.
"BKC Designated Transfer" means the sale by the Company of up to 10 Burger
King restaurants to a franchisee to be designated by BKC.
"Board of Directors" means the Company's board of directors or any
authorized committee of such board of directors.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of corporate stock, including any
preferred stock.
"Cash Flow" means, for any given period and person, the sum of, without
duplication, Consolidated Net Income, plus (a) the portion of Net Income
attributable to the minority interests in its Restricted Subsidiaries, to the
extent not included in calculating Consolidated Net Income, plus (b) any
provision for taxes based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income, plus (c)
Consolidated Interest Expense, to the extent deducted in computing
Consolidated Net Income, plus (d) the amortization of all intangible assets,
to the extent such amortization was deducted in computing Consolidated Net
Income (including, but not limited to, inventory write-ups, goodwill, debt
and financing costs, and Incentive Arrangements), plus (e) any
non-capitalized transaction costs incurred in connection with actual or
proposed financings, acquisitions or divestitures (including, but not limited
to, financing and refinancing fees, including those in connection with the
Offerings, to the extent deducted in computing Consolidated Net Income), plus
(f) all
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depreciation and all other non-cash charges (including, without limitation,
those charges relating to purchase accounting adjustments and LIFO
adjustments), to the extent deducted in computing Consolidated Net Income,
plus (g) any interest income, to the extent such income was not included in
computing Consolidated Net Income, plus (h) all dividend payments on
preferred stock (whether or not paid in cash) to the extent deducted in
computing Consolidated Net Income, plus (i) any extraordinary or
non-recurring charge or expense arising out of the implementation of SFAS 106
or SFAS 109 to the extent deducted in computing Consolidated Net Income, plus
(j) to the extent not covered in clause (e) above, fees paid or payable in
respect of the TJC Agreement to the extent deducted in computing Consolidated
Net Income, plus (k) the net loss of any person, other than those of a
Restricted Subsidiary, to the extent deducted in computing Consolidated Net
Income, plus (l) net losses in respect of any discontinued operations as
determined in accordance with GAAP, to the extent deducted in computing
Consolidated Net Income; provided, however, that if any such calculation
includes any period during which an acquisition or sale of a person or the
incurrence or repayment of Indebtedness occurred, then such calculation for
such period shall be made on a Pro Forma Basis.
"Cash Flow Coverage Ratio" means, for any given period and person, the
ratio of: (i) Cash Flow, divided by (ii) the sum of Consolidated Interest
Expense and all dividend payments on any series of preferred stock of such
person (except dividends paid or payable in additional shares of Capital
Stock (other than Disqualified Stock) and except for accrued and unpaid
dividends with respect to preferred stock outstanding on the date of original
issuance of the Senior Notes), in each case, without duplication; provided,
however, that if any such calculation includes any period during which an
acquisition or sale of a person or the incurrence or repayment of
Indebtedness occurred, then such calculation for such period shall be made on
a Pro Forma Basis.
"Change of Control" means the occurrence of each of the following: (i) any
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act), excluding the Existing Stockholders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Stock of the Company; and
(ii) the Company consolidates with, or merges with or into, another person or
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person, or any person consolidates
with, or merges with or into, the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is converted
into or exchanged for cash, securities or other property, other than any such
transaction where (A) the outstanding Voting Stock of the Company is
converted into or exchanged for (1) Voting Stock (other than Redeemable
Capital Stock) of the surviving or transferee corporation or (2) cash,
securities and other property in an amount which could be paid by the Company
as a Restricted Payment under the Indenture and (B) immediately after such
transaction no "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), excluding the Existing Stockholders, is the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Stock of the surviving or
transferee corporation; and (iii) during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by
such Board of Directors or whose nomination for election by the stockholders
of the Company was approved by a vote of a majority of the directors then
still in office who are entitled to vote to elect such new director and were
either directors at the beginning of such period or persons whose election as
directors or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors of the Company
then in office.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the Company's assets. Although there is a developing
body of case law interpreting the phrase "substantially all," there is no
precise established definition of the
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phrase under applicable law. Accordingly, the ability of a holder of Senior
Notes to require the Company to repurchase such Senior Notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of
the assets of the Company and its Subsidiaries to another person may be
uncertain.
"Commission" means the Securities and Exchange Commission.
"Consolidated Interest Expense" means, for any given period and person,
the aggregate of the interest expense in respect of all Indebtedness of such
person and its Restricted Subsidiaries for such period, on a consolidated
basis, determined in accordance with GAAP (including amortization of original
issue discount on any such Indebtedness, all non-cash interest payments, the
interest portion of any deferred payment obligation and the interest
component of capital lease obligations, but excluding amortization of
deferred financing fees if such amortization would otherwise be included in
interest expense); provided, however, that for the purpose of the Cash Flow
Coverage Ratio, Consolidated Interest Expense shall be calculated on a Pro
Forma Basis; provided further that any premiums, fees and expenses (including
the amortization thereof) payable in connection with the Offerings and the
application of the net proceeds therefrom or any other refinancing of
Indebtedness will be excluded.
"Consolidated Net Income" means, for any given period and person, the
aggregate of the Net Income of such person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that: (i) the Net Income of any person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, and (ii) Consolidated Net Income of any person
will not include, without duplication, any deduction for: (A) any increased
amortization or depreciation resulting from the write-up of assets pursuant
to Accounting Principles Board Opinion Nos. 16 and 17, as amended or
supplemented from time to time, (B) the amortization of all intangible assets
(including amortization attributable to inventory write-ups, goodwill, debt
and financing costs, and Incentive Arrangements), (C) any non-capitalized
transaction costs incurred in connection with actual or proposed financings,
acquisitions or divestitures (including, but not limited to, financing and
refinancing fees), (D) any extraordinary or nonrecurring charges relating to
any premium or penalty paid, write-off or deferred financing costs or other
financial recapitalization charges in connection with redeeming or retiring
any Indebtedness prior to its stated maturity, and (E) any Restructuring
Charges; provided, however, that for purposes of determining the Cash Flow
Coverage Ratio, Consolidated Net Income shall be calculated on a Pro Forma
Basis.
"Consolidated Net Worth" with respect to any person means, as of any date,
the consolidated equity of the common stockholders of such person (excluding
the cumulated foreign currency translation adjustment), all determined on a
consolidated basis in accordance with GAAP, but without any reduction in
respect of the payment of dividends on any series of such person's preferred
stock if such dividends are paid in additional shares of Capital Stock (other
than Disqualified Stock); provided, however, that Consolidated Net Worth
shall also include, without duplication: (a) the amortization of all
write-ups of inventory, (b) the amortization of all intangible assets
(including amortization of goodwill, debt and financing costs, and Incentive
Arrangements), (c) any non-capitalized transaction costs incurred in
connection with actual or proposed financings, acquisitions or divestitures
(including, but not limited to, financing and refinancing fees), (d) any
increased amortization or depreciation resulting from the write-up of assets
pursuant to Accounting Principles Board Opinion Nos. 16 and 17, as amended
and supplemented from time to time, (e) any extraordinary or nonrecurring
charges or expenses relating to any premium or penalty paid, write-off or
deferred financing costs or other financial recapitalization charges incurred
in connection with redeeming or retiring any Indebtedness prior to its stated
maturity, (f) any Restructuring Charges, and (g) any extraordinary or
non-recurring charge arising out of the implementation of SFAS 106 or SFAS
109; provided, however, that Consolidated Net Worth shall be calculated on a
Pro Forma Basis.
"Credit Agreement" means the Second Amended and Restated Credit Agreement,
dated February 7, 1996, among the Company, certain of its Subsidiaries and
the lenders party thereto in their capacities as lenders thereunder and The
First National Bank of Boston, as agent, together with all loan documents and
instruments thereunder (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement
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thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including, without limitation, increasing the amount of
available borrowings thereunder, and all Obligations with respect thereto, in
each case, to the extent permitted by the "Limitation on Incurrence of
Indebtedness" covenant, or adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness
under such agreement or any successor or replacement agreement and whether by
the same or any other agent, lender or group of lenders.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that by its terms (or by the
terms of any security into which it is convertible--or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part on, or
prior to, the maturity date of the Senior Notes.
"Equity Interests" means Capital Stock or partnership interests or
warrants, options or other rights to acquire Capital Stock or partnership
interests (but excluding (i) any debt security that is convertible into, or
exchangeable for, Capital Stock or partnership interests, and (ii) any other
Indebtedness or Obligation) provided, however, that Equity Interests will not
include any Incentive Arrangements or obligations or payments thereunder.
"Equity Offering" means a public or private offering by the Company for
cash of Capital Stock or other Equity Interests and all warrants, options or
other rights to acquire Capital Stock, other than (i) an offering of
Disqualified Stock or (ii) Incentive Arrangements or obligations or payments
thereunder.
"Exchange Debenture Issue Date" means the date on which the Exchange
Debentures are originally issued under the Exchange Debenture Indenture.
"Executive Employment Agreements" means the Employment Agreements,
effective as of September 1, 1994, between the Company, on the one hand, and
Lawrence E. Jaro, William C. Osborn, Gary W. Hubert, Joel D. Aaseby and Scott
E. Vasatka, on the other hand, as in effect at the date of issuance of the
Senior Notes.
"Existing Stockholders" means (a) The Jordan Company and Jordan/Zalaznick
Capital Corporation and their respective affiliates, principals, partners and
employees, family members of any of the foregoing and trusts for the benefit
of any of the foregoing, including, without limitation, MCIT PLC, Leucadia
National Corporation and Jordan Industries, Inc., and their respective
Subsidiaries and (b) the officers and directors of the Company on the date of
issuance of the Senior Notes and their respective affiliates and family
members and trusts for the benefit of any of the foregoing.
"GAAP" means generally accepted accounting principles, consistently
applied, as of the date of original issuance of the Senior Notes. All
financial and accounting determinations and calculations under the Indenture
will be made in accordance with GAAP.
"Hedging Obligations" means, with respect to any person, the Obligations
of such persons under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, (ii) foreign exchange
contracts, currency swap agreements or similar agreements, and (iii) other
agreements or arrangements designed to protect such person against
fluctuations, or otherwise to establish financial hedges in respect of,
exchange rates, currency rates or interest rates.
"Incentive Arrangements" means any earn-out agreements, stock appreciation
rights, "phantom" stock plans, employment agreements, non-competition
agreements, subscription and stockholders agreements and other incentive and
bonus plans and similar arrangements made in connection with acquisitions of
persons or businesses by the Company or the Restricted Subsidiaries or the
retention of executives, officers or employees by the Company or the
Restricted Subsidiaries.
"Indebtedness" means, with respect to any person, any indebtedness,
whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of
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credit (or reimbursement agreements in respect thereof) or representing the
deferred and unpaid balance of the purchase price of any property (including
pursuant to capital leases), except any such balance that constitutes an
accrued expense or a trade payable, and any Hedging Obligations, if and to
the extent such indebtedness (other than a Hedging Obligation) would appear
as a liability upon a balance sheet of such person prepared on a consolidated
basis in accordance with GAAP, and also includes, to the extent not otherwise
included, the guarantee of items that would be included within this
definition; provided, however, that "Indebtedness" will not include (i) any
Incentive Arrangements or obligations or payments thereunder, or (ii) any BKC
Agreement, except for any indebtedness in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or representing
the deferred and unpaid balance of the purchase price of any property
(including pursuant to capital leases).
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy or similar case or proceeding, or any reorganization,
receivership, liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, or (ii) any assignment for the benefit of creditors
or any other marshalling of assets and liabilities of the Company.
"Investment" means any capital contribution to, or other debt or equity
investment in, any Person.
"issue" means create, issue, assume, guarantee, incur or otherwise become
directly or indirectly liable for any Indebtedness or Capital Stock, as
applicable; provided, however, that any Indebtedness or Capital Stock of a
person existing at the time such person becomes a Restricted Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be deemed
to be issued by such Restricted Subsidiary at the time it becomes a
Restricted Subsidiary. For this definition, the terms "issuing," "issuer,"
"issuance" and "issued" have meanings correlative to the foregoing.
"Jaro Leases" means the leases between the Company's Subsidiaries and
Lawrence E. Jaro relating to two Burger King restaurants as in effect at the
date of original issuance of the Senior Notes.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell and any
filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any person, the net income (loss) of
such person, determined in accordance with GAAP, excluding, however, any gain
or loss, together with any related provision for taxes, realized in
connection with any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions).
"Net Proceeds" means, with respect to any Asset Sale, the aggregate amount
of cash proceeds (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale,
other than the portion of such deferred payment constituting interest, and
including any amounts received as disbursements or withdrawals from any
escrow or similar account established in connection with any such Asset Sale,
but, in either such case, only as and when so received) received by the
Company or any of its Restricted Subsidiaries in respect of such Asset Sale,
net of: (i) the cash expenses of such Asset Sale (including, without
limitation, the payment of principal of, and premium, if any, and interest
on, Indebtedness required to be paid as a result of such Asset Sale (other
than the Senior Notes) and legal, accounting, management and advisory and
investment banking fees and sales commissions), (ii) taxes paid or payable as
a result thereof, (iii) any portion of cash proceeds that the Company
determines in good faith should be reserved for post-closing adjustments, it
being understood and agreed that on the day that all such post-closing
adjustments have been determined, the amount (if any) by which the reserved
amount in respect of such Asset Sale exceeds the actual post-closing
adjustments payable by the Company or any of its Restricted Subsidiaries
shall constitute Net Proceeds on such date, (iv) any relocation expenses and
pension, severance and shutdown costs incurred as a result thereof, and (v)
any deduction or appropriate amounts to be provided by the Company or any of
its Restricted Subsidiaries as a reserve in accordance with GAAP against any
liabilities associated with the
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asset disposed of in such transaction and retained by the Company or such
Restricted Subsidiary after such sale or other disposition thereof,
including, without limitation, pension and other post-employment benefit
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with such transaction.
"Non-Restricted Subsidiary" means any Subsidiary of the Company other than
a Restricted Subsidiary.
"Obligations" means, with respect to any Indebtedness, all principal,
interest, premiums, penalties, fees, indemnities, expenses (including legal
fees and expenses), reimbursement obligations and other liabilities payable
to the holder of such Indebtedness under the documentation governing such
Indebtedness, and any other claims of such holder arising in respect of such
Indebtedness.
"Other Permitted Indebtedness" means:
(i) Indebtedness of the Company and its Restricted Subsidiaries existing
as of the date of original issuance of the Senior Notes and all related
Obligations as in effect on such date;
(ii) Indebtedness of the Company and its Restricted Subsidiaries in
respect of bankers acceptances and letters of credit (including, without
limitation, letters of credit in respect of workers' compensation claims)
issued in the ordinary course of business, or other Indebtedness in
respect of respect to reimbursement-type obligations regarding workers'
compensation claims;
(iii) Refinancing Indebtedness, provided that: (A) the principal amount
of such Refinancing Indebtedness shall not exceed the outstanding
principal amount of Indebtedness (including unused commitments) extended,
refinanced, renewed, replaced, substituted or refunded plus any amounts
incurred to pay premiums, fees and expenses in connection therewith, (B)
the Refinancing Indebtedness shall have a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of
the Indebtedness being extended, refinanced, renewed, replaced,
substituted or refunded; provided, however, that this limitation in this
clause (B) does not apply to Refinancing Indebtedness of Senior
Indebtedness, and (C) in the case of Refinancing Indebtedness of
Subordinated Indebtedness, such Refinancing Indebtedness shall be
subordinated to the Senior Notes at least to the same extent as the
Subordinated Indebtedness being extended, refinanced, renewed, replaced,
substituted or refunded;
(iv) intercompany Indebtedness of and among the Company and its
Restricted Subsidiaries (excluding guarantees by Restricted Subsidiaries
of Indebtedness of the Company not issued in compliance with the
"Limitation on Guarantees of Company Indebtedness by Restricted
Subsidiaries" covenant);
(v) Indebtedness of the Company and its Restricted Subsidiaries incurred
in connection with making permitted Restricted Payments under clauses
(iii), (iv) (but only to the extent that such Indebtedness is provided by
the Company or a Restricted Subsidiary) or (x) of the second sentence of
the "Limitation on Restricted Payments" covenant;
(vi) Indebtedness of any Non-Restricted Subsidiary created after the date
of original issuance of the Senior Notes, provided that such Indebtedness
is nonrecourse to the Company and its Restricted Subsidiaries and the
Company and its Restricted Subsidiaries have no Obligations with respect
to such Indebtedness;
(vii) Indebtedness of the Company and its Restricted Subsidiaries under
Hedging Obligations;
(viii) Indebtedness of the Company and its Restricted Subsidiaries
arising from the honoring by a bank or other financial institution of a
check, draft or similar instrument inadvertently (except in the case of
daylight overdrafts, which will not be, and will not be deemed to be,
inadvertent) drawn against insufficient funds in the ordinary course of
business;
(ix) Indebtedness of any person at the time it is acquired as a
Restricted Subsidiary, provided that such Indebtedness was not issued by
such person in connection with or in anticipation of such acquisition;
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(x) guarantees by Restricted Subsidiaries of Indebtedness of any
Restricted Subsidiary if such Indebtedness so guaranteed is permitted
under the Indenture;
(xi) guarantees by a Restricted Subsidiary of Indebtedness of the Company
if the Indebtedness so guaranteed is permitted under the Indenture and the
Senior Notes are guaranteed by such Restricted Subsidiary to the extent
required by the "Limitation on Guaranties of Company Indebtedness by
Restricted Subsidiaries" covenant;
(xii) guarantees by the Company of Indebtedness of any Restricted
Subsidiary if the Indebtedness so guaranteed is permitted under the
Indenture;
(xiii) Indebtedness of the Company and its Restricted Subsidiaries in
connection with performance, surety, statutory, appeal or similar bonds in
the ordinary course of business;
(xiv) Indebtedness of the Company and its Restricted Subsidiaries in
connection with agreements providing for indemnification, purchase price
adjustments and similar obligations in connection with the sale or
disposition of any of their business, properties or assets; and
(xv) If the Company issues Exchange Debentures in exchange for the Senior
Preferred Stock, the issuance of additional Exchange Debentures in lieu of
cash interest with respect to all interest payments payable on or prior to
, 2001 in accordance with the Exchange Debenture Indenture.
"Permitted Liens" means: (a) with respect to the Company and its
Restricted Subsidiaries,
(1) Liens for taxes, assessments, governmental charges or claims which
are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have
been made therefor;
(2) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business and with respect to amounts not
yet delinquent or being contested in good faith by appropriate
proceedings, if a reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made therefor;
(3) Liens incurred on deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security;
(4) Liens incurred on deposits made to secure the performance of tenders,
bids, leases, statutory obligations, surety and appeal bonds, government
contracts, performance and return of money bonds and other obligations of
a like nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money);
(5) easements, rights-of-way, zoning or other restrictions, minor defects
or irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of the Company or
any of its Restricted Subsidiaries incurred in the ordinary course of
business;
(6) Liens (including extensions, renewals and replacements thereof) upon
property acquired (the "Acquired Property") after the date of original
issuance of the Senior Notes, provided that: (A) any such Lien is created
solely for the purpose of securing Indebtedness representing, or issued to
finance, refinance or refund, the cost (including the cost of
construction) of the Acquired Property, (B) the principal amount of the
Indebtedness secured by such Lien does not exceed 100% of the cost of the
Acquired Property, (C) such Lien does not extend to or cover any property
other than the Acquired Property and any improvements on such Acquired
Property, and (D) the issuance of the Indebtedness to purchase the
Acquired Property is permitted by the "Limitation on Incurrence of
Indebtedness" covenant;
(7) Liens in favor of customs and revenue authorities arising as a matter
of law to secure payment of customs duties in connection with the
importation of goods;
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(8) judgment and attachment Liens not giving rise to an Event of Default;
(9) leases or subleases granted to others not interfering in any material
respect with the business of the Company or any of its Restricted
Subsidiaries;
(10) Liens securing Indebtedness under Hedging Obligations;
(11) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements;
(12) Liens arising out of consignment or similar arrangements for the
sale of goods entered into by the Company or its Restricted Subsidiaries
in the ordinary course of business;
(13) any interest or title of a lessor in property subject to any capital
lease obligation or operating lease;
(14) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(15) Liens existing on the date of original issuance of the Senior Notes
and any extensions, refinancings, renewals, replacements, substitutions or
refundings thereof;
(16) any Lien granted to the Trustee and any substantially equivalent
Lien granted to any trustee or similar institution under any indenture for
Senior Indebtedness permitted by the terms of the Indenture;
(17) Liens in respect of (A) the BKC Intercreditor Agreement or (B) other
BKC Agreements that do not constitute Indebtedness; and
(18) additional Liens at any one time outstanding in respect of
properties or assets where aggregate fair market value does not exceed
$5,000,000 (the fair market value to be determined on the date such Lien
is granted on such properties or assets);
(b) with respect to the Restricted Subsidiaries,
(1) Liens securing Restricted Subsidiaries' reimbursement Obligations
with respect to letters of credit that encumber documents and other
property relating to such letters of credit and the products and proceeds
thereof;
(2) Liens securing Indebtedness issued by Restricted Subsidiaries if such
Indebtedness is (A) under the Credit Agreement, or (B) permitted by the
first sentence of the "Limitation on Incurrence of Indebtedness" covenant,
clauses (i), (ii) or (iii) of the second sentence of the "Limitation on
Incurrence of Indebtedness" covenant, or clauses (i), (iii) (to the extent
the Indebtedness subject to such Refinancing Indebtedness was subject to
Liens), (vi), (vii), (ix) or (x) of the definition of Other Permitted
Indebtedness;
(3) Liens securing intercompany Indebtedness issued by any Restricted
Subsidiary to the Company or another Restricted Subsidiary; and
(4) Liens securing guarantees by Restricted Subsidiaries of Indebtedness
issued by the Company if such guarantees permitted by clause (xi) (but
only in respect of the property, rights and assets of the Restricted
Subsidiaries issuing such guarantees) of the definition of Other Permitted
Indebtedness;
(c) with respect to the Company,
(1) Liens securing Indebtedness issued by the Company if such
Indebtedness is (A) under the Credit Agreement, or (B) if such
Indebtedness is permitted by the "Limitation on Incurrence of
Indebtedness" covenant (including, but not limited to, Indebtedness issued
by the Company under the Credit Agreement pursuant to clause (i) and/or
clause (iii) of the second sentence of "Limitation on Incurrence of
Indebtedness" covenant);
(2) Liens securing Indebtedness of the Company if such Indebtedness is
permitted by clauses (i), (iii) (to the extent the Indebtedness subject to
such Refinancing Indebtedness was subject to Liens) or (vii) of the
definition of Other Permitted Indebtedness;
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(3) Liens securing guarantees by the Company of Indebtedness issued by
Restricted Subsidiaries if such Indebtedness is permitted by the
"Limitation on Incurrence of Indebtedness" covenant (including, but not
limited to, Indebtedness issued by Restricted Subsidiaries under the
Credit Agreement pursuant to clause (i) and/or clause (iii) of the second
sentence of the "Limitation on Incurrence of Indebtedness" covenant) and
if such guarantees are permitted by clause (xii) (but only in respect of
Indebtedness issued by the Restricted Subsidiaries under the Credit
Agreement pursuant to the "Limitation on Incurrence of Indebtedness"
covenant) of the definition of Other Permitted Indebtedness; and
(4) Liens securing the Company's reimbursement obligations with respect
to letters of credit that encumber documents and other property relating
to such letters of credit and the products and proceeds thereof
provided, however, that, notwithstanding any of the foregoing, the Permitted
Liens referred to in clause (c) of this definition shall not include any Lien
on Capital Stock of Restricted Subsidiaries held directly by the Company (as
distinguished from Liens on Capital Stock of Restricted Subsidiaries held by
other Restricted Subsidiaries) other than Liens securing (A) Indebtedness of
the Company issued under the Credit Agreement pursuant to the "Limitation on
Incurrence of Indebtedness" covenant and any permitted Refinancing
Indebtedness of such Indebtedness, (B) Liens in respect of (1) the BKC
Intercreditor Agreement and (2) other BKC Agreements that do not constitute
Indebtedness and (C) guarantees by the Company of Indebtedness issued by
Restricted Subsidiaries under the Credit Agreement pursuant to the
"Limitation on Incurrence of Indebtedness" covenant and any permitted
Refinancing Indebtedness of such Indebtedness.
"Pro Forma Basis" means, for purposes of determining Consolidated Net
Income in connection with the Cash Flow Coverage Ratio (including in
connection with the "Limitation on Restricted Payments" covenant, the
"Designation of Restricted and Non-Restricted Subsidiaries" covenant, the
"Merger or Consolidation" covenant, the incurrence of Indebtedness pursuant
to the first sentence of the "Limitation on Incurrence of Indebtedness"
covenant and Consolidated Net Worth for purposes of the "Merger or
Consolidation" covenant, giving pro forma effect to (x) any acquisition or
sale of a person, business or asset, related incurrence, repayment or
refinancing of Indebtedness or other related transactions, including any
Restructuring Charges which would otherwise be accounted for as an adjustment
permitted by Regulation S-X under the Securities Act or on a pro forma basis
under GAAP, or (y) any incurrence, repayment or refinancing of any
Indebtedness and the application of the proceeds therefrom, in each case, as
if such acquisition or sale and related transactions, restructurings,
consolidations, cost savings, reductions, incurrence, repayment or
refinancing were realized on the first day of the relevant period permitted
by Regulation S-X under the Securities Act or on a pro forma basis under
GAAP. Furthermore, in calculating the Cash Flow Coverage Ratio, (1) interest
on outstanding Indebtedness determined on a fluctuating basis as of the
determination date and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the rate
of interest on such Indebtedness in effect on the determination date; (2) if
interest on any Indebtedness actually incurred on the determination date may
optionally be determined at an interest rate based upon a factor of a prime
or similar rate, a eurocurrency interbank offered rate, or other rates, then
the interest rate in effect on the determination date will be deemed to have
been in effect during the relevant period; and (3) notwithstanding clause (1)
above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to interest rate swaps
or similar interest rate protection Hedging Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation
of such agreements.
"Redeemable Preferred Stock" means preferred stock that by its terms or
otherwise is required to be redeemed or is redeemable at the option of the
holder thereof on, or prior to, the maturity date of the Senior Notes.
"Refinancing Indebtedness" means (i) Indebtedness of the Company and its
Restricted Subsidiaries issued or given in exchange for, or the proceeds of
which are used to, extend, refinance, renew, replace, substitute or refund
any Indebtedness permitted under this Indenture or any Indebtedness issued to
so
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extend, refinance, renew, replace, substitute or refund such Indebtedness,
(ii) any refinancings of Indebtedness issued under the Credit Agreement, and
(iii) any additional Indebtedness issued to pay premiums and fees in
connection with clauses (i) and (ii).
"Restricted Investment" means any Investment in any person; provided that
Restricted Investments will not include: (i) Investments in marketable
securities and other negotiable instruments permitted by the Indenture; (ii)
any Incentive Arrangements; (iii) Investments in the Company; or (iv)
Investments in any Restricted Subsidiary (provided that any Investment in a
Restricted Subsidiary was made for fair market value (as determined by the
Board of Directors in good faith)). The amount of any Restricted Investment
shall be the amount of cash and the fair market value at the time of transfer
of all other property (as determined by the Board of Directors in good faith)
initially invested or paid for such Restricted Investment, plus all additions
thereto, without any adjustments for increases or decreases in value of or
write-ups, write-downs or write-offs with respect to, such Restricted
Investment.
"Restricted Subsidiary" means: (i) any Subsidiary of the Company existing
on the date of original issuance of the Senior Notes, and (ii) any other
Subsidiary of the Company formed, acquired or existing after the date of
original issuance of the Senior Notes that is designated as a "Restricted
Subsidiary" by the Company pursuant to a resolution approved a majority of
the Board of Directors, provided, however, that the term Restricted
Subsidiary shall not include any Subsidiary of the Company that has been
redesignated by the Company pursuant to a resolution approved by a majority
of the Board of Directors as a Non-Restricted Subsidiary in accordance with
the "Designation of Restricted and Non-Restricted Subsidiaries" covenant
unless such Subsidiary shall have subsequently been redesignated a Restricted
Subsidiary in accordance with clause (ii) of this definition.
"Restructuring Charges" means any charges or expenses in respect of
restructuring or consolidating any business, operations or facilities, any
compensation or headcount reduction, or any other cost savings, of any
persons or businesses either alone or together with the Company or any
Restricted Subsidiary, as permitted by GAAP or Regulation S-X under the
Securities Act.
"Senior Indebtedness" means: (i) all Obligations (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on any Indebtedness of the
Company, whether outstanding on the date of issuance of the Senior Notes or
thereafter created, incurred or assumed, of the following types: (A) all
Indebtedness of the Company (including without limitation the Senior Notes)
for money borrowed, and (B) all Indebtedness evidenced by notes, debentures,
bonds or other similar instruments for the payment of which the Company is
responsible or liable; (ii) all capitalized lease obligations of the Company;
(iii) all Obligations of the Company: (A) for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction, (B) all constituting Hedging Obligations, or (C) issued as the
deferred purchase price of property and all conditional sale Obligations of
the Company and all Obligations of the Company under any title retention
agreement; (iv) all guarantees of the Company with respect to Obligations of
other persons of the type referred to in clauses (ii) and (iii) and with
respect to the payment of dividends of other persons; and (v) all Obligations
of the Company consisting of modifications, renewals, extensions,
replacements and refundings of any Obligations described in clauses (i),
(ii), (iii) or (iv) unless, in the instrument creating or evidencing the same
or pursuant to which the same is outstanding, it is expressly provided that
such Obligations are subordinated or junior in right of payment to the Senior
Notes; provided, however, that Senior Indebtedness shall not be deemed to
include: (1) any Obligation of the Company to any Subsidiary, (2) any
liability for federal, state, local or other taxes owed or owing by the
Company, (3) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities), (4) any Indebtedness, guarantee or
Obligation of the Company that is contractually subordinated or junior in any
respect to any other Indebtedness, guarantee or Obligation of the Company, or
(5) any Indebtedness to the extent the same is incurred in violation of the
Indenture. Senior Indebtedness shall include all Obligations in respect of
the Senior Notes and the Indenture.
To the extent any payment on the Senior Notes, whether by or on behalf of
the Company, as proceeds of security or enforcement of any right of setoff or
otherwise, is declared to be fraudulent or preferential,
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set aside or required to be paid to a trustee, receiver or other similar
party under any bankruptcy, insolvency, receivership or similar law, then if
such payment is recovered by, or paid over to, such trustee, receiver or
other similar party, the Senior Notes or part thereof originally intended to
be satisfied by such payment shall be deemed to be reinstated and outstanding
as if such payment had not occurred.
"Senior Preferred Stock Issue Date" means the date on which the Senior
Preferred Stock is originally issued under the Certificate of Designation.
"SFAS 106" means Statement of Financial Accounting Standards No. 106.
"SFAS 109" means Statement of Financial Accounting Standards No. 109.
"Significant Subsidiary" means any Restricted Subsidiary of the Company
that would be a "significant subsidiary" as defined in clause (2) of the
definition of such term in Rule 1-02 of Regulation S-X under the Securities
Act and the Exchange Act.
"Subordinated Indebtedness" means all Obligations of the type referred to
in clauses (i) through (v) of the definition of Senior Indebtedness, if the
instrument creating or evidencing the same, or pursuant to which the same is
outstanding, designates such Obligations as subordinated or junior in right
of payment to Senior Indebtedness.
"Subsidiary" of any person means any entity of which the Equity Interests
entitled to cast at least a majority of the votes that may be cast by all
Equity Interests having ordinary voting power for the election of directors
or other governing body of such entity are owned by such person (regardless
of whether such Equity Interests are owned directly by such person or through
one or more Subsidiaries).
"TJC Agreement" means the Management Consulting Agreement, dated February
7, 1996, between the Company and TJC Management Corporation, as in effect on
the date of original issuance of the Senior Notes.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect the board of directors.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the
then outstanding principal amount of such Indebtedness into (ii) the sum of
the product(s) obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other requirement payment of
principal, including payment at final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
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UNITS
Each Unit offered hereby consists of $ aggregate liquidation preference
of Senior Preferred Stock and shares of Common Stock of the Company.
The Senior Preferred Stock and the Common Stock comprising each Unit will not
be separately tradable until the earliest to occur of (i) , 1997, (ii)
such earlier date as may be determined by the Underwriter, (iii) in the event
of a Change of Control, the date on which the Company mails notice thereof to
holders of the Senior Preferred Stock, (iv) in the event that the Company
elects to exchange the Senior Preferred Stock for Exchange Debentures, the
date on which the Company mails notice thereof to holders of the Senior
Preferred Stock, (v) in the event that the Company elects to redeem the
Senior Preferred Stock pursuant to the second paragraph set forth under
"--Redemption of Senior Preferred Stock," the date on which the Company mails
notice thereof to holders of the Senior Preferred Stock, and (vi) the date on
which the Company consummates a public offering of Common Stock (such
earliest date being the "Separation Date").
SENIOR PREFERRED STOCK
The Senior Preferred Stock will be issued pursuant to a Certificate of
Designation. The summary contained herein of certain provisions of the Senior
Preferred Stock does not purport to be complete and is qualified in its
entirety by reference to the provisions of the Certificate of Designation,
the form of which has been filed as an exhibit to the Registration Statement
of which this Prospectus is a part. The definitions of certain terms used in
the Certificate of Designation and in the following summary are substantially
the same as those used in the Indenture. See "--Senior Notes--Certain
Definitions."
GENERAL
The Board of Directors has adopted resolutions creating a maximum of
shares of Senior Preferred Stock and will file a Certificate of
Designation with respect thereto with the Secretary of State of the State of
Delaware as required by Delaware law. Subject to certain conditions, the
Senior Preferred Stock is exchangeable for Exchange Debentures at the option
of the Company on any dividend payment date. The Senior Preferred Stock, when
issued and paid for by the Underwriter in accordance with the terms of the
Underwriting Agreement (as defined herein), will be fully paid and
non-assessable, and the holders thereof will not have any subscription or
preemptive rights related thereto. Fleet National Bank will be transfer agent
and registrar for the Senior Preferred Stock.
RANK
The Senior Preferred Stock will, with respect to dividend distributions
and distributions upon the liquidation, winding-up and dissolution of the
Company, rank (i) senior to all classes of Common Stock of the Company and to
each series of Preferred Stock existing on the date of this Prospectus and
each other class of capital stock or series of Preferred Stock established
after the date of this Prospectus by the Board of Directors the terms of
which do not expressly provide that it ranks senior to or on a parity with
the Senior Preferred Stock as to dividend distributions and distributions
upon the liquidation, winding-up and dissolution of the Company (collectively
referred to with the Common Stock of the Company as "Junior Securities");
(ii) subject to certain conditions, on a parity with any class of capital
stock or series of Preferred Stock issued by the Company established after
the date of this Prospectus by the Board of Directors, the terms of which
expressly provide that such class or series will rank on a parity with the
Senior Preferred Stock as to dividend distributions and distributions upon
the liquidation, winding-up and dissolution of the Company (collectively
referred to as "Parity Securities"); and (iii) subject to certain conditions,
junior to each class of capital stock or series of Preferred Stock issued by
the Company established after the date of this Prospectus by the Board of
Directors the terms of which expressly provide that such class or series will
rank senior to the Senior Preferred Stock as to dividend distributions and
distributions upon liquidation, winding-up and dissolution of the Company
(collectively referred to as "Senior Securities"). In addition, creditors and
stockholders of the Company's Subsidiaries will have priority over the Senior
Preferred Stock with respect to claims on the assets of such Subsidiaries.
The Company's obligations under the Senior Preferred Stock will also be
subject to the BKC Intercreditor
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Agreement. See "--BKC Intercreditor Agreement." The Senior Preferred Stock
will be subject to the issuance of series of Junior Securities, Parity
Securities and Senior Securities, provided that the Company may not issue any
new class of Parity Securities or Senior Securities without the approval of
the holders of at least 50% of the shares of Senior Preferred Stock then
outstanding, voting or consenting, as the case may be, together as one class,
except that without the approval of the holders of Senior Preferred Stock,
the Company may issue and have outstanding shares of Parity Securities issued
from time to time in exchange for, or the proceeds of which are used to
redeem or repurchase, any or all of the shares of Senior Preferred Stock or
other Parity Securities.
BKC INTERCREDITOR AGREEMENT
Pursuant to the BKC Intercreditor Agreement, the Company's obligations
under the Senior Preferred Stock are subject to the prior payment in full of
all indebtedness, liabilities and other obligations of the Company and its
subsidiaries to BKC under the BKC franchise agreements, BKC leases and any
other indebtedness of the Company and its subsidiaries to BKC, whenever and
however arising, whether primary or secondary, absolute or contingent, and
including charges and costs of collection. In the event that the Company
defaults in any such obligations to BKC, the Company will be prohibited from
making any payments in respect of the Senior Preferred Stock. See "Risk
Factors--BKC Intercreditor Agreement" and "Business--Obligations to Burger
King Corporation."
DIVIDENDS
Holders of Senior Preferred Stock will be entitled to receive, when, as
and if declared by the Board of Directors, out of funds legally available
therefor, dividends on the Senior Preferred Stock at a rate per annum equal
to % of the liquidation preference per share of Senior Preferred Stock. All
dividends will be cumulative whether or not earned or declared on a daily
basis from the date of issuance of the Senior Preferred Stock and will be
payable quarterly in arrears on , , and of each year,
commencing on , 1997. On or before , 2001 the Company may, at its
option, pay dividends in cash or in additional fully paid and non-assessable
shares of Senior Preferred Stock having an aggregate liquidation preference
equal to the amount of such dividends. After , 2001 dividends may be
paid only in cash. It is not expected that the Company will pay any dividends
in cash for any period ending on or prior to , 2001. The terms of the
Company's debt instruments, including the Indenture and the Credit Agreement,
restrict the payment of cash dividends by the Company, and future agreements
may provide the same. See "Risk Factors--Restrictive Covenants," "--Senior
Notes--Certain Covenants" and "Description of Certain Indebtedness." If any
dividend (or portion thereof) payable on any dividend payment date after
, 2001 is not declared or paid in full in cash on such dividend payment
date, the amount of such dividend that is payable and that is not paid in
cash on such date will increase at the rate of % per annum from such
dividend payment date until declared and paid in full.
No full dividends may be declared or paid or funds set apart for the
payment of dividends on any Parity Securities for any period unless full
cumulative dividends shall have been or contemporaneously are declared and
paid in full or declared and, if payable in cash, a sum in cash set apart for
such payment on the Senior Preferred Stock. If full dividends are not so
paid, the Senior Preferred Stock will share dividends pro rata with the
Parity Securities. No dividends may be paid or set apart for such payment on
Junior Securities (except dividends on Junior Securities in additional shares
of Junior Securities) and no Junior Securities or Parity Securities may be
repurchased, redeemed or otherwise retired nor may funds be set apart for
payment with respect thereto, if full cumulative dividends have not been paid
on the Senior Preferred Stock.
REDEMPTION OF SENIOR PREFERRED STOCK
Optional Redemption. The Senior Preferred Stock may be redeemed (subject
to contractual and other restrictions with respect thereto and to the legal
availability of funds therefor) at any time on or after , 2001, in
whole or in part, at the option of the Company, at the redemption prices
(expressed as a percentage of the liquidation preference thereof) set forth
below, plus an amount in cash
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equal to all accumulated and unpaid dividends (including an amount in cash
equal to a prorated dividend for the period from the dividend payment date
immediately prior to the redemption date to the redemption date), if redeemed
during the 12-month period beginning of each of the years set forth
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ----------------------- --------------
<S> <C>
2001 ................... %
2002 ................... %
2003 ................... %
2004 and thereafter ... 100%
</TABLE>
In addition, the Company may redeem the Senior Preferred Stock in whole,
but not in part, at a redemption price equal to % of the liquidation
preference thereof, plus an amount in cash equal to all accumulated and
unpaid dividends (including an amount in cash equal to a prorated dividend
for the period from the dividend payment date immediately prior to the
redemption date to the redemption date), with the proceeds of an Equity
Offering, provided that such redemption shall occur within 60 days of the
date of the closing of such Equity Offering.
No optional redemption may be authorized or made (i) unless prior thereto
full unpaid cumulative dividends shall have been paid or a sum set apart for
such payment on the Senior Preferred Stock or (ii) at less than 101% of the
liquidation preference of the Senior Preferred Stock at any time when the
Company is making or purchasing shares of Senior Preferred Stock under an
Offer in accordance with the provisions of "--Change of Control."
In the event of partial redemptions of Senior Preferred Stock, the shares
to be redeemed will be determined pro rata or by lot, as determined by the
Company. The terms of the Company's debt instruments, including the Indenture
and the Credit Agreement, restrict the ability of the Company to redeem the
Senior Preferred Stock, and future agreements may provide the same. See
"--Senior Notes--Certain Covenants" and "Description of Certain
Indebtedness."
Mandatory Redemption. On , 2008, the Company will be required to
redeem (subject to contractual and other restrictions with respect thereto
and to the legal availability of funds therefor) all outstanding shares of
Senior Preferred Stock at a price equal to the then effective liquidation
preference thereof, plus an amount in cash equal to all accumulated and
unpaid dividends (including an amount in cash equal to a prorated dividend
for the period from the dividend payment date immediately prior to the
redemption date to the redemption date).
Procedure for Redemption. On and after a redemption date, unless the
Company defaults in the payment of the applicable redemption price, dividends
will cease to accrue on shares of Senior Preferred Stock called for
redemption and all rights of holders of such shares will terminate except for
the right to receive the redemption price, without interest. The Company will
send a written notice of redemption by first class mail to each holder of
record of shares of Senior Preferred Stock, not fewer than 30 days nor more
than 60 days prior to the date fixed for such redemption. Shares of Senior
Preferred Stock issued and reacquired will, upon compliance with the
applicable requirements of Delaware law, have the status of authorized but
unissued shares of Preferred Stock of the Company undesignated as to series
and may with any and all other authorized but unissued shares of Preferred
Stock of the Company be designated or redesignated and issued or reissued, as
the case may be, as part of any series of Preferred Stock of the Company,
except that any issuance or reissuance of shares of Senior Preferred Stock
must be in compliance with the Certificate of Designation.
Change of Control. Upon the occurrence of a Change of Control, each holder
of Senior Preferred Stock will have the right to require the Company to
purchase all or any part of such holder's Senior Preferred Stock pursuant to
an Offer at a purchase price equal to 101% of the liquidation preference
thereof, plus an amount in cash equal to all accumulated and unpaid dividends
per share (including an amount in cash equal to a prorated dividend for the
period from the dividend payment date immediately
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prior to the repurchase date to the repurchase date). Notice of an Offer must
be mailed within 30 days following a Change of Control, must remain open for
at least 30 and not more than 40 days and must comply with the requirements
of Rule 14e-1 under the Exchange Act and any other applicable securities laws
and regulations.
None of the provisions in the Certificate of Designation relating to a
purchase upon a Change of Control are waivable by the Board of Directors. The
Company could, in the future, enter into certain transactions, including
certain recapitalizations of the Company, that would not constitute a Change
of Control, but would increase the amount of indebtedness outstanding at such
time. If a Change of Control were to occur, the Company could be obligated to
offer to repurchase all of the securities issued under the Indenture and to
repay all outstanding obligations under the Credit Agreement, and there can
be no assurance that the Company would have sufficient funds to pay the
purchase price for all shares of Senior Preferred Stock that the Company is
required to purchase. In addition, certain events that may obligate the
Company to offer to repurchase all of the securities issued under the
Indenture or to repay all outstanding obligations under the Credit Agreement
may not constitute a Change of Control under the Certificate of Designation.
In the event that the Company were required to purchase outstanding shares
of Senior Preferred Stock pursuant to an Offer, the Company expects that it
would need to seek third-party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing. In
addition, the Company's ability to purchase the Senior Preferred Stock may be
limited by other then-existing borrowing agreements, including the Indenture
and the Credit Agreement. See "--Senior Notes--Certain Covenants" and
"Description of Certain Indebtedness."
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding-up
of the Company, holders of Senior Preferred Stock will be entitled to be
paid, out of the assets of the Company available for distribution, the
liquidation preference per share, plus an amount in cash equal to all
accumulated and unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding-up (including an amount equal to a prorated dividend
for the period from the last dividend payment date to the date fixed for
liquidation, dissolution or winding-up), before any distribution is made on
any Junior Securities, including, without limitation, Common Stock of the
Company. If, upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, the amounts payable with respect to the Senior
Preferred Stock and all other Parity Securities are not paid in full, the
holders of the Senior Preferred Stock and the Parity Securities will share
equally and ratably in any distribution of assets of the Company in
proportion to the full liquidation preference and accumulated and unpaid
dividends to which each is entitled. After payment of the full amount of the
liquidation preferences and accumulated and unpaid dividends to which they
are entitled, the holders of shares of Senior Preferred Stock will not be
entitled to any further participation in any distribution of assets of the
Company. However, neither the sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Company nor the
consolidation or merger of the Company with or into one or more corporations
will be deemed to be a liquidation, dissolution or winding-up of the Company.
The Certificate of Designation for the Senior Preferred Stock does not
contain any provision requiring funds to be set aside to protect the
liquidation preference of the Senior Preferred Stock, although such
liquidation preference will be substantially in excess of the par value of
such shares of Senior Preferred Stock. In addition, the Company is not aware
of any provision of Delaware law or any controlling decision of the courts of
the State of Delaware (the state of incorporation of the Company) that
requires a restriction upon the surplus of the Company solely because the
liquidation preference of the Senior Preferred Stock will exceed its par
value. Consequently, there will be no restriction upon the surplus of the
Company solely because the liquidation preference of the Senior Preferred
Stock will exceed the par value and there will be no remedies available to
holders of the Senior Preferred Stock before or after the payment of any
dividend, other than in connection with the liquidation of the
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Company, solely by reason of the fact that such dividend would reduce the
surplus of the Company to an amount less than the difference between the
liquidation preference of the Senior Preferred Stock and its par value.
VOTING RIGHTS
Holders of the Senior Preferred Stock will have no voting rights with
respect to general corporate matters except as provided by law or as set
forth in the Certificate of Designation. The Certificate of Designation
provides that (a) if (i) dividends on the Senior Preferred Stock are in
arrears and unpaid (and, in the case of dividends payable after , 2001,
are not paid in cash) for four consecutive quarterly periods, (ii) the
Company fails to discharge any redemption obligation with respect to the
Senior Preferred Stock (whether or not the Company is permitted to do so by
the terms of the Indenture, the Credit Agreement or any other obligation of
the Company), (iii) the Company fails to make an offer to purchase all of the
outstanding shares of Senior Preferred Stock following a Change of Control
(whether or not the Company is permitted to do so by the terms of the
Indenture, the Credit Agreement or any other obligation of the Company), (iv)
a breach or violation of the provisions described under the caption
"--Certain Covenants" occurs and the breach or violation continues for a
period of 30 days or more or (v) a default occurs on the obligation to pay
principal of, interest on or any other payment obligation when due (a
"Payment Default") at final maturity on one or more classes of Indebtedness
of the Company or any Subsidiary of the Company, whether such Indebtedness
exists on the Senior Preferred Stock Issue Date or is incurred thereafter,
having individually or in the aggregate an outstanding principal amount of
$25,000,000 or more, or any other Payment Default occurs on one or more such
classes of Indebtedness and such class or classes of Indebtedness are
declared due and payable prior to their respective maturities, then the
number of directors constituting the Board of Directors will be adjusted to
permit the holders of the majority of the then outstanding Senior Preferred
Stock, voting separately as a class, to elect two directors, and (b) the
approval of holders of a majority of the outstanding shares of Senior
Preferred Stock, voting as a separate class, will be required for (i) any
merger, consolidation or sale of assets of the Company except as permitted
pursuant to the covenant entitled "Merger or Consolidation" and (ii) for any
modification of the Exchange Debenture Indenture. Each such event described
in clause (a) above is referred to herein as a "Voting Rights Triggering
Event." Voting rights arising as a result of a Voting Rights Triggering Event
will continue until such time as all dividends in arrears on the Senior
Preferred Stock are paid in full (and after , 2001, paid in cash) and
any failure, breach or default referred to in clause (a) is remedied.
In addition, the Certificate of Designation provides that, except as
stated above under "--Ranking," the Company will not authorize any class of
Senior Securities or Parity Securities without the affirmative vote or
consent of holders of at least 50% of the shares of Senior Preferred Stock
then outstanding, voting or consenting, as the case may be, as one class. The
Certificate of Designation also provides that the Company may not amend the
Certificate of Designation so as to affect adversely the specified rights,
preferences, privileges or voting rights of holders of shares of the Senior
Preferred Stock, or authorize the issuance of any additional shares of Senior
Preferred Stock, without the affirmative vote or consent of the holders of at
least 50% of the then outstanding shares of Senior Preferred Stock, voting or
consenting, as the case may be, as one class. The Certificate of Designation
also provides that, except as set forth above, (a) the creation,
authorization or issuance of any shares of Junior Securities, Parity
Securities or Senior Securities or (b) the increase or decrease in the amount
of authorized capital stock of any class, including any Preferred Stock,
shall not require the consent of the holders of Senior Preferred Stock and
shall not be deemed to affect adversely the rights, preferences, privileges
or voting rights of holders of shares of Senior Preferred Stock.
Under Delaware law, holders of Preferred Stock will be entitled to vote as
a class upon a proposed amendment to the Certificate of Incorporation,
whether or not entitled to vote thereon by the Certificate of Incorporation,
if the amendment would increase or decrease the par value of the shares of
such class, or alter or change the powers, preferences or special rights of
the shares or such class so as to affect them adversely.
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CERTAIN COVENANTS
Merger or Consolidation. The Certificate of Designation provides that,
without the consent of holders of a majority of the outstanding shares of
Senior Preferred Stock, voting as a separate class, the Company shall not
consolidate or merge with or into, or sell, lease, convey or otherwise
dispose of all or substantially all of its assets to, any person (any such
consolidation, merger or sale being a "Disposition") unless: (a) the
successor corporation of such Disposition or the corporation to which such
Disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(b) the Senior Preferred Stock shall be converted into or exchanged for and
shall become shares of the such successor, transferee or resulting
corporation, having in respect of such successor, transferee or resulting
corporation substantially the same powers, preferences and relative
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereon, that the Senior Preferred Stock had
immediately prior to such Disposition; (c) immediately after such
Disposition, no Voting Rights Triggering Event shall have occurred and be
continuing; (d) the corporation formed by or surviving any such Disposition,
or the corporation to which such Disposition shall have been made, shall have
Consolidated Net Worth (immediately after the Disposition but prior to giving
any pro forma effect to purchase accounting adjustments or Restructuring
Charges resulting from the Disposition) equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the Disposition;
and (e) prior to the consummation of any proposed Disposition, the Company
shall have delivered to the transfer agent an Officers' Certificate and an
opinion of counsel to the effect that such Disposition complies with the
terms of the Certificate of Designation and that all conditions precedent to
such Disposition have been satisfied.
Junior Payments. The Certificate of Designation provides that the Company
will not, directly or indirectly, (i) declare or pay any dividend or make any
distribution on account of any Junior Securities (other than dividends or
distributions payable in Junior Securities (other than Disqualified Stock)),
(ii) purchase, redeem or otherwise acquire or retire for value any Junior
Securities or (iii) make any Restricted Investment (all such dividends,
distributions, purchases, redemptions, acquisitions, retirements and
Restricted Investments being collectively referred to as "Junior Payments"),
if, at the time of such Junior Payment:
(a) a Voting Rights Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof; or
(b) all dividends on the Senior Preferred Stock payable on dividend
payment dates on or after , 2001, have not been declared and paid in
cash.
Notwithstanding the foregoing, the Certificate of Designation shall not
prohibit as Junior Payments:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration, such payment would
comply with all of the provisions of the Certificate of Designation
(including, but not limited to, the "Junior Payments" covenant);
(ii) making Restricted Investments at any time, and from time to time, in
an aggregate outstanding amount of $15,000,000 after the Senior Preferred
Stock Issue Date (it being understood that if any Restricted Investment
after the Senior Preferred Stock Issue Date pursuant to this clause (ii)
is sold, transferred or otherwise conveyed to any person other than the
Company or a Subsidiary, the portion of the net cash proceeds or fair
market value of securities or properties paid or transferred to the
Company and its Subsidiaries in connection with such sale, transfer or
conveyance that relates or corresponds to the repayment or return of the
original cost of such a Restricted Investment will replenish or increase
the amount of Restricted Investments permitted to be made pursuant to this
cause (ii), so that up to $15,000,000 of Restricted Investments may be
outstanding under this clause (ii) at any given time); provided that,
without otherwise limiting this clause (ii), any Restricted Investment in
a Subsidiary made pursuant to this clause (ii) is made for fair market
value (as determined by the Board of Directors in good faith);
(iii) the repurchase, redemption, retirement or acquisition of the
Company's stock from the executives, management, employees or consultants
of the Company or its Subsidiaries pursuant to the terms of any
subscription, stockholder or other agreement or plan, up to an aggregate
amount not to exceed $7,500,000;
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(iv) any loans, advances, distributions or payments from the Company to
its Subsidiaries, or any loans, advances, distributions or payments by a
Subsidiary to the Company or to another Subsidiary, in each case pursuant
to intercompany Indebtedness, intercompany management agreements and other
intercompany agreements and obligations;
(v) the payment of (a) consulting, financial and investment banking fees
under the TJC Agreement, provided, that no Voting Rights Triggering Event
shall have occurred and be continuing, and (b) indemnities, expenses and
other amounts under the TJC Agreement;
(vi) the redemption, repurchase, retirement or other acquisition of any
Junior Securities in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of the Company)
of other Junior Securities;
(vii) Restricted Investments made or received in connection with the
sale, transfer or disposition of any business, properties or assets of the
Company or any Subsidiary;
(viii) any Restricted Investment constituting securities or instruments
of a person issued in exchange for trade or other claims against such
person in connection with a financial reorganization or restructuring of
such person;
(ix) payments in connection with the application of the net proceeds of
the Offerings as set forth under "Use of Proceeds"; and
(x) payments of fees, expenses and indemnities to the directors of the
Company and its Subsidiaries.
Transactions with Affiliates. The provision of the Certificate of
Designation relating to transactions with Affiliates will be substantially
the same as the provisions of the Indenture relating to such matters. See
"--Senior Notes--Certain Covenants."
Reports. The provisions of the Certificate of Designations relating to the
provision of reports and information by the Company will be substantially the
same as the provisions of the Indenture relating to such matters. See
"--Senior Notes--Provision of Financial Information to Holders of Senior
Notes."
EXCHANGE
The Company may at its option exchange all, but not less than all, of the
then outstanding shares of Senior Preferred Stock into Exchange Debentures on
any dividend payment date, provided that on the date of such exchange: (a)
there are no contractual impediments to such exchange; (b) there are legally
available funds sufficient therefor; (c) a registration statement relating to
the Exchange Debentures shall have been declared effective under the
Securities Act prior to such exchange and shall continue to be in effect on
the date of such exchange or the Company shall have obtained a written
opinion of counsel that an exemption from the registration requirements of
the Securities Act is available for such exchange, and that upon receipt of
such Exchange Debentures pursuant to such exchange made in accordance with
such exemption, the holders (assuming such holder is not an Affiliate of the
Company) thereof will not be subject to any restrictions imposed by the
Securities Act upon the resale thereof and such exemption is relied upon by
the Company for such exchange; (d) the Exchange Debenture Indenture and the
trustee thereunder shall have been qualified under the Trust Indenture Act;
(e) immediately after giving effect to such exchange, no Default or Event of
Default (each as defined in the Exchange Debenture Indenture) would exist
under the Exchange Debenture Indenture; and (f) the Company shall have
delivered a written opinion of counsel, dated the date of exchange, regarding
the satisfaction of the conditions set forth in clauses (a), (b), (c) and (d)
and certain other matters. The Company shall send a written notice of
exchange by mail to each holder of record of shares of Senior Preferred
Stock, which notice shall state, among other things, (i) that the Company is
exercising its option to exchange the Senior Preferred Stock for Exchange
Debentures pursuant to the Certificate of Designation and (ii) the date of
exchange (the "Exchange Date"), which date shall not be less than 30 days nor
more than 60 days following the date on which such notice is mailed. On the
Exchange Date, holders of outstanding shares of Senior Preferred Stock will
be entitled to receive a principal amount of Exchange Debentures equal to the
liquidation preference per share, plus an amount in cash equal to all accrued
and unpaid dividends (including an
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amount in cash equal to a prorated dividend for the period from the dividend
payment date immediately prior to the Exchange Date to the Exchange Date), as
provided below.
The Exchange Debentures will be issued in registered form, without
coupons. Exchange Debentures issued in exchange for Senior Preferred Stock
will be issued in principal amounts of $1,000 and integral multiples thereof
to the extent possible, and will also be issued in principal amounts less
than $1,000 so that each holder of Senior Preferred Stock will receive
certificates representing the entire amount of Exchange Debentures to which
his shares of Senior Preferred Stock entitle him, provided that the Company
may, at its option, pay cash in lieu of issuing an Exchange Debenture in a
principal amount less than $1,000. On and after the Exchange Date, dividends
will cease to accrue on the outstanding shares of Senior Preferred Stock, and
all rights of the holders of Senior Preferred Stock (except the right to
receive the Exchange Debentures, an amount in cash equal to the accrued and
unpaid dividends to the Exchange Date and if the Company so elects, cash in
lieu of any Exchange Debenture which is in an amount that is not an integral
multiple of $1,000) will terminate. The person entitled to receive the
Exchange Debentures issuable upon such exchange will be treated for all
purposes as the registered holder of such Exchange Debentures.
The Credit Agreement and the Indenture will contain limitations with
respect to the Company's ability to issue the Exchange Debentures, and any
future credit agreements or other agreements relating to indebtedness to
which the Company becomes a party may contain similar limitations. See
"--Senior Notes--Certain Covenants" and "Description of Certain
Indebtedness."
The Company intends to comply with the provisions of Rule 13e-4
promulgated pursuant to the Exchange Act in connection with any exchange, to
the extent applicable.
Transfer Agent and Registrar. is the transfer agent
and registrar for the Preferred Stock.
EXCHANGE DEBENTURES
The Exchange Debentures, if issued, will be issued under the Exchange
Debenture Indenture between the Company and Fleet National Bank, as Trustee.
A copy of the form of Exchange Debenture Indenture has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
terms of the Exchange Debentures include those stated in the Exchange
Debenture Indenture and those made part of the Exchange Debenture Indenture
by reference to the Trust Indenture Act. The Exchange Debentures will be
subject to all such terms, and prospective holders of the Exchange Debentures
are referred to the Exchange Debenture Indenture and the Trust Indenture Act
for a statement of such terms. The following summary of certain provisions of
the Exchange Debenture Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act and to all of the provisions of the Exchange Debenture
Indenture, including the definitions of certain terms therein and those terms
made a part of the Exchange Debenture Indenture by reference to the Trust
Indenture Act. The definitions of certain terms used in the Exchange
Debenture Indenture and in the following summary are substantially the same
as those used in the Indenture. See "--Senior Notes--Certain Definitions."
GENERAL
The Exchange Debentures, if issued, will be general unsecured obligations
of the Company, subordinated to all existing and future Senior Indebtedness,
including the Senior Notes and indebtedness under the Credit Agreement. The
Exchange Debentures will be issued in fully registered form only in
denominations of $1,000 and integral multiples thereof (other than as
described in "--Senior Preferred Stock--Exchange" or with respect to
additional Exchange Debentures issued in lieu of cash interest as described
herein).
Principal of, and premium, if any, and interest on the Exchange Debentures
will be payable, and the Exchange Debentures may be presented for
registration of transfer or exchange, at the office of the Paying Agent and
Registrar in New York, New York. Holders of Exchange Debentures must
surrender
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their Exchange Debentures to the Paying Agent to collect principal payments,
and the Company may pay principal and interest by check and may mail checks
to a holder's registered address; provided that all payments with respect to
Exchange Debentures, the holders of which have given wire transfer
instructions to the Company, will be required to be made by wire transfer of
immediately available funds to the accounts specified by the holders thereof.
The Registrar may require payment of a sum sufficient to cover any transfer
tax or similar governmental charge payable in connection with certain
transfers or exchanges. See "--Other Provisions of the Exchange Debenture
Indenture" and "--Senior Notes--Transfer and Exchange." The Trustee will
initially act as Paying Agent and Registrar. The Company may change any
Paying Agent and Registrar without prior notice to holders of the Exchange
Debentures, and the Company or any of its Subsidiaries may act as Paying
Agent or Registrar.
The Exchange Debentures will mature on , 2008. Each Exchange
Debenture will bear interest at the rate set forth on the cover of this
Prospectus from the Exchange Debenture Issue Date or from the most recent
interest payment date to which interest has been paid or provided for.
Interest will be payable semi-annually in cash (or, on or prior to ,
2001, in additional Exchange Debentures, at the option of the Company) in
arrears on and of each year, commencing with the first such date
after the Exchange Debenture Issue Date. Interest on the Exchange Debentures
will be computed on the basis of a 360-day year of twelve 30-day months and
the actual number of days elapsed.
SUBORDINATION AND RANKING
The Exchange Debentures will be subordinated to the prior payment when due
of the principal of, and premium, if any, and interest on, all existing and
future Senior Indebtedness of the Company, and will rank pari passu or senior
in right of payment to all other Subordinated Indebtedness of the Company.
The Exchange Debentures will also effectively rank junior to all indebtedness
of the Company's subsidiaries. As of September 30, 1996, on a pro forma basis
after giving effect to the Offerings and the application of the net proceeds
therefrom, the aggregate principal amount of Senior Indebtedness of the
Company and indebtedness of the Company's subsidiaries would have been
approximately $108.0 million. In addition, the Company's obligations under
the Exchange Debentures will be subject to the BKC Intercreditor Agreement.
See "--BKC Intercreditor Agreement." The Exchange Debenture Indenture will
permit the Company and its Subsidiaries to incur additional Indebtedness,
including Senior Indebtedness, subject to certain limitations. In addition,
under the terms of the Exchange Debenture Indenture, the Company's
Subsidiaries may incur certain Indebtedness pursuant to agreements that may
restrict the ability of such Subsidiaries to make dividends or other
intercompany transfers to the Company necessary to service the Company's
obligations, including its obligations under the Exchange Debentures. The
Exchange Debenture Indenture will not limit the Company's obligations, or the
incurrence of new obligations under franchise, royalty and lease obligations
with BKC. Any failure by the Company to satisfy its obligations with respect
to the Exchange Debentures at maturity (with respect to payments of
principal) or prior thereto (with respect to payments of interest or required
repurchases) would constitute a default under the Exchange Debenture
Indenture and the Credit Agreement and could cause a default under agreements
governing other indebtedness of the Company and its Subsidiaries. See "Risk
Factors--Holding Company Structure; Dependence on Subsidiaries; Limitations
on Access to Cash Flow of the Subsidiaries," "--Certain Covenants" and
"Description of Certain Indebtedness."
Upon (a) any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property or
(b) an assignment for the benefit of creditors or any marshalling of the
Company's assets and liabilities, the holders of Senior Indebtedness will be
entitled to receive payment in full of all Obligations due in respect of such
Senior Indebtedness (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Indebtedness)
before holders of the Exchange Debentures will be entitled to receive any
payment with respect to the Exchange Debentures. Until all Obligations with
respect to Senior Indebtedness are paid in full, any distribution to which
holders of the Exchange Debentures would be entitled shall be made to holders
of Senior Indebtedness. However, holders of the Exchange Debentures may
receive securities that are subordinated to at least the same extent as the
Exchange Debentures to Senior Indebtedness and any securities issued in
exchange for Senior Indebtedness.
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In addition, the Company may not make any payment upon or in respect of
the Exchange Debentures (except in such subordinated securities) if (a) a
default in the payment of any principal, premium, if any, interest or other
Obligations with respect to any Designated Senior Debt occurs and is
continuing beyond any applicable grace period (whether upon maturity, as a
result of acceleration or otherwise) or (b) any other default occurs and is
continuing with respect to any Designated Senior Debt that permits holders of
such Designated Senior Debt to accelerate its maturity, and the Company and
the Trustee receive a notice of such default (a "Payment Blockage Notice")
from the holders, or from the trustee, agent or other representative of the
holders, of any such Designated Senior Debt. Payments on the Exchange
Debentures may and shall be resumed upon the earlier of (i) the date upon
which the default is cured or waived or (ii) in the case of a default
referred to in clause (b) above, 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt has been accelerated. No new period of payment
blockage may be commenced within 360 days after the receipt by the Trustee of
any prior Payment Blockage Notice. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been cured or waived for a period of
not less than 180 days.
"Designated Senior Debt" means (a) Indebtedness under the Senior Notes and
the Indenture, (b) Indebtedness under the Credit Agreement and (c) any other
Senior Indebtedness permitted to be incurred pursuant to the Exchange
Debenture Indenture in a principal amount of not less than $20,000,000
designated by the Company as Designated Senior Debt.
The Exchange Debenture Indenture will further require that the Company
promptly notify holders of Senior Indebtedness if payment on the Exchange
Debentures is accelerated because of an Event of Default. In addition, the
subordination provisions of the Exchange Debenture Indentures may not be
amended without the consent of all holders of Designated Senior Debt.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, holders of the Exchange Debentures may
recover less ratably that other creditors of the Company.
BKC INTERCREDITOR AGREEMENT
Pursuant to the BKC Intercreditor Agreement, the Company's obligations
under the Exchange Debentures are subject to the prior payment in full of all
indebtedness, liabilities and other obligations of the Company and its
Subsidiaries to BKC under the BKC franchise agreements, BKC leases and any
other indebtedness of the Company and its Subsidiaries to BKC, whenever and
however arising, whether primary or secondary, absolute or contingent, and
including charges and costs of collection. In the event that the Company
defaults in any such obligation to BKC, the Company will be prohibited from
making any payments in respect of the Exchange Debentures. See "Risk
Factors--Holding Company Structure; Dependence on Subsidiaries; Limitations
on Access to Cash Flow of Subsidiaries" and "--BKC Intercreditor Agreement."
REDEMPTION OF EXCHANGE DEBENTURES
Optional Redemption. The Exchange Debentures may not be redeemed at the
option of the Company prior to , 2001 other than out of the net proceeds
of one or more Equity Offerings, as and to the extent described below. During
the 12-month period beginning on of the years indicated below, the
Exchange Debentures will be redeemable, at the option of the Company, in
whole or in part, on at least 30 but not more than 60 days' notice to each
holder of Exchange Debentures to be redeemed, at the redemption prices
(expressed as percentages of the principal amount) set forth below, plus any
accrued and unpaid interest to the redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ----------------------- --------------
<S> <C>
2001 ................... %
2002 ................... %
2003 ................... %
2004 and thereafter ... 100%
</TABLE>
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<PAGE>
In addition, at any time, the Company may redeem the Exchange Debentures
in whole, but not in part, at a redemption price equal to % of the
principal amount thereof, plus accrued and unpaid interest thereon to the
applicable redemption date, with the proceeds of an Equity Offering, provided
that such redemption shall occur within 60 days of the date of the closing of
such Equity Offering.
Mandatory Redemption. Except as set forth below under "--Mandatory Offers
to Purchase Exchange Debentures--Change of Control" and "--Asset Sales," the
Company is not required to make any mandatory redemption, purchase or sinking
fund payments with respect to the Exchange Debentures.
MANDATORY OFFERS TO PURCHASE EXCHANGE DEBENTURES
Change of Control. Upon the occurrence of a Change of Control (such date
being the "Change of Control Trigger Date"), each holder of Exchange
Debentures shall have the right to require the Company to purchase all or any
part (equal to $1,000 or an integral multiple thereof) of such holder's
Exchange Debentures pursuant to an Offer (as defined) at a purchase price in
cash equal to 101% of the aggregate principal amount thereof, plus any
accrued and unpaid interest to the date of purchase. The Company shall
furnish to the Trustee, at least two Business Days before notice of an Offer
is mailed to all holders of Exchange Debentures pursuant to the procedures
described below under "--Procedures for Offers," notice that the Offer is
being made. Transactions constituting a Change of Control are not limited to
hostile takeover transactions not approved by the current management of the
Company. Except as described under "--Change of Control," the Exchange
Debenture Indenture does not contain provisions that permit the holders of
Exchange Debentures to require the Company to purchase or redeem the Exchange
Debentures in the event of a takeover, recapitalization or similar
restructuring, including an issuer recapitalization or similar transaction
with management.
The Company expects that prepayment of the Exchange Debentures following a
Change of Control would, and the exercise by holders of Exchange Debentures
of the right to require the Company to purchase Exchange Debentures may,
constitute a default under the Credit Agreement or other indebtedness of the
Company. The Exchange Debenture Indenture will provide that, prior to the
mailing of the notice referred to below, but in any event within 30 days
following any Change of Control Trigger Date, the Company covenants to (i)
repay in full and terminate all commitments under Indebtedness under the
Credit Agreement and all other Senior Indebtedness the terms of which require
repayment upon a Change of Control or offer to repay in full and terminate
all commitments under all Indebtedness under the Credit Agreement and all
other such Senior Indebtedness and to repay the Indebtedness owed to each
lender which has accepted such offer or (ii) obtain the requisite consents
under the Credit Agreement and all such other Senior Indebtedness to permit
the repurchase of the Exchange Debentures as provided below. The Company
shall first comply with the covenant in the immediately preceding sentence
before it shall be required to repurchase Exchange Debentures pursuant to the
provisions described below. The Company's failure to comply with this
covenant shall constitute an Event of Default described in clause (c) and not
in clause (b) under "--Events of Default" below. In the event a Change of
Control occurs, the Company will likely be required to refinance the
Indebtedness outstanding under the Credit Agreement, the Senior Notes and the
Exchange Debentures. If there is a Change of Control, any Indebtedness under
the Credit Agreement could be accelerated. There can be no assurance that
sufficient funds will be available at the time of any Change of Control to
make any required repurchases of the Senior Notes and the Exchange Debentures
given the Company's high leverage. The financing of the purchases of Senior
Notes and the Exchange Debentures could additionally result in a default
under the Credit Agreement or other indebtedness of the Company. The
occurrence of a Change of Control may also have an adverse impact on the
ability of the Company to obtain additional financing in the future. The
ability of holders of Exchange Debentures to require that the Company
purchase Exchange Debentures upon a Change of Control may deter persons from
effecting a takeover of the Company. Except as described above with respect
to a Change of Control, the Indenture does not contain provisions that permit
the holders of Exchange Debentures to require that the Company purchase or
redeem the Exchange Debentures in the event of a takeover, recapitalization
or similar restructuring. See "Risk Factors--Leverage and Coverage" and
"--Holding Company Structure; Dependence on Subsidiaries; Limitations on
Access to Cash Flow of the Subsidiaries."
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Asset Sales. The Exchange Debenture Indenture provides that the Company
may not, and may not permit any Restricted Subsidiary to, directly or
indirectly, consummate an Asset Sale (including the sale of any of the
Capital Stock of any Restricted Subsidiary) providing for Net Proceeds in
excess of $3,000,000 unless at least 75% of the Net Proceeds from such Asset
Sale are applied (in any manner otherwise permitted by the Exchange Debenture
Indenture) to one or more of the following purposes in such combination as
the Company shall elect: (a) an investment in another asset or business in
the same line of business as, or a line of business similar to that of, the
line of business of the Company and its Restricted Subsidiaries at the time
of the Asset Sale; provided that such investment occurs on or prior to the
365th day following the date of such Asset Sale (the "Asset Sale Disposition
Date"), (b) to reimburse the Company or its Subsidiaries for expenditures
made, and costs incurred, to repair, rebuild, replace or restore property
subject to loss, damage or taking to the extent that the Net Proceeds consist
of insurance proceeds received on account of such loss, damage or taking, (c)
the purchase, redemption or other prepayment or repayment of outstanding
Senior Indebtedness of the Company or Indebtedness of the Company's
Restricted Subsidiaries on or prior to the 365th day following the Asset Sale
Disposition Date or (d) an Offer expiring on or prior to the Purchase Date
(as defined herein). The Exchange Debenture Indenture also provides that the
Company may not, and may not permit any Restricted Subsidiary to, directly or
indirectly, consummate an Asset Sale unless at least 75% of the consideration
thereof received by the Company or such Restricted Subsidiary is in the form
of cash, cash equivalents or marketable securities; provided that, solely for
purposes of calculating such 75% of the consideration, the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet or in the notes thereto, excluding contingent
liabilities and trade payables) of the Company or any Restricted Subsidiary
(other than liabilities that are by their terms subordinated to the Senior
Notes) that are assumed by the transferee of any such assets and (y) any
notes or other obligations received by the Company or any such Restricted
Subsidiary from such transferee that are promptly, but in no event more than
30 days after receipt, converted by the Company or such Restricted Subsidiary
into cash (to the extent of the cash received), shall be deemed to be cash
and cash equivalents for purposes of this provision. Any Net Proceeds from
any Asset Sale that are not applied or invested as provided in the first
sentence of this paragraph shall constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $6,000,000 (such date
being an "Asset Sale Trigger Date"), the Company shall make an Offer to all
holders of Exchange Debentures to purchase the maximum principal amount of
the Exchange Debentures then outstanding that may be purchased out of Excess
Proceeds, at an offer price in cash in an amount equal to 100% of principal
amount thereof plus any accrued and unpaid interest to the Purchase Date in
accordance with the procedures set forth in the Indenture. Notwithstanding
the foregoing, to the extent that any or all of the Net Proceeds of an Asset
Sale is prohibited or delayed by applicable local law from being repatriated
to the United States, the portion of such Net Proceeds so affected will not
be required to be applied as described in this or the preceding paragraph,
but may be retained for so long, but only for so long, as the applicable
local law prohibits repatriation to the United States.
To the extent that any Excess Proceeds remain after completion of an
Offer, the Company may use such remaining amount for general corporate
purposes. If the aggregate principal amount of Exchange Debentures
surrendered by holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Exchange Debentures to be purchased on a pro rata
basis. Upon completion of an Asset Sale Offer, the amount of Excess Proceeds
shall be reset at zero.
Although the Credit Agreement will permit dividends from the Company's
Subsidiaries to the Company for the purpose of paying interest on the
Exchange Debentures, dividends for other purposes, such as repurchases of
Exchange Debentures by the Company upon an Asset Sale, will not be permitted
under the terms of the Credit Agreement. Accordingly, the Company would need
to seek the consent of its lenders under the Credit Agreement in order to
repurchase Exchange Debentures with the Net Proceeds of an Asset Sale. See
"Risk Factors--Holding Company Structure; Dependence on Subsidiaries;
Limitation on Access to Cash Flow of the Subsidiaries."
Procedures for Offers. Within 30 days following any Change of Control
Trigger Date or Asset Sale Trigger Date, subject to the provisions of the
Exchange Debenture Indenture, the Company shall mail a
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notice to each holder of Exchange Debentures at such holder's registered
address a notice stating: (a) that an offer (an "Offer") is being made
pursuant to a Change of Control or an Asset Sale Trigger Date, as the case
may be, the length of time the Offer shall remain open and the maximum
principal amount of Exchange Debentures that will be accepted for payment
pursuant to such Offer, (b) the purchase price, the amount of accrued and
unpaid interest as of the purchase date, and the purchase date (which shall
be no earlier than 30 days and no later than 40 days from the date such
notice is mailed (the "Purchase Date")), and (c) such other information
required by the Exchange Debenture Indenture and applicable law and
regulations.
On the Purchase Date for any Offer, the Company will, to the extent
required by the Exchange Debenture Indenture and such Offer, (1) in the case
of an Offer resulting from a Change of Control, accept for payment all
Exchange Debentures or portions thereof tendered pursuant to such Offer and,
in the case of an Offer resulting from an Asset Sale Trigger Date, accept for
payment the maximum principal amount of Exchange Debentures or portions
thereof tendered pursuant to such Offer that can be purchased out of the
Excess Proceeds, (2) deposit with the Paying Agent the aggregate purchase
price of all Exchange Debentures or portions thereof accepted for payment and
any accrued and unpaid interest on such Exchange Debentures as of the
Purchase Date, and (3) deliver or cause to be delivered to the Trustee all
Exchange Debentures tendered pursuant to the Offer. The Paying Agent shall
promptly mail to each holder of Exchange Debentures or portions thereof
accepted for payment an amount equal to the purchase price for such Exchange
Debentures plus any accrued and unpaid interest thereon, and the Trustee
shall promptly authenticate and mail (or cause to be transferred by
book-entry) to such holder of Exchange Debentures accepted for payment in
part a new Exchange Debenture equal in principal amount to any unpurchased
portion of the Exchange Debentures and any Exchange Debenture not accepted
for payment in whole or in part shall be promptly returned to the holder
thereof. The Company will publicly announce the results of the Offer on or as
soon as practicable after the Purchase Date.
The Company will comply with any tender offer rules under the Exchange Act
which may then be applicable, including Rule 14e-1, in connection with an
offer required to be made by the Company to repurchase the Exchange
Debentures as a result of a Change of Control or an Asset Sale Trigger Date.
To the extent that the provisions of any securities laws or regulations
conflict with provisions of the Exchange Debenture Indenture, the Company
shall comply with the applicable securities laws and regulations and shall
not be deemed to have breached its obligations under the Indenture by virtue
thereof.
Selection and Notice. In the event of a redemption or purchase of less
than all of the Exchange Debentures, the Exchange Debentures to be redeemed
or purchased will be chosen by the Trustee pro rata, by lot or by any other
method that the Trustee considers fair and appropriate and, if the Exchange
Debentures are listed on any securities exchange, by a method that complies
with the requirements of such exchange; provided that, if less than all of a
holder's Exchange Debentures are to be redeemed or accepted for payment, only
principal amounts of $1,000 or multiples thereof may be selected for
redemption or accepted for payment. On and after any redemption or purchase
date, interest shall cease to accrue on the Exchange Debentures or portions
thereof called for redemption or accepted for payment. Notice of any
redemption or offer to purchase will be mailed at least 30 days but not more
than 60 days before the redemption or purchase date to each holder of
Exchange Debentures to be redeemed or purchased at such holder's registered
address.
CERTAIN COVENANTS
The Exchange Debenture Indenture contains, among other things, the
following covenants:
Limitation on Restricted Payments. The Exchange Debenture Indenture
provides that the Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, (i) declare or pay any dividend or
make any distribution on account of the Company's or such Restricted
Subsidiary's Capital Stock or other Equity Interests (other than dividends or
distributions payable in Capital Stock or other Equity Interests (other than
Disqualified Stock) of the Company and dividends or distributions payable by
a Restricted Subsidiary to a Restricted Subsidiary or to the Company); (ii)
purchase, redeem or otherwise acquire or retire for value any Capital Stock
or other Equity Interests of the Company or any
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of its Restricted Subsidiaries (other than any such Equity Interest purchased
from the Company or any Restricted Subsidiary for fair market value (as
determined by the Board of Directors in good faith)); (iii) voluntarily
prepay any Subordinated Indebtedness of the Company, whether any such
Subordinated Indebtedness is outstanding on, or issued after, the date of
original issuance of the Exchange Debentures except as specifically permitted
by the covenants of the Exchange Debenture Indenture as described herein; or
(iv) make any Restricted Investment (all such dividends, distributions
purchases, redemptions, acquisitions, retirements, prepayments and Restricted
Investments being collectively referred to as "Restricted Payments"), if, at
the time of such Restricted Payment:
(a) a Default or Event of Default shall have occurred and be continuing
or shall occur as a consequence thereof; or
(b) immediately after such Restricted Payment and after giving effect
thereto on a Pro Forma Basis, the Company shall not be able to issue $1.00
of additional Indebtedness pursuant to the first sentence of the
"Limitation on Incurrence of Indebtedness" covenant; or
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made after the date of original issuance of the Senior
Preferred Stock, without duplication, exceeds the sum of: (1) 50% of the
aggregate Consolidated Net Income (including, for this purpose, gains from
Asset Sales and, to the extent not included in Consolidated Net Income,
any gain from a sale or disposition of a Restricted Investment) of the
Company (or, in case such aggregate is a loss, 100% of such loss) for the
period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing immediately after the date of original issuance
of the Senior Preferred Stock and ended as of the Company's most recently
ended fiscal quarter at the time of such Restricted Payment; plus (2) 100%
of the aggregate net cash proceeds and the fair market value of any
property or securities (as determined by the Board of Directors in good
faith) received by the Company from the issue or sale of Capital Stock or
other Equity Interests of the Company subsequent to the date of original
issuance of the Senior Preferred Stock (other than (x) Capital Stock or
other Equity Interests issued or sold to a Restricted Subsidiary and (y)
the issuance or sale of Disqualified Stock); plus (3) $6,000,000; plus (4)
the amount by which the principal amount of and any accrued interest on
either (A) Senior Indebtedness of the Company or (B) any Indebtedness of
any Restricted Subsidiary is reduced on the Company's consolidated balance
sheet upon the conversion or exchange other than by a Restricted
Subsidiary subsequent to the date of original issuance of the Senior
Preferred Stock of any Indebtedness of the Company or any Restricted
Subsidiary (not held by the Company or any Restricted Subsidiary) for
Capital Stock or other Equity Interests (other than Disqualified Stock) of
the Company (less the amount of any cash, or the fair market value of any
other property or securities (as determined by the Board of Directors in
good faith), distributed by the Company or any Restricted Subsidiary (to
persons other than the Company or any other Restricted Subsidiary) upon
such conversion or exchange); plus (5) if any Non-Restricted Subsidiary is
redesignated as a Restricted Subsidiary, the value of the Restricted
Payment that would result if such subsidiary were redesignated as a
Non-Restricted Subsidiary at such time, as determined in accordance with
the second sentence of the "Designation of Restricted and Non-Restricted
Subsidiaries" covenant; provided, however, that for purposes of this
clause (5), the value of any redesignated Non-Restricted Subsidiary shall
be reduced by the amount that any such redesignation replenishes or
increases the amount of Restricted Investments permitted to be made
pursuant to clause (ii) of the next sentence.
Notwithstanding the foregoing, the Indenture shall not prohibit as
Restricted Payments:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration, such payment would
comply with all covenants of such Indenture (including, but not limited to,
the "Limitation on Restricted Payments" covenant);
(ii) making Restricted Investments at any time, and from time to time, in
an aggregate outstanding amount of $12,000,000 after the date of original
issuance of the Senior Preferred Stock (it being understood that if any
Restricted Investment after the date of original issuance of the Senior
Preferred Stock pursuant to this clause (ii) is sold, transferred or
otherwise conveyed to any person other than the Company or a Restricted
Subsidiary, the portion of the net cash proceeds or fair market value of
securities
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or properties paid or transferred to the Company and its Restricted
Subsidiaries in connection with such sale, transfer or conveyance that
relates or corresponds to the repayment or return of the original cost of
such a Restricted Investment will replenish or increase the amount of
Restricted Investments permitted to be made pursuant to this clause (ii), so
that up to $12,000,000 of Restricted Investments may be outstanding under
this clause (ii) at any given time); provided that, without otherwise
limiting this clause (ii), any Restricted Investment in a Subsidiary made
pursuant to this clause (ii) is made for fair market value (as determined by
the Board of Directors in good faith);
(iii) the repurchase, redemption, retirement or acquisition of the
Company's stock from the executives, management, employees or consultants of
the Company or its Subsidiaries pursuant to the terms of any subscription,
stockholder or other agreement or plan, up to an aggregate amount not to
exceed $6,000,000;
(iv) any loans, advances, distributions or payments from the Company to
its Restricted Subsidiaries, or any loans, advances, distributions or
payments by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary, in each case pursuant to intercompany Indebtedness, intercompany
management agreements and other intercompany agreements and obligations;
(v) the purchase, redemption, retirement or other acquisition of (a) any
Senior Indebtedness of the Company or any Indebtedness of a Restricted
Subsidiaries required by its terms to be purchased, redeemed, retired or
acquired with the net proceeds from asset sales (as defined in the instrument
evidencing such Senior Indebtedness or Indebtedness) or upon a change of
control (as defined in the instrument evidencing such Senior Indebtedness or
Indebtedness) and (b) the Exchange Debentures pursuant to the "--Change of
Control" or "--Asset Sales" provisions of the Indenture;
(vi) the payment of (a) consulting, financial and investment banking fees
under the TJC Agreement, provided, that no Default or Event of Default shall
have occurred and be continuing or shall occur as a consequence thereof, and
the Company's Obligations to pay such fees under the TJC Agreement shall be
subordinated expressly to the Company's Obligations in respect of the
Exchange Debentures, and (b) indemnities, expenses and other amounts under
the TJC Agreement;
(vii) the redemption, repurchase, retirement or other acquisition of any
Capital Stock or other Equity Interests of the Company or any Restricted
Subsidiary in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of other Capital
Stock or other Equity Interests of the Company (other than any Disqualified
Stock) or the redemption, repurchase, retirement or other acquisition of any
Capital Stock or other Equity Interests of any Restricted Subsidiary in
exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to the Company or a Subsidiary of the Company) of other Capital
Stock or other Equity Interests of such Restricted Subsidiary; provided that,
in each case, any net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition, and any Net Income
resulting therefrom, shall be excluded from clauses (c)(1) and (c)(2) of the
preceding paragraph;
(viii) the defeasance, redemption or repurchase of pari passu or
Subordinated Indebtedness with the net cash proceeds from an issuance of
permitted Refinancing Indebtedness or the substantially concurrent sale
(other than to a Subsidiary of the Company) of Capital Stock or other Equity
Interests of the Company (other than Disqualified Stock); provided that any
net cash proceeds that are utilized for any such defeasance, redemption or
repurchase, and any Net Income resulting therefrom, shall be excluded from
clauses (c)(1) and (c)(2) of the preceding paragraph;
(ix) Restricted Investments made or received in connection with the sale,
transfer or disposition of any business, properties or assets of the Company
or any Restricted Subsidiary, provided, that if such sale, transfer or
disposition constitutes an Asset Sale, the Company complies with the "Asset
Sale" provisions of the Exchange Debenture Indenture;
(x) any Restricted Investment constituting securities or instruments of a
person issued in exchange for trade or other claims against such person in
connection with a financial reorganization or restructuring of such person;
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(xi) payments in connection with the application of the net proceeds of
the offerings as described under "Use of Proceeds"; and
(xii) payments of fees, expenses and indemnities to the directors of the
Company and its Restricted Subsidiaries.
Limitation on Incurrence of Indebtedness. The Exchange Debenture Indenture
provides that the Company will not, and will not permit any Restricted
Subsidiary to, issue any Indebtedness (other than the Indebtedness
represented by the Exchange Debentures) unless the Company's Cash Flow
Coverage Ratio for its four full fiscal quarters next preceding the date such
additional Indebtedness is issued would have been at least 2.0 to 1
determined on a Pro Forma Basis (including, for this purpose, any other
Indebtedness incurred since the end of the applicable four quarter period) as
if such additional Indebtedness and any other Indebtedness issued since the
end of such four quarter period had been issued at the beginning of such
four-quarter period.
The foregoing limitations will not apply to the issuance of:
(i) Indebtedness of the Company and/or its Restricted Subsidiaries as
measured on such date of issuance in an aggregate principal amount
outstanding on any such date of issuance not exceeding $90,000,000
aggregate principal amount under the Credit Agreement; provided that the
aggregate principal amount of Indebtedness outstanding under this clause
(i) together with the aggregate principal amount of Indebtedness
outstanding under clause (iii) below shall not exeed $96,000,000 in
aggregate principal amount at any one time outstanding.
(ii) Indebtedness of the Company and its Restricted Subsidiaries in
connection with capital leases, sale and leaseback transactions, purchase
money obligations, capital expenditures or similar financing transactions
relating to: (A) their properties, assets and rights as of the date of
original issuance of the Exchange Debentures up to $6,000,000 in aggregate
principal amount, or (B) their properties, assets and rights acquired
after the date of original issuance of the Exchange Debentures, provided
that the aggregate principal amount of such Indebtedness under this clause
(ii)(B) does not exceed 100% of the cost of such properties, assets and
rights;
(iii) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount up to $30,000,000 (all or
any portion of which may be issued as additional Indebtedness under the
Credit Agreement); provided that the aggregate principal amount of
Indebtedness outstanding under this clause (iii) together with the
aggregate principal amount of Indebtedness outstanding under clause (i)
above shall not exceed $96,000,000 in aggregate principal amount at any
one time outstanding; and
(iv) Other Permitted Indebtedness.
Notwithstanding the foregoing, no Restricted Subsidiary shall under any
circumstances issue a guarantee of any Indebtedness of the Company except for
guarantees issued by Restricted Subsidiaries pursuant to the "Limitation on
Guarantees of Company Indebtedness by Restricted Subsidiaries" covenant,
provided, however, that the foregoing will not limit or restrict guarantees
issued by Restricted Subsidiaries in respect of Indebtedness of other
Restricted Subsidiaries.
Limitation on Liens. The Exchange Debenture Indenture provides that the
Company shall not, and shall not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien
(other than Permitted Liens) upon any property or asset now owned or
hereafter acquired by them, or any income or profits therefrom, or assign or
convey any right to receive income therefrom; provided, however, that in
addition to creating Permitted Liens on its properties or assets, the Company
and any of its Restricted Subsidiaries may create any Lien upon any of their
properties or assets (including, but not limited to, any Capital Stock of its
Subsidiaries) if the Exchange Debentures are equally and ratably secured.
Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries. The Exchange Debenture Indenture provides that the
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or
become
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effective, any encumbrance or restriction on the ability of any Restricted
Subsidiary to: (a) pay dividends or make any other distributions on its
Capital Stock or any other interest or participation in, or measured by, its
profits, owned by the Company or any Restricted Subsidiary, or pay any
Indebtedness owed to, the Company or any Restricted Subsidiary, (b) make
loans or advances to the Company, or (c) transfer any of its properties or
assets to the Company, except for such encumbrances or restrictions existing
under or by reason of:
(i) applicable law,
(ii) Indebtedness permitted (A) under the first sentence of the first
paragraph of the "Limitation on Incurrence of Indebtedness" covenant, (B)
under clauses (i) and (iii) of the second paragraph of the "Limitation on
Incurrence of Indebtedness" covenant and clauses (i), (v), (vi), (vii),
(ix), (x) and (xi) of the definition of Other Permitted Indebtedness, or
(C) by agreements and transactions permitted under the "Limitation on
Restricted Payments" covenant,
(iii) customary provisions restricting subletting or assignment of any
lease or license of the Company or any Restricted Subsidiary,
(iv) (A) the terms of the BKC Intercreditor Agreement and any other BKC
Agreements, and (B) customary provisions of any other franchise,
distribution or similar agreement,
(v) any instrument governing Indebtedness or any other encumbrance or
restriction of a person acquired by the Company or any Restricted
Subsidiary at the time of such acquisition, which encumbrance or
restriction is not applicable to any person, or the properties or assets
of any person, other than the person, or the property or assets of the
person, so acquired,
(vi) Indebtedness or other agreements existing on the date of original
issuance of the Exchange Debentures,
(vii) any Refinancing Indebtedness permitted under the "Limitation on
Incurrence of Indebtedness" covenant and clauses (i), (v), (vi), (vii),
(ix), (x) and (xi) of the definition of Other Permitted Indebtedness;
provided that the encumbrances and restrictions created in connection with
such Refinancing Indebtedness are no more restrictive in any material
respect with regard to the interests of the holders of Exchange Debentures
than the encumbrances and restrictions in the refinanced Indebtedness,
(viii) any restrictions, with respect to a Restricted Subsidiary, imposed
pursuant to an agreement that has been entered into for the sale or
disposition of the stock, business, assets or properties of such
Restricted Subsidiary,
(ix) the terms of any Indebtedness of the Company incurred in connection
with the "Limitation on Incurrence of Indebtedness" covenant, provided
that the terms of such Indebtedness constitute no greater encumbrance or
restriction on the ability of any Restricted Subsidiary to pay dividends
or make distributions, make loans or advances or transfer properties or
assets than is otherwise permitted by this covenant, or
(x) the terms of purchase money obligations, but only to the extent such
purchase money obligations restrict or prohibit the transfer of the
property so acquired.
Nothing contained in this covenant shall prevent the Company from entering
into any agreement or instrument providing for the incurrence of Permitted
Liens or restricting the sale or other disposition of property or assets of
the Company or any of its Restricted Subsidiaries that are subject to
Permitted Liens.
Limitation on Transactions With Affiliates. The Exchange Debenture
Indenture provides that neither the Company nor any of its Restricted
Subsidiaries may make any loan, advance, guarantee or capital contribution
to, or for the benefit of, or sell, lease, transfer or dispose of any
properties or assets to, or for the benefit of, or purchase or lease any
property or assets from, or enter into any or amend any contract, agreement
or understanding with, or for the benefit of, an Affiliate (each such
transaction or series of related transactions that are part of a common plan
are referred to as an "Affiliate Transaction"), except in good faith and on
terms that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable
transaction on an arm's length basis from an unrelated person.
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The Indenture further provides that the Company will not, and will not
permit any Restricted Subsidiary to, engage in any Affiliate Transaction
involving aggregate payments or other transfers by the Company and its
Restricted Subsidiaries in excess of $3,000,000 (including cash and non-cash
payments and benefits valued at their fair market value by the Board of
Directors of the Company in good faith) unless the Company delivers to the
Trustee:
(i) a resolution of the Board of Directors of the Company stating that
the Board of Directors (including a majority of the disinterested
directors, if any) has, in good faith, determined that such Affiliate
Transaction complies with the provisions of the Exchange Debenture
Indenture, and
(ii) (A) with respect to any Affiliate Transaction involving the
incurrence of Indebtedness, a written opinion of a nationally recognized
investment banking or accounting firm experienced in the review of similar
types of transactions, (B) with respect to any Affiliate Transaction
involving the transfer of real property, fixed assets or equipment, either
directly or by a transfer of 50% or more of the Capital Stock of a
Restricted Subsidiary which holds any such real property, fixed assets or
equipment, a written appraisal from a nationally recognized appraiser,
experienced in the review of similar types of transactions or (C) with
respect to any Affiliate Transaction not otherwise described in (A) and
(B) above, a written certification from a nationally recognized
professional or firm experienced in evaluating similar types of
transactions, in each case, stating that the terms of such transaction are
fair to the Company or such Restricted Subsidiary, as the case may be,
from a financial point of view.
Notwithstanding the foregoing, this Affiliate Transactions covenant will
not apply to:
(i) transactions between the Company and any Restricted Subsidiary or
between Restricted Subsidiaries;
(ii) payments under the TJC Agreement;
(iii) any other payments or transactions permitted pursuant to the
"Limitation on Restricted Payments" covenant;
(iv) (A) payments and transactions under the Executive Employment
Agreements and (B) reasonable compensation paid to officers, employees or
consultants of the Company or any Subsidiary as determined in good faith
by the Company's Board of Directors or executives;
(v) payments and transactions under the Jaro Leases;
(vi) payments and transactions involving First National Bank of Boston
and its subsidiaries and affiliates in connection with the BBI Note, the
Credit Agreement and any other Indebtedness permitted by the "Limitation
on Incurrence of Indebtedness" covenant; and
(vii) payments and transactions in connection with the Offerings and the
application of the net proceeds therefrom as described under "Use of
Proceeds."
Limitation on Guarantees of Company Indebtedness by Restricted
Subsidiaries. The Company will not permit any Restricted Subsidiary, directly
or indirectly, to guarantee any Indebtedness of the Company other than the
Exchange Debentures (the "Other Company Indebtedness") unless (A) such
Restricted Subsidiary contemporaneously executes and delivers a supplemental
indenture to the Indenture providing for a guarantee of payment of the
Exchange Debentures then outstanding by such Restricted Subsidiary to the
same extent as the guarantee of payment (the "Other Company Indebtedness
Guarantee") of the Other Company Indebtedness (including waiver of
subrogation, if any) and (B) if the Other Company Indebtedness guaranteed by
such Restricted Subsidiary is (1) Senior Indebtedness, the guarantee for the
Exchange Debentures may be subordinated in right of payment, to the same
extent that the Exchange Debentures are subordinated to Senior Indebtedness,
to the Other Company Indebtedness Guarantee and (2) Subordinated
Indebtedness, the guarantee for the Senior Notes shall be pari passu or
senior in right of payment to the Other Company Indebtedness Guarantee;
provided that the foregoing will not limit or restrict guarantees issued by
Restricted Subsidiaries in respect of Indebtedness of other Restricted
Subsidiaries.
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Each guarantee of the Exchange Debentures created by a Restricted
Subsidiary pursuant to the provisions described in the foregoing paragraph
shall be in form and substance satisfactory to the Trustee and shall provide,
among other things, that it will be automatically and unconditionally
released and discharged upon (i) any sale, exchange or transfer permitted by
the Exchange Debentures Indenture of (a) all of the Company's Capital Stock
in such Restricted Subsidiary or (b) the sale of all or substantially all of
the assets of the Restricted Subsidiary and upon the application of the Net
Proceeds from such sale in accordance with the requirements of the "Asset
Sales" provisions described herein or (ii) the release or discharge of the
Other Company Indebtedness Guarantee that resulted in the creation of such
guarantee of the Exchange Debentures, except a discharge or release by or as
a result of direct payment under such Other Company Indebtedness Guarantee.
Designation of Restricted and Non-Restricted Subsidiaries. The Exchange
Debenture Indenture provides that, subject to the exceptions described below,
from and after the date of original issuance of the Exchange Debentures, the
Company may designate any existing or newly formed or acquired Subsidiary as
a Non-Restricted Subsidiary; provided that (i) either (A) the Subsidiary to
be so designated has total assets of $1,200,000 or less or (B) immediately
before and after giving effect to such designation on a Pro Forma Basis: (1)
the Company could incur $1.00 of additional Indebtedness pursuant to the
first sentence of the "Limitation on Incurrence of Indebtedness" covenant
determined on a Pro Forma Basis; and (2) no Default or Event of Default shall
have occurred and be continuing, and (ii) all transactions between the
Subsidiary to be so designated and its Affiliates remaining in effect are
permitted pursuant to the "Limitation on Transactions with Affiliates"
covenant. Any Investment made by the Company or any Restricted Subsidiary
which is redesignated from a Restricted Subsidiary to a Non-Restricted
Subsidiary shall thereafter be considered as having been a Restricted Payment
(to the extent not previously included as a Restricted Payment) made on the
day such Subsidiary is designated a Non-Restricted Subsidiary in the amount
of the greater of (i) the fair market value (as determined by the Board of
Directors of the Company in good faith) of the Equity Interests of such
Subsidiary held by the Company and its Restricted Subsidiaries on such date,
and (ii) the amount of the Investments determined in accordance with GAAP
made by the Company and any of its Restricted Subsidiaries in such
Subsidiary.
A Non-Restricted Subsidiary may be redesignated as a Restricted
Subsidiary. The Company may not, and may not permit any Restricted Subsidiary
to, take any action or enter into any transaction or series of transactions
that would result in a Person becoming a Restricted Subsidiary (whether
through an acquisition, the redesignation of a Non-Restricted Subsidiary or
otherwise, but not including through the creation of a new Restricted
Subsidiary) unless, immediately before and after giving effect to such
action, transaction or series of transactions on a Pro Forma Basis, (a) the
Company could incur at least $1.00 of additional Indebtedness pursuant to the
first sentence of "Limitation on Incurrence of Indebtedness" and (b) no
Default or Event of Default shall have occurred and be continuing.
The designation of a Subsidiary as a Restricted Subsidiary or the removal
of such designation is required to be made by a resolution adopted by a
majority of the Board of Directors of the Company stating that the Board of
Directors has made such designation in accordance with the Exchange Debenture
Indenture, and the Company is required to deliver to the Trustee such
resolution together with an Officers' Certificate certifying that the
designation complies with the Exchange Debenture Indenture. Such designation
will be effective as of the date specified in the applicable resolution,
which may not be before the date the applicable Officers' Certificate is
delivered to the Trustee.
Senior Subordinated Debt. The Exchange Debenture Indenture will provide
that the Company will not, and will not permit any Restricted Subsidiary to,
incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to any Senior
Indebtedness and senior in any respect in right of payment to the Exchange
Debentures.
MERGER OR CONSOLIDATION
The Exchange Debenture Indenture provides that the Company shall not
consolidate or merge with or into, or sell, lease, convey or otherwise
dispose of all or substantially all of its assets to, any person (any such
consolidation, merger or sale being a "Disposition") unless: (a) the
successor corporation of such Disposition or the corporation to which such
Disposition shall have been made is a corporation organized
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or existing under the laws of the United States, any state thereof or the
District of Columbia; (b) the successor corporation of such Disposition or
the corporation to which such Disposition shall have been made expressly
assumes the Obligations of the Company, pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee, under the Exchange
Debenture Indenture and the Exchange Debentures; (c) immediately after such
Disposition, no Default or Event of Default shall exist; and (d) the
corporation formed by or surviving any such Disposition, or the corporation
to which such Disposition shall have been made, shall (i) have Consolidated
Net Worth (immediately after the Disposition but prior to giving any pro
forma effect to purchase accounting adjustments or Restructuring Charges
resulting from the Disposition) equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the Disposition, and (ii) have a Cash
Flow Coverage Ratio, for the four fiscal quarters immediately preceding the
applicable Disposition, and determined on a Pro Forma Basis, equal to or greater
than the actual Cash Flow Coverage Ratio of the Company for such four quarter
period. The limitations in the Exchange Debenture Indenture on the Company's
ability to make a Disposition described in this paragraph do not restrict the
Company's ability to sell less than all or substantially all of its assets, such
sales being governed by the "Asset Sales" provisions of the Exchange Debenture
Indenture as described herein.
Prior to the consummation of any proposed Disposition, the Company shall
deliver to the Trustee an Officers' Certificate to the foregoing effect and
an opinion of counsel stating that the proposed Disposition and such
supplemental indenture comply with the Exchange Debentures Indenture.
PROVISION OF FINANCIAL INFORMATION TO HOLDERS OF EXCHANGE DEBENTURES
So long as the Exchange Debentures are outstanding, whether or not the
Company is subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, the Company shall submit for filing with the Commission the
annual reports, quarterly reports and other documents relating to the Company
and its Restricted Subsidiaries that the Company would have been required to
file with the Commission pursuant to Section 13 or 15(d) if the Company were
subject to such reporting requirements. The Company will also provide to all
holders of Exchange Debentures and file with the Trustee copies of such
annual reports, quarterly reports and other documents required to be
furnished to stockholders generally under the Exchange Act.
EVENTS OF DEFAULT AND REMEDIES
The Exchange Debenture Indenture provides that an Event of Default is: (a)
a default for 30 days in payment of interest on the Exchange Debentures; (b)
a default in payment when due of principal or premium, if any, with respect
to the Exchange Debentures; (c) the failure of the Company to comply with any
of its other agreements or covenants in, or provisions of, such Exchange
Debenture Indenture or the Exchange Debentures outstanding under such
Exchange Debenture Indenture and the Default continues for the period, if
applicable, and after the notice specified in the next paragraph; (d) a
default by the Company or any Restricted Subsidiary under any mortgage,
indenture or instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness for money borrowed by the Company or
any Restricted Subsidiary (or the payment of which is guaranteed by the
Company or any Restricted Subsidiary), whether such Indebtedness or guarantee
now exists or shall be created hereafter, if (1) either (A) such default
results from the failure to pay principal of or interest on any such
Indebtedness (after giving effect to any extensions thereof) or (B) as a
result of such default the maturity of such Indebtedness has been accelerated
prior to its expressed maturity, and (2) the principal amount of such
Indebtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal or interest thereon, or,
because of the acceleration of the maturity thereof, aggregates in excess of
$6,000,000; (e) a failure by the Company or any Restricted Subsidiary to pay
final judgments (not covered by insurance) aggregating in excess of
$6,000,000 which judgments a court of competent jurisdiction does not
rescind, annul or stay within 45 days after their entry; and (f) certain
events of bankruptcy or insolvency involving the Company or any Significant
Subsidiary. In the case of
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any Event of Default pursuant to clause (a) or (b) above occurring by reason
of any willful action (or inactions) taken (or not taken) by or on behalf of
the Company with the intention of avoiding payment of the premium that the
Company would have to pay pursuant to a redemption of Exchange Debentures as
described under "--Redemption of Senior Notes--Optional Redemption," an
equivalent premium shall also become and be immediately, due and payable to
the extent permitted by law.
A Default or Event of Default under clause (c) (other than an Event of
Default arising under the "Merger or Consolidation" covenant which shall be
an Event of Default with the notice but without the passage of time specified
in this paragraph) is not an Event of Default under the Exchange Debenture
Indenture until the Trustee or the holders of at least 25% in principal
amount of the Exchange Debentures then outstanding notify the Company of the
Default and the Company does not cure the Default within 30 days after
receipt of the notice. A Default or Event of Default under clause (f) of the
preceding paragraph will result in the Exchange Debentures automatically
becoming due and payable without further action or notice.
Upon the occurrence of an Event of Default, the Trustee or the holders of
at least 25% in principal amount of the then outstanding Exchange Debentures
may declare all Exchange Debentures to be due and payable by notice in
writing to the Company and the Trustee specifying the respective Event of
Default and that it is a "notice of acceleration" (the "Acceleration Notice")
and the same shall become immediately due and payable. The holders of a
majority in principal amount of the Exchange Debentures then outstanding
under the Exchange Debenture Indenture, by notice to the Trustee, may rescind
any declaration of acceleration of such Exchange Debentures and its
consequences (if the rescission would not conflict with any judgment or
decree) if all existing Events of Default (other than the nonpayment of
principal of or interest on such Exchange Debentures that shall have become
due by such declaration) shall have been cured or waived. Subject to certain
limitations, holders of a majority in principal amount of the Exchange
Debentures then outstanding under the Exchange Debenture Indenture may direct
the Trustee in its exercise of any trust or power. Holders of the Exchange
Debentures may not enforce the Exchange Debenture Indenture, except as
provided therein. The Trustee may withhold from holders of Exchange
Debentures notice of any continuing Default or Event of Default (except a
Default or an Event of Default in payment of principal, premium, if any, or
interest) if the Trustee determines that withholding notice is in their
interest.
The holders of a majority in aggregate principal amount of the Exchange
Debentures then outstanding may on behalf of all holders of such Exchange
Debentures waive any existing Default or Event of Default under the Exchange
Debenture Indenture and its consequences, except a continuing Default in the
payment of the principal of, or premium, if any, or interest on, such
Exchange Debentures, which may only be waived with the consent of each holder
of the Exchange Debentures affected.
Upon any payment or distribution of assets of the Company and its
subsidiaries in a total or partial liquidation, dissolution, reorganization
or similar proceeding, including a Default under clause (f) above involving
certain events of bankruptcy or insolvency of the Company or a Significant
Subsidiary, there may not be sufficient assets remaining to satisfy the
claims of any Holders of Exchange Debentures given the provisions described
under "--Subordination and Ranking" and the effective structural
subordination of the Exchange Debentures to the obligations of the
Subsidiaries of the Company.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Exchange Debenture Indenture, and upon an
officer of the Company becoming aware of any Default or Event of Default, a
statement specifying such Default or Event of Default.
OTHER PROVISIONS OF THE EXCHANGE DEBENTURE INDENTURE
The Exchange Debenture Indenture will include other provisions that are
substantially the same with respect to the Exchange Debentures as those with
respect to the Senior Notes set forth under "--Senior Notes--No Personal
Liability of Officers, Directors, Employees, Stockholders and Subsidiaries,"
"--Satisfaction and Discharge of the Indenture," "--Transfer and Exchange,"
"--Amendment, Supplement and Waiver," "--Concerning the Trustee,"
"--Book-Entry, Delivery and Form," "--Certificated Senior Notes" and
"--Same-Day Settlement and Payment."
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DESCRIPTION OF CAPITAL STOCK
The following summarizes certain provisions of the Certificate of
Incorporation, the Bylaws and the Stockholders Agreement, in each case giving
effect to the Recapitalization described below. Such summaries do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all of the provisions of the Certificate of Incorporation, the
Bylaws and the Stockholders Agreement, including the definitions therein of
certain terms, copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.
GENERAL
The Board of Directors and the Company's stockholders have approved,
subject to the closing of the Offerings, the adoption of the Certificate of
Incorporation and Bylaws. The Certificate of Incorporation will provide for,
among other things, the authorization of 4,000,000 shares of Common Stock,
300,000 shares of non-voting Common Stock ("Non-Voting Common Stock), 4,425
shares of Class A(1 Preferred Stock, 1,200 shares of Class A(2 Preferred
Stock, 1,875 shares of Class B Preferred Stock, 91,500 shares of Senior
Preferred Stock and 1,000 shares of undesignated, serial preferred stock.
THE RECAPITALIZATION
The Company's capital structure as reflected in its historical
consolidated financial statements consists of four classes of common stock
(Classes A, B, C and D) (the "Original Common Stock") and four classes of
Preferred Stock (Special Voting Preferred Stock and Classes A(1, A(2 and B
Preferred Stock) (the "Original Preferred Stock"). The Company eliminated the
Special Voting Preferred Stock in February 1996. The various classes of
Common Stock and Preferred Stock differ principally in respect of voting,
dividend and liquidation rights.
The Company and the Current Holders have entered into a recapitalization
agreement (the "Recapitalization Agreement"). Pursuant to the
Recapitalization Agreement, upon the consummation of the Offerings, the
Certificate of Incorporation, the Bylaws and the stockholders agreement,
dated September 1, 1994, between the Company and the Current Holders (the
"Stockholders Agreement") will be amended and restated so that, among other
things, (i) each share of Original Common Stock (other than the Class B
Common Stock) will be converted into a share of Common Stock and the Company
will effect a stock split resulting in the Current Holders receiving 1,000
shares of Common Stock for each share of Original Common Stock (other than
the Class B Common Stock) originally owned; (ii) each share of Class B Common
Stock will be converted into a share of Non-Voting Common Stock and the
Company will effect a stock split resulting in the holders of Class B Common
Stock prior to the Offerings receiving 1,000 shares of Non-Voting Common
Stock for each share of Class B Common Stock originally owned; and (iii) the
Current Holders and the Company will enter into an amended Stockholders
Agreement. See "--Stockholders Agreement."
After giving effect to the Recapitalization but prior to giving effect to
the Offerings, the Company will have outstanding 1,082,970 shares of Common
Stock (assuming the exercise of outstanding options and warrants) and 112,360
shares of Non-Voting Common Stock, 4,425 shares of Class A(1, Preferred
Stock, 1,200 shares of Class A(2, Preferred Stock and 1,875 shares of Class B
Preferred Stock. See "Principal Stockholders."
COMMON STOCK
Following the Offerings, 1,030,660 shares of Common Stock will be issued
and outstanding. All of the issued and outstanding shares of Common Stock
are, and upon the consummation of the Offerings the shares of Common Stock
offered hereby will be, fully paid and non-assessable. Each holder of shares
of Common Stock (other than the Non-Voting Common Stock) is entitled to one
vote per share on all matters to be voted on by stockholders. The holders of
Common Stock are entitled to dividends and other distributions if, as and
when declared by the Board of Directors out of assets legally available
therefor, subject to the rights of the holders of Preferred Stock and the
restrictions, if any, imposed by indebtedness outstanding from time to time.
See "Dividend Policy."
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Upon the liquidation, dissolution or winding up of the Company, the
holders of shares of Common Stock would be entitled to share ratably in the
distribution of all of the Company's assets remaining available for
distribution after satisfaction of all its liabilities and the payment of the
liquidation preference of any outstanding shares of Preferred Stock. The
holders of Common Stock have no preemptive or other subscription rights to
purchase shares of stock of the Company, nor are such holders entitled to the
benefits of any sinking fund provisions. As of September 30, 1996, there were
29 beneficial owners of Common Stock.
NON-VOTING COMMON STOCK
Immediately prior to the consummation of the Offerings, the Company will
authorize 300,000 shares of Non-Voting Common Stock for issuance. The Company
intends to issue shares of Non-Voting Common Stock to stockholders that are
not permitted by law or under applicable regulation to own or control voting
equity securities. The Non-Voting Common Stock is identical to the Common
Stock in all respects except voting and conversion rights. The holders of
Non-Voting Common Stock have no right to vote except as required by law. Upon
transfer to an entity not restricted from holding voting Common Stock, each
share of Non-Voting Common Stock may be converted into an equal number of
shares of Common Stock, entitling the holders thereof to voting rights. Upon
the close of the Offerings, BancBoston will be the only holder of Non-Voting
Common Stock.
WARRANTS AND OPTIONS
Senior Subordinated Warrants. In connection with the financing of the
Company's acquisition of 36 Burger King restaurants from BKC franchisees in
February 1996, the Company issued immediately exercisable warrants (the
"Senior Subordinated Warrants") to purchase up to 71,720 shares of Common
Stock to PMI at a purchase price of $.01 per share. The number of shares of
Common Stock and the exercise price per share are subject to adjustment in
the event of certain dilutive issuances of Common Stock at less than the
current market price of the Common Stock. The Company can repurchase any or
all of the Senior Subordinated Warrants from PMI at a purchase price of $2.7
million, subject to adjustment, at any time prior to August 7, 1997 in the
event of a public offering of Common Stock prior to such date. The Company
currently intends to exercise its repurchase right in connection with the
consummation of the Offerings. The Senior Subordinated Warrants expire on
February 7, 2006. See "Use of Proceeds."
BBI Warrants. In connection with the financing of the Company's
acquisition of 68 Burger King restaurants from BKC in September 1994 and the
acquisition of 39 Burger King restaurants from a BKC franchisee in November
1994, the Company issued immediately exercisable warrants (the "BBI
Warrants") to purchase up to 112,360 shares of Non-Voting Common Stock to BBI
at a purchase price of $.001 per share. The number of shares of Non-Voting
Common Stock and the exercise price per share are subject to adjustment in
the event of certain dilutive issuance of Common Stock at less than the
current market price of the Common Stock. The BBI Warrants expire on February
7, 2006.
Employee Options. The Company has granted options to purchase an aggregate
of 11,240 shares of Common Stock to employees of the Company. See
"Management--Stock Options."
STOCKHOLDERS AGREEMENT
The Stockholders Agreement provides for certain rights and obligations
among the Company and the Current Holders including with respect to the
election of directors, restrictions on transfer, co-sale rights and
registration rights. Pursuant to the Stockholders Agreement, the Current
Holders have agreed to vote their shares for the election of at least four
members of the board of directors designated by affiliates of The Jordan
Company, including MCIT PLC (the "TJC Investors") and three directors
designated by the current executive officers of the Company (the "Management
Holders").
The Current Holders may only transfer shares of Common Stock in accordance
with the Stockholders Agreement. The Company and the Current Holders have a
right of fiirst offer to purchase all or any portion of any shares of Common
Stock to be transferred by any Current Holder, subject to certain
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limited exceptions, on the same terms put forth for such transfer by the
selling holder. The Stockholders Agreement provides for preferences on the
rights of first offer such that the Management Holders have the first right
to purchase shares sold by any other Management Holder and the TJC Investors
have the first right to purchase shares sold by any other TJC Investor. The
Company also granted to each Current Holder a right of first refusal on any
additional issuance of capital stock or securities convertible into capital
stock. These rights have been waived in connection with the Offerings.
In the event any Current Holder proposes to sell (i) more than 5% of the
outstanding Common Stock of the Company or (ii) more than 50% of its initial
holdings of Common Stock, the other Current Holders may join in such sale on
the same terms on a pro rata basis and the purchaser must buy such securities
on a pro rata basis from each Current Holder who joins in the sale. In
addition, in the event that a majority of the TJC Investors and BancBoston
agree to sell two thirds or more of their aggregate shares of Common Stock to
a third party in an arms-length sale, they may obligate the other TJC
Investors, the Management Holders and PMI to sell their shares on the same
terms. Further, the TJC Investors are not permitted to effect a sale of
Common Stock or a transaction which results in a change of control of the
Company without the consent of BancBoston, PMI and MCIT.
Pursuant to the Stockholders Agreement, the TJC Investors (other than
MCIT), BancBoston and PMI have been granted by the Company demand and
incidental registration rights. All other Current Holders have been granted
incidental registration rights.
In general, each of (i) the holders of a majority of shares of Common
Stock held by the TJC Investors (other than MCIT) and (ii) BancBoston have
the right to cause the Company to register their holdings of Common Stock
under the Securities Act (such right being referred to as a "demand
registration right"), subject to certain exceptions. At any time after
September 1, 1999, the holders of a majority of shares of Common Stock held
by PMI will also be entitled to substantially comparable demand registration
rights as the Jordan Investors and BancBoston, subject to certain exceptions.
All stockholders of Common Stock are each entitled, if the Company determines
to file a registration statement covering any of its securities under the
Securities Act, other than a registration statement on Form S-4 or Form S-8,
to require the Company to use its best efforts to include a requested amount
of their shares of Common Stock in the Company's registered offering (such
right being referred to as an "incidental registration right"), subject to
certain limitations. The number of shares of Common Stock registered pursuant
to a demand or incidental registration may be reduced pursuant to a specified
formula if the managing underwriter determines that market conditions require
a limitation on the number of such shares registered.
The Company is required to bear all registration expenses in connection
with each demand and incidental registration and has agreed to indemnify the
holders of demand and incidental registration rights against, and provide
contribution with respect to, certain liabilities under the Securities Act in
connection with incidental and demand registrations. See "Principal
Stockholders."
PREFERRED STOCK
Except where required by law, none of the shares of Class A(1 Preferred
Stock, Class A(2 Preferred Stock or Class B Preferred Stock are entitled to
vote on any matters to be voted on by the stockholders of the Company.
Subject to dividend payments to the holders of the Senior Preferred Stock,
shares of Class A(1 Preferred Stock and Class A(2 Preferred Stock are
entitled to receive annual dividends of 6% payable quarterly. Dividends of
Class A(1 Preferred Stock are payable either in additional shares of Class
A(1 Preferred Stock, or in cash and are cumulative if not declared and paid;
dividends of Class A(2 Preferred Stock are payable only in cash and are
cumulative if not declared and paid. Shares of Class B Preferred Stock are
entitled to receive annual dividends of 6% payable quarterly in cash and are
cumulative if not declared and paid. Dividend payments to the holders of
shares of Class B Preferred Stock, current and cumulative, may be made only
after all accrued dividends of Class A(1 Preferred Stock and Class A(2
Preferred Stock have been declared and paid.
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Upon a liquidation, dissolution or winding up of the Company, the holders
of all shares of Class A(1 Preferred Stock and Class A(2 Preferred Stock are
entitled, before any distribution or payment is made to any other class of
capital stock of the Company other than Senior Preferred Stock, to be paid
all principal and accrued and unpaid dividends on the shares. In the event
that the assets of the Company are insufficient to pay all principal and
accrued and unpaid dividends of the shares of Class A(1 Preferred Stock and
Class A(2 Preferred Stock, holders of such shares shall be paid ratably in
proportion to the amount of principal and accrued and unpaid dividends on
each share. Holders of Class B Preferred Stock are entitled to be paid all
principal and accrued and unpaid dividends after distribution of all amounts
due the holders of Class A(1 Preferred Stock, Class A(2 Preferred Stock and
Senior Preferred Stock but before any distribution or payment to any other
class of capital stock of the Company.
All of the shares of Class A(1 Preferred Stock, Class A(2 Preferred Stock
and Class B Preferred Stock may be redeemed in whole or part in cash by the
Company provided that all accrued and unpaid dividends are first declared and
paid and such redemption is permissible under the Company's financing
agreements. Shares of Class B Preferred Stock may not be redeemed until all
shares of Class A(1 Preferred Stock and Class A(2 have first been redeemed.
All of the shares of Class A(1 Preferred Stock, Class A(2 Preferred Stock and
Class B Preferred Stock are subject to mandatory redemption by the Company on
March 31, 2009.
For a description of the Senior Preferred Stock, see "Description of
Securities--Senior Preferred Stock."
The Certificate of Incorporation will authorize the Board of Directors to
create and issue one or more series of Preferred Stock and determine the
rights and preferences of each series, to the extent permitted by the
Certificate of Incorporation and applicable law. Among other rights, the
Board of Directors may determine, without the further vote or action by the
Company's stockholders, (i) the number of shares constituting the series and
the distinctive designation of the series; (ii) the dividend rate on the
shares of the series, whether dividends will be cumulative and, if so, from
which date or dates, and the relative rights of priority, if any, of payment
of dividends on shares of the series; (iii) whether the series shall have
voting rights, in addition to the voting rights provided by law and, if so,
the terms of such voting rights; (iv) whether the series shall have
conversion privileges, and, if so, the terms and conditions of such
conversion, including provision for adjustment of the conversion rate in such
events as the Board of Directors shall determine; (v) whether or not the
shares of that series shall be redeemable or exchangeable and, if so, the
terms and conditions of such redemption or exchange, as the case may be,
including the date or dates upon or after which they shall be redeemable or
exchangeable, as the case may be, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at different
redemption dates; (vi) whether the series shall have a sinking fund for the
redemption or purchase of shares of that series and, if so, the terms and
amount of such sinking fund and (vii) the rights of the shares of the series
in the event of voluntary or involuntary liquidation, dissolution or winding
up of the Company and the relative rights or priority, if any, of payment of
shares of the series. Except for any difference so provided by the Board of
Directors, the shares of all series of Preferred Stock will rank on a parity
with respect to the payment of dividends and the distribution of assets upon
liquidation.
CERTIFICATE OF INCORPORATION AND BYLAWS
The rights of the Company's stockholders are governed by the Delaware
Corporation Law, the Certificate of Incorporation, and the Bylaws. Certain
provisions of the Certificate of Incorporation and the Bylaws, which are
summarized below, may discourage or make more difficult a takeover attempt
that a stockholder might consider in its best interest. Such provisions may
also adversely affect the prevailing market price for the Common Stock.
Preferred Stock. The Board of Directors will have the authority, without
action by the Company's stockholders, to fix the rights, privileges and
preferences of, and to issue up to 1,000 shares of Preferred Stock. The
issuance of such Preferred Stock may have the effect of delaying, deferring
or preventing a change in control of the Company without further action by
the stockholders and may adversely affect the voting and other rights of the
holders of the Common Stock, including the loss of voting control to others.
The Company currently has no plans to issue any additional shares of
Preferred Stock.
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No Stockholder Action by Written Consent; Special Meetings. The
Certificate of Incorporation and Bylaws will prohibit stockholders from
taking action by written consent in lieu of an annual or special meeting. In
addition, special meetings of stockholders may be called only by the Chairman
of the Board, the President, or a majority of the Board of Directors. Special
meetings may not be called by stockholders.
Advance Notice Requirements for Stockholder Proposals. The Bylaws will
establish advance notice procedures with regard to stockholder proposals.
These procedures provide that the notice of stockholder proposals must be
received by the Company no later than (i) with respect to an annual meeting
of stockholders, 60 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders and (ii) with respect to a special
meeting of stockholders, no later than the close of business on the tenth day
following the date on which notice of such meeting is first sent or given to
stockholders. Each stockholder proposal must set forth certain information as
specified in the Bylaws.
ANTI-TAKEOVER EFFECTS OF THE BKC FRANCHISE AGREEMENTS
Current BKC policies and procedures require the Company and each of its
subsidiaries that is a franchisee to seek BKC consent prior to making certain
changes to their capital structure and modifications to their corporate
governance documents. Pursuant to the BKC franchise agreements, BKC's consent
is required for transfers or issuances by the Company of its equity
securities or the transfer or issuance to third parties of the equity
securities of the Company's subsidiary franchisees and BKC consent may be
required or transfers of the Company's equity securities that result in a
change of control of the Company in connection with a public tender offer. If
BKC's required consent was not obtained in connection with any such issuance
or transfer of the Company's equity securities, BKC could terminate its
franchise agreements with the Company's subsidiaries, which would have a
material adverse effect on the Company's financial condition and results of
operations. In addition, the Company's financial flexibility and ability to
issue equity securities in connection with acquiring future Burger King
restaurants could be limited by BKC. Any such limitations would affect the
Company's growth strategy and could have a material adverse effect on the
Company's financial condition and results of operations.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a summary of important terms of certain indebtedness of
the Company. For more complete information regarding such indebtedness,
reference is made to the definitive agreements and instruments setting forth
the terms of such indebtedness, copies of which have been filed as exhibits
to the Registration Statement of which this Prospectus is a part and which
are incorporated by reference herein. For a description of the terms of the
Senior Notes and the Exchange Debentures, see "Description of
Securities--Senior Notes and --Exchange Debentures."
CREDIT AGREEMENT
The Credit Agreement provides for up to $100.0 million of senior secured
indebtedness, consisting of two term loans of $45.0 million ("Term Loan A")
and $40.0 million ("Term Loan B" and, together with Term Loan A, the "Term
Loans"), and $15.0 million of Revolving Loans (the Revolving Loans, together
with the Term Loans, the "Loans"). Subject to certain restrictions, National
Restaurant Enterprises, Inc., a wholly owned subsidiary of the Company
("Enterprises") may use the commitments under the Revolving Loans for the
issuance of documentary or standby letters of credit.
Term Loan A and the Revolving Loans bear interest at a rate of the lower
of either FNBB's annual rate of interest (the "Base Rate") plus 1.5% or the
Eurodollar Rate (as defined in the Credit Agreement) plus 2.75%, and mature
on January 31, 2002. The interest rates for Term Loan A and the Revolving
Loans are subject to downward adjustment based on a debt service ratio of
Enterprises on specified dates. As of September 30, 1996, the outstanding
principal balance under the Revolving Loans was $2.5 million. Term Loan B
bears interest at a rate of the lower of either the Base Rate plus 2% or the
Eurodollar Rate plus 3.25%, and matures on January 31, 2004. Interest on
Loans utilizing the Base Rate is payable quarterly in arrears and interest on
Loans utilizing the Eurodollar Rate is payable at the end of each respective
interest period. Enterprises is required to repay the principal amount on the
Term Loans in consecutive quarterly installments pursuant to payment
schedules specified in the Credit Agreement. In addition, Enterprises is
required to make annual prepayments on the principal amount of the Term Loans
based on Consolidated Excess Cash Flow (as defined in the Credit Agreement).
Due to various amendments to the Credit Agreement and as a result of
Enterprises' various acquisitions, Enterprises has not been required to
prepay any amounts under the Term Loans based on Consolidated Excess Cash
Flow since entering into the Credit Agreement.
The Credit Agreement contains certain customary covenants with respect to,
among other things: (i) maintenance by Enterprises and its subsidiaries of
prescribed ratios of cash flow to total debt service and cash flow to total
interest expense (each as determined in the Credit Agreement); (ii)
maintenance by Enterprises and its subsidiaries of minimum levels of cash
flow (as determined); and (iii) restrictions on indebtedness, distributions,
investments, liens, sales and leasebacks, mergers, consolidations,
acquisitions, sales and dispositions of assets, capital expenditures, and
restaurant development. As of September 30, 1996, the Company was in
compliance with all such covenants and restrictions.
Borrowings under the Credit Agreement are secured by a first priority
security interest in all present and future acquired tangible assets of
Enterprises and certain of its subsidiaries (other than real estate and the
franchise agreements) and Enterprises' repayment obligations are guaranteed
by certain of its subsidiaries and the Company.
The Company intends to use $86.6 million of the net proceeds from the
Offerings to prepay the Loans in full. The Company will have $15.0 million of
Revolving Loans available for future borrowings after consummation of the
Offerings. The Company is currently negotiating with several lenders for a
new bank credit agreement to replace the Credit Agreement pursuant to which
the Company expects to be able to borrow up to approximately $75 million
under a revolving credit facility to fund acquisitions and provide working
capital and for other general corporate purposes. The Company expects that
the new credit agreement will extend over a term of six years and that the
agreement would be secured by a first priority security interest on
substantially all of the Company's assets, including a pledge of all of the
stock of the Company's subsidiaries. Closing of the Offerings are not subject
to the closing of the new credit agreement. See "Use of Proceeds."
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FAC NOTES
In connection with the acquisition of certain Burger King restaurants from
Daniel White and affiliate, AmeriKing Colorado Corporation I ("ACCI"), a
wholly owned subsidiary of Enterprises, issued a Promissory Note to Franchise
Acceptance Corporation Limited (the "CO Note") in the principal amount of
$1.87 million. Franchise Acceptance Corporation Limited is an affiliate of
BKC. The CO Note bears an interest rate of the Program Rate (as defined
therein) plus 2.75% per annum, payable monthly in arrears. The CO Note
matures on January 25, 2006 and requires ACCI to make monthly principal
payments of $15,541.67 ( 1/120 of the original principal amount) starting
January 25, 1996 for each month up to maturity.
ACCI may at its option, subject to certain restrictions, prepay the CO
Note, in whole or in part. However, ACCI is required to continue its monthly
principal payments following any partial voluntary prepayment. In addition,
ACCI is required to pay the CO Note in full following any Event of Default
(as defined therein). Events of Default under the CO Note include, among
other things, failure to make required payments or failure by ACCI to meet
BKC franchise agreement requirements.
Borrowings under the CO Notes are secured by a security interest in all
present and future restaurant-related assets of ACCI.
In connection with the acquisition of certain Burger King restaurants from
the stockholders of QSC, Inc. and Ro-Lank, Inc., AmeriKing Tennessee
Corporation I ("ATCI"), a wholly owned subsidiary of Enterprises, issued a
Secured Promissory Note (the "TN Note") to BKC in the principal amount of
$6.9 million. Pursuant to the terms of the TN Note, on February 7, 1996 ATCI
paid down $817,000 of the principal from the proceeds of the sale of the
building and underlying real estate of one of its Burger King restaurants. In
July 1996, the TN Note was refinanced and is currently an obligation of ATCI
to Franchise Acceptance Corporation Limited. The CO Note and the TN Note are
collectively referred to as the "FAC Notes." The TN Note bears interest at a
rate of the Program Rate plus 2.75% per annum payable monthly in arrears,
matures on July 18, 2006 and requires ATCI to make monthly principal payments
of $50,083.33 ( 1/120 of the principal amount) starting August 25, 1996 for
each month up to maturity.
ATCI may at its option, subject to certain restrictions, prepay the TN
Note, in whole or in part. However, ATCI is required to continue its monthly
principal payments following any partial voluntary prepayment. In addition,
ATCI is required to pay the TN Note in full following any Event of Default
(as defined therein). Events of Default under the TN Note include, among
other things, failure to make required payments or failure by ATCI to meet
BKC franchise agreement requirements.
Borrowings under the TN Notes are secured by a security interest in all
present and future restaurant-related assets of ATCI.
The FAC Notes are senior in right of payment to the Senior Notes.
BBI NOTES
In connection with the acquisition of certain Burger King restaurants from
Sheldon Friedman and affiliates in November 1994, the Company issued
promissory notes to BancBoston in the aggregate principal amount of $600,000
(collectively, the "BBI Notes"). The BBI Notes are junior in right of payment
to the Senior Notes and bear interest at a rate of 6% per annum, payable
quarterly in arrears. The BBI Notes have a scheduled maturity date of March
31, 2005.
The Company may at its option prepay the BBI Notes, in whole or in part.
The Company is required to prepay all BBI Notes upon a Change of Control (as
defined in the BBI Notes). The Company is not subject to a prepayment premium
upon a voluntary or mandatory prepayment of the BBI Notes.
SENIOR SUBORDINATED NOTES
On February 7, 1996, the Company, Enterprises, and PMI entered into a note
purchase agreement (the "Senior Subordinated Note Purchase Agreement") for
the purchase by PMI of $15.0 million aggregate principal amount of Senior
Subordinated Notes (collectively, the "Senior Subordinated
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Notes"). The Senior Subordinated Notes are general, unsecured obligations of
Enterprises and are guaranteed by certain subsidiaries of Enterprises. The
Senior Subordinated Notes mature on January 31, 2005, without a prepayment
schedule, and bear interest at a rate of 12.5% per annum, payable quarterly
in arrears.
The Senior Subordinated Notes are subordinated in right of payment to the
loans under the Credit Agreement. The Senior Subordinated Notes may, at the
election of the Company, be prepaid in whole or in part, at any time, subject
to a specified prepayment premium. Upon (i) a Change of Control (as defined
in the Senior Note Purchase Agreement), (ii) a merger, reorganization, or
consolidation involving the Company or Enterprises, (iii) the sale or
disposition of all or substantially all of the assets of the Company,
Enterprises, and their subsidiaries, taken as a whole, (iv) the occurrence of
one or more events that give rise to a mandatory prepayment obligation with
respect to other indebtedness of the Company, or (v) the occurrence of a
public offering in which shares of Common Stock are being registered for sale
by holders other than the Company or PMI (or its designated transferee),
Enterprises, at the option of the holders of a majority of the Senior
Subordinated Notes, may be required to prepay the Senior Subordinated Notes
subject to a specified prepayment premium.
The Company intends to use $18.5 million of the net proceeds from the
Offerings to prepay the Senior Subordinated Notes in full (including a
prepayment penalty of $750,000 and warrant redemption payment of
approximately $2.7 million).
SUBORDINATED NOTES
On February 7, 1996, the Company and MCIT entered into an amended and
restated purchase agreement (the "Subordinated Note Purchase Agreement")
which related to the prior purchase by MCIT of $11.0 million aggregate
principal amount of Subordinated Notes (collectively, the "Subordinated
Notes") and certain shares of capital stock of the Company. The Subordinated
Notes are general, unsecured obligations of the Company. The Subordinated
Notes mature on August 31, 2005, without a prepayment schedule, and bear
interest at a rate of 12.75% per annum, payable semi-annually in arrears.
The Subordinated Notes are subordinated to the Company's guarantee
obligations in respect of borrowings under the Credit Agreement. Subject to
their subordination terms, the Company may at its option prepay the
Subordinated Notes, in whole or in part; however, the Company is required to
prepay all Subordinated Notes upon a Change of Control (as defined in the
Subordinated Note Purchase Agreement). The Company is not subject to a
prepayment premium upon a voluntary or mandatory prepayment of the
Subordinated Notes.
The Company intends to use $11.0 million of the net proceeds from the
Offerings to prepay the Subordinated Notes in full. See "Use of Proceeds."
SELLER NOTES
In connection with the acquisition of certain Burger King restaurants from
Messrs. Jaro and Osborn in September 1994, the Company issued promissory
notes to entities controlled by Messrs. Jaro and Osborn in the aggregate
principal amount of $4.4 million (collectively and as amended and restated,
the "Seller Notes"). The Seller Notes are junior in right of payment to the
Senior Subordinated Notes and the Company's guarantee obligations in respect
of borrowings under the Credit Agreement and bear interest at a rate of
12.75% per annum, payable semi-annually in arrears. The Seller Notes have a
scheduled maturity of August 31, 2005.
The Company may prepay the Seller Notes only under certain specified
limited conditions and is required to prepay the Seller Notes in full without
a prepayment premium upon the occurrence of specified events, including upon
(i) an acceleration of the Subordinated Notes, (ii) a default by the Company
in the payment of any principal on a Seller Note, (iii) the commencement of a
bankruptcy proceeding by the Company or certain of its subsidiaries or (iv) a
Change of Control (which is defined to have the same meaning as set forth in
the Subordinated Note Purchase Agreement).
The Company intends to use $4.4 million of the net proceeds from the
Offerings to prepay the Seller Notes in full. See "Use of Proceeds."
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CERTAIN TRANSACTIONS
Subordinated Debt Holders. PMI, MCIT, affiliates of Messrs. Jaro and
Osborn and BancBoston are the holders of Senior Subordinated Notes,
Subordinated Notes, Seller Notes and the BBI Notes, respectively. For the
nine-month period ended September 30, 1996, the Company accrued approximately
$1.2 million of interest expense to PMI under the Senior Subordinated Notes
and during fiscal 1995, the Company paid to MCIT, the holders of the Seller
Notes and BancBoston approximately $1.4 million, $560,000 and $36,000 as
interest expense under the Subordinated Notes, the Seller Notes and the BBI
Notes, respectively. Simultaneously with the consummation of the Offerings,
the Company will use approximately $33.9 million from the net proceeds of the
Offerings to prepay the principal amount under each of the Senior
Subordinated Notes, the Subordinated Notes and the Seller Notes (including
the prepayment penalty of $750,000 and warrant redemption payment of
approximately $2.7 million to PMI to repurchase immediately exercisable
warrants to purchase 71,720 shares of Common Stock held by PMI). The FAC
Notes and the BBI Notes will remain outstanding following the Offerings. PMI,
MCIT and BancBoston are principal stockholders of the Company. Mr. Jaro is
the Company's Chairman, Chief Executive Officer, managing owner and a
principal stockholder and Mr. Osborn is the Company's Vice Chairman, director
and a principal stockholder. See "Use of Proceeds" and "Description of
Certain Indebtedness."
The Jordan Company. On September 1, 1994, the Company and Enterprises
entered into a consulting agreement with an affiliate of The Jordan Company
(the "TJC Consulting Agreement"). Under the TJC Consulting Agreement, the
Company retained an affiliate of The Jordan Company to render consulting
services to it regarding the Company and its subsidiaries, their financial
and business affairs and their relationships with their lenders and
stockholders, and the operation and expansion of their business. The TJC
Consulting Agreement expires on September 1, 2004, but is automatically
renewed for successive one-year terms, unless either party provides written
notice of termination 60 days prior to the scheduled renewal date. The TJC
Consulting Agreement provides for an annual consulting fee payable on a
quarterly basis equal to the higher of (i) $500,000 or (ii) 2.5% of the
Company's cash flow (as determined in the TJC Consulting Agreement). In
addition, the TJC Consulting Agreement provides for payment to the affiliate
of The Jordan Company of (i) an investment banking and sponsorship fee of up
to 2% of the purchase price of certain acquisitions or sales involving the
Company, Enterprises or any of their subsidiaries and (ii) a financial
consulting fee of up to 1.0% of any debt, equity or other financing arranged
by the Company with the assistance of TJC. During fiscal 1995 and the nine
months ended September 30, 1996, the Company paid consulting fees to the
affiliate of The Jordan Company of approximately $479,000 and $439,000,
respectively, pursuant to the terms of the TJC Consulting Agreement. In
connection with the acquisition on February 7, 1996 by certain subsidiaries
of Enterprises of an aggregate of 36 Burger King restaurant franchises
located in the States of Indiana, Kentucky, Ohio, Virginia and North
Carolina, the Company paid to the affiliate of The Jordan Company an
investment banking fee of $1.0 million and paid fees totalling $300,000 to
certain members of the Company's senior management. If the Offerings and
related financings are consummated by the Company, the Company will pay to
the affiliate of The Jordan Company an investment banking fee of $1.3 million
pursuant to the terms of the TJC Consulting Agreement. The Company believes
that the terms of the TJC Consulting Agreement are comparable to the terms
that it would obtain from non-affiliated parties for comparable services.
Messrs. Jordan, Zalaznick and Caputo are partners of The Jordan Company.
Burger King Corporation. In connection with certain of its previous
acquisitions of Burger King restaurants, the Company and its subsidiaries
have entered into certain agreements with BKC as a precondition to receiving
BKC approval of the acquisition. As part of its purchase agreement with BKC,
dated September 1, 1994, Enterprises committed to expend up to $2.25 million
by September 1, 1997 to upgrade the 68 Burger King restaurants it acquired.
As part of its November 21, 1995 acquisition of 11 Burger King restaurants,
the Company and ATCI agreed to (i) renew the Company's commitment, initially
made in connection with its November 30, 1994 acquisition, to sell up to 10
Burger King restaurants to a franchisee to be designated by BKC and (ii)
expend approximately $1.65 million by November 21, 1997 to upgrade certain of
the 11 Burger King restaurants so acquired. The commitment by ATCI to upgrade
the restaurants is subject to certain capital expenditures to be made by BKC.
As part
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of its acquisitions of 36 Burger King restaurants on February 7, 1996, the
Company and ATCI (i) renewed the Company's commitment to sell up to 10 Burger
King restaurants to a franchisee to be designated and (ii) agreed to make the
capital expenditures necessary to bring each of the Burger King restaurants
operated by the Company and its subsidiaries into compliance with BKC current
repair and maintenance standards by September 7, 1997.
In connection with the Offerings, the Company will be required to enter
into an agreement with BKC pursuant to which the Company will, among other
things, indemnify BKC for any claims against BKC arising out of the
Offerings.
Members of the Board of Directors. Enterprises leases the land and
buildings for two Burger King restaurants under noncancelable operating
leases from an entity which is owned by Mr. Jaro. The leases expire in March
2006 and January 2007, respectively, and require total monthly rental
payments of $20,600. For the year ended January 1, 1996 and for the nine
month period ended September 30, 1996, the Company recorded rent expense of
$248,000 and $185,000, respectively, under these leases.
Pursuant to the provisions of BKC's franchise agreements, Messrs. Jaro,
Osborn and Hubert, as managing owners and owners, have guaranteed the
obligations of the Company and its subsidiaries under each franchise
agreement and each lease agreement in which BKC is the lessor.
In connection with the September 1994 purchase of the Management
Restaurants, the Company (i) entered into a $700,000 revolving loan agreement
with Mr. Jaro whereby the Company loaned funds to Mr. Jaro and (ii) deferred
payment in full of the purchase price for one of the Management Restaurants
sold to the Company by a corporation controlled by Mr. Jaro. Effective upon
the consummation of the Offerings, the Company intends to cancel the
outstanding balance of the revolving loan to Mr. Jaro in exchange for Mr.
Jaro's cancellation of the outstanding balance of the deferred purchase price
for the restaurant.
The Company has adopted a policy to provide that future transactions
between the Company and its officers, directors and other affiliates must (i)
be approved by a majority of the members of the Board of Directors and by a
majority of the disinterested members of the Board of Directors and (ii) be
on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
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UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") among the Company and the
Underwriters, the Company has agreed to issue and sell to the Underwriters,
and the Underwriters, severally and not jointly, have agreed to purchase from
the Company, the respective principal amounts of Senior Notes set forth
opposite their names below.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation $
Jefferies & Company, Inc. ...........................
-------------
Total ........................................... $100,000,000
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to purchase the Senior Notes are subject to the approval of
certain legal matters by counsel and to certain other conditions. If any of
the Senior Notes are purchased by the Underwriters pursuant to the
Underwriting Agreement, all such Senior Notes must be so purchased.
The Underwriters have advised the Company that the Underwriters propose to
offer the Senior Notes to the public initially at the price set forth on the
cover page of this Prospectus and to certain dealers (who may include the
Underwriters) at such offering price less a concession not to exceed $ per
Senior Note. The Underwriter may allow and such dealers may reallow discounts
not in excess of $ per Senior Note to certain dealers. After the initial
public offering, the public offering price and such concessions may be
changed at any time without notice.
The Senior Notes will constitute a new class of securities with no
established trading market. The Company does not intend to list such
securities on any national securities exchange or on the Nasdaq National
Market. The Company has been advised by the Underwriters that following the
completion of the Notes Offering, the Underwriters currently intend to make a
market in the Senior Notes. However, the Underwriters are not obligated to do
so and any such market-making may be discontinued at any time without notice
in their sole discretion. In addition, such market-making activity will be
subject to the limits imposed by the Securities Act and the Exchange Act.
Accordingly, no assurance can be given as to the liquidity of, or the trading
market for, the Senior Notes. See "Risk Factors--Absence of Public Market for
the Securities."
The Company has agreed to indemnify the Underwriters against certain
liabilities and expenses in connection with the offer and sale by the Company
of the Senior Notes, including liabilities under the Securities Act, and to
contribute to payments that the Underwriters may be required to make in
respect thereof.
Donaldson, Lufkin & Jenrette Securities Corporation, one of the
Underwriters, is also acting as the underwriter of the Units Offering. See
"Summary--Concurrent Offering."
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LEGAL MATTERS
Certain legal matters with respect to the legality of the Securities
offered hereby will be passed upon for the Company by Mayer, Brown & Platt,
New York, New York. Mayer, Brown & Platt also represents The Jordan Company
and its affiliates from time to time in connection with its various
acquisitions and divestitures. Certain legal matters relating to the
Offerings will be passed upon for the Underwriters by Latham & Watkins, New
York, New York.
EXPERTS
The consolidated financial statements of the Company as of January 1, 1996
and December 31, 1994 and for the periods then ended and the historical
schedules of restaurant contribution for each of the periods from January 1,
1993 to the earlier of the date of purchase by the Company or December 31,
1995, appearing in this Prospectus and Registration Statement have been
audited by Deloitte & Touche LLP, independent certified public accountants,
as set forth in their reports thereon appearing elsewhere herein, and are
included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-1 (the "Registration Statement") under the Securities Act, with respect to
the Securities offered hereby. For the purposes hereof, the term
"Registration Statement" means the original Registration Statement and any
and all amendments thereto. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and
such Securities, reference is hereby made to such Registration Statement,
which can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission
at Seven World Trade Center, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549 at prescribed rates.
Statements contained in this Prospectus as to the contents of any contract
or other document 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, each such statement being qualified in
all respects by such reference.
NEITHER BKC NOR ANY OF ITS SUBSIDIARIES, AFFILIATES, OFFICERS, DIRECTORS,
AGENTS, EMPLOYEES, ACCOUNTANTS OR ATTORNEYS ARE IN ANY WAY PARTICIPATING IN,
APPROVING OR ENDORSING THESE OFFERINGS OF SECURITIES, ANY OF THE UNDERWRITING
OR ACCOUNTING PROCEDURES USED IN THE OFFERINGS, OR ANY REPRESENTATIONS MADE
IN CONNECTION WITH THE COMPANY. THE GRANT BY BKC OF ANY FRANCHISE OR OTHER
RIGHTS TO THE COMPANY IS NOT INTENDED AS, AND SHOULD NOT BE INTERPRETED AS,
AN EXPRESS OR IMPLIED APPROVAL, ENDORSEMENT OR ADOPTION OF ANY STATEMENT
REGARDING ACTUAL OR PROJECTED FINANCIAL OR OTHER PERFORMANCE WHICH MAY BE
CONTAINED IN THE COMPANY'S OFFERING MATERIALS. ALL FINANCIAL AND OTHER
PROJECTIONS HAVE BEEN PREPARED BY, AND ARE THE SOLE RESPONSIBILITY OF, THE
COMPANY.
ANY REVIEW BY BKC OF THE OFFERING MATERIALS OR THE INFORMATION INCLUDED
THEREIN HAS BEEN CONDUCTED SOLELY FOR THE BENEFIT OF BKC TO DETERMINE
CONFORMANCE WITH BKC'S INTERNAL POLICIES, AND NOT TO BENEFIT OR PROTECT ANY
OTHER PERSON. NO INVESTOR SHOULD INTERPRET SUCH REVIEW BY BKC AS AN APPROVAL,
ENDORSEMENT, ACCEPTANCE OR ADOPTION OF ANY REPRESENTATION, WARRANTY, COVENANT
OR PROJECTION CONTAINED IN THE MATERIALS REVIEWED.
107
<PAGE>
THE ENFORCEMENT OR WAIVER OF ANY OBLIGATION OF THE COMPANY UNDER ANY
AGREEMENT BETWEEN THE COMPANY AND BKC OR BKC'S AFFILIATES IS A MATTER OF
BKC'S OR BKC'S AFFILIATES' SOLE DISCRETION. NO INVESTOR SHOULD RELY ON ANY
REPRESENTATION, ASSUMPTION OR BELIEF THAT BKC OR BKC'S AFFILIATES WILL
ENFORCE OR WAIVE PARTICULAR OBLIGATIONS OF THE COMPANY UNDER SUCH AGREEMENTS.
108
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The pro forma consolidated statements of operations of the Company for
fiscal 1995, for the nine months ended October 2, 1995 and September 30, 1996
and for the twelve months ended September 30, 1996 gives effect to each of
the following transactions as if each had occurred on January 1, 1995: (i)
the Company's acquisition of a total of 18 restaurants from BKC and two
existing Burger King franchisees in three transactions, one in September
1995, one in October 1995 and one in November 1995, including five
restaurants in Colorado, nine in Tennessee, two in Illinois and two in
Georgia (collectively, the "1995 Acquisitions"); (ii) the Company's
acquisition of a total of 36 restaurants from two existing Burger King
franchisees in two transactions in February 1996, including 21 restaurants in
Virginia, three in North Carolina, seven in Kentucky, three in Ohio and two
in Indiana (collectively, the "1996 Acquisitions"); and (iii) the
consummation of the Offerings and the application of the estimated net
proceeds therefrom as described in "Use of Proceeds." The pro forma
consolidated balance sheet gives effect to the consummation of the Offerings
and the application of the estimated net proceeds therefrom as further
described in "Use of Proceeds" as if they had occurred as of September 30,
1996.
The Company believes that the assumptions used in the pro forma financial
statements provide a reasonable basis on which to present such statements.
The pro forma financial statements are provided for information purposes only
and should not be construed to be indicative of the Company's results of
operations or financial position had the Offerings and the other events
described above been consummated on or as of the dates assumed, and are not
intended to project the Company's results of operations or its financial
position for any future period or as of any future date. The Pro Forma
Consolidated Financial Statements of the Company and accompanying notes
should be read in conjunction with the Historical Schedules of Restaurant
Contribution and the notes thereto and the audited Consolidated Financial
Statements of the Company and the notes thereto, each included elsewhere in
this Prospectus.
P-1
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR FISCAL 1995
<TABLE>
<CAPTION>
ADJUSTMENTS
---------------------------------------------
1995 1996 1995 AND 1996
ACQUISITIONS ACQUISITIONS ACQUISITIONS
ACTUAL (1) (2) ADJUSTMENTS
----------- -------------- -------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Restaurant sales ....................... $139,572 $14,399 $41,721 $ 0
Restaurant operating expenses:
Cost of sales ......................... 44,798 4,846 13,116
Restaurant labor and related costs ... 34,526 4,038 10,254
Depreciation and amortization ......... 4,927 321 462 1,355 (3)
Occupancy and other operating expenses 38,930 3,834 12,393 (1,500)(4)
(247)(5)
----------- -------------- -------------- -------------
Total restaurant operating expenses . 123,181 13,039 36,225 (392)
----------- -------------- -------------- -------------
Restaurant contribution ................ 16,391 1,360 5,496 392
General and administrative expenses ... 5,904 799(6) 1,992(6) (1,324)(7)
121 (8)
----------- -------------- -------------- -------------
Operating income ..................... 10,487 561(9) 3,504(9) 1,595
Other income (expense):
Interest expense ...................... (8,323) (4,045)(10)
Amortization of deferred costs ....... (511) (522)(12)
Other income (expense), net ........... 74
----------- -------------- -------------- -------------
Total other income (expense), net ... (8,760) (4,567)
----------- -------------- -------------- -------------
Income before income taxes ............. 1,727 561(9) 3,504(9) (2,972)
Provision for income taxes ............. 825 448 (14)
----------- -------------- -------------- -------------
Net income ............................. $ 902 $ 561(9) $ 3,504(9) $(3,420)
=========== ============== ============== =============
Preferred stock dividends ..............
Weighted average shares outstanding (in
thousands)(20) ........................
Net income per common share(20) .......
EBITDA ................................. $ 16,142 (19)
===========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ADJUSTMENTS
----------------
PRO FORMA PRO FORMA AS
SUBTOTAL OTHER OFFERINGS ADJUSTED
--------- ----- --------- --------------
<S> <C> <C> <C> <C>
Restaurant sales ....................... $195,692 $ 0 $ 0 $195,692
Restaurant operating expenses:
Cost of sales ......................... 62,760 -- -- 62,760
Restaurant labor and related costs ... 48,818 -- -- 48,818
Depreciation and amortization ......... 7,065 -- -- 7,065
Occupancy and other operating expenses 53,410 -- -- 53,410
--------- ----- --------- --------------
Total restaurant operating expenses . 172,053 -- -- 172,053
--------- ----- --------- --------------
Restaurant contribution ................ 23,639 -- -- 23,639
General and administrative expenses ... 7,492 -- -- 7,492
--------- ----- --------- --------------
Operating income ..................... 16,147 -- -- 16,147
Other income (expense):
Interest expense ...................... (12,368) -- 966 (11) (11,402)
Amortization of deferred costs ....... (1,033) -- 489 (13) (544)
Other income (expense), net ........... 74 -- -- 74
--------- ----- --------- --------------
Total other income (expense), net ... (13,327) -- 1,455 (11,872)
--------- ----- --------- --------------
Income before income taxes ............. 2,820 -- 1,455 4,275
Provision for income taxes ............. 1,273 -- 597 (16) 1,870
--------- ----- --------- --------------
Net income ............................. $ 1,547 $ 0 $ 858 $ 2,405 (17)(18)
========= ===== ========= ==============
Preferred stock dividends .............. 4,200
Weighted average shares outstanding (in
thousands)(20) ........................ 1,031
Net income per common share(20) ....... $ (1.74)
==============
EBITDA ................................. $ 24,817 (19)
==============
</TABLE>
P-2
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED OCTOBER 2, 1995
<TABLE>
<CAPTION>
ADJUSTMENTS
---------------------------------------------
1995 1996
ACQUISITIONS ACQUISITIONS 1995 AND 1996
ACTUAL (1) (2) ACQUISITIONS
----------- -------------- -------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Restaurant sales ........................ $103,446 $12,638 $31,315 $ 0
Restaurant operating expenses:
Cost of sales .......................... 33,226 4,285 9,829 --
Restaurant labor and related costs .... 25,818 3,550 7,571 --
Depreciation and amortization .......... 3,646 259 306 1,111 (3)
Occupancy and other operating expenses 28,650 3,410 9,257 (1,125)(4)
(187)(5)
----------- -------------- -------------- -------------
Total restaurant operating expenses .. 91,340 11,504 26,963 (201)
----------- -------------- -------------- -------------
Restaurant contribution ................. 12,106 1,134 4,352 201
General and administrative expenses .... 4,202 685(6) 1,494(6) (1,030)(7)
97 (8)
----------- -------------- -------------- -------------
Operating income ...................... 7,904 449(9) 2,858(9) 1,134
Other income (expense):
Interest expense ....................... (6,222) -- -- (3,200)(10)
Amortization of deferred costs ........ (378) -- -- (397)(12)
Other income (expense), net ............ 78 -- -- --
-------------- -------------- -------------
Total other income (expense) .......... (6,522) -- -- (3,597)
----------- -------------- -------------- -------------
Income before provision for income taxes 1,382 449(9) 2,858(9) (2,463)
Provision for income taxes .............. 661 -- -- 346 (14)
----------- -------------- -------------- -------------
Net income .............................. $ 721 $ 449(9) $ 2,858(9) $(2,809)
=========== ============== ============== =============
Preferred stock dividends ...............
Weighted average shares outstanding
(in thousands)(20) .....................
Net income per common share(20) ........
EBITDA .................................. $ 12,088 (19)
===========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ADJUSTMENTS
----------------
PRO FORMA PRO FORMA AS
SUBTOTAL OTHER OFFERINGS ADJUSTED
--------- ----- --------- --------------
<S> <C> <C> <C> <C>
Restaurant sales ........................ $147,399 $ 0 $ 0 $147,399
Restaurant operating expenses:
Cost of sales .......................... 47,340 -- -- 47,340
Restaurant labor and related costs .... 36,939 -- -- 36,939
Depreciation and amortization .......... 5,322 -- -- 5,322
Occupancy and other operating expenses 40,005 -- -- 40,005
--------- ----- --------- --------------
Total restaurant operating expenses .. 129,606 -- -- 129,606
--------- ----- --------- --------------
Restaurant contribution ................. 17,793 -- -- 17,793
General and administrative expenses .... 5,448 -- -- (9) 5,448
--------- ----- --------- --------------
Operating income ...................... 12,345 -- -- 12,345
Other income (expense):
Interest expense ....................... (9,422) -- 852 (11) (8,570)
Amortization of deferred costs ........ (775) -- 367 (13) (408)
Other income (expense), net ............ 78 -- -- 78
--------- ----- --------- --------------
Total other income (expense) .......... (10,119) -- 1,219 (8,900)
--------- ----- --------- --------------
Income before provision for income taxes 2,226 -- 1,219 3,445
Provision for income taxes .............. 1,007 -- 500 (16) 1,507
--------- ----- --------- --------------
Net income .............................. $ 1,219 $ 0 $ 719 $ 1,938 (17)(18)
========= ===== ========= ==============
Preferred stock dividends ............... 3,150
Weighted average shares outstanding
(in thousands)(20) ..................... 1,031
Net income per common share(20) ........ $ (1.18)
==============
EBITDA .................................. $ 18,749 (19)
==============
</TABLE>
P-3
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
ADJUSTMENTS
------------------------------ -----------
1996 1996 PRO FORMA
ACTUAL ACQUISITIONS(2) ADJUSTMENTS SUBTOTAL
------------- --------------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Restaurant sales ........................ $149,973 $3,454 $ 0 $153,427
Restaurant operating expenses:
Cost of sales .......................... 48,476 1,121 -- 49,597
Restaurant labor and related costs .... 37,406 938 -- 38,344
Depreciation and amortization .......... 5,431 44 128 (3) 5,603
(149)(4)
Occupancy and other operating expenses 41,050 1,169 4 (5) 42,074
------------- --------------- ------------- -----------
Total restaurant operating expenses .. 132,363 3,272 (17) 135,618
------------- --------------- ------------- -----------
Restaurant contribution ................. 17,610 182 17 17,809
(132)(7)
General and administrative expenses .... 5,907 235 (6) 11 (8) 6,021
------------- --------------- ------------- -----------
Operating income ...................... 11,703 (53)(9) 138 11,788
Other income (expense):
Interest expense ....................... (8,880) -- 544 (10) (8,336)
Amortization of deferred costs ........ (736) -- (39)(12) (775)
Other income (expense), net ............ (87) -- -- (87)
Other non-recurring expense ............ (3,064) -- -- (3,064)
------------- --------------- ------------- -----------
Total other income (expense) .......... (12,767) -- 505 (12,262)
------------- --------------- ------------- -----------
Income before provision for income taxes (1,064) (53)(9) 643 (474)
Provision for income taxes .............. (426) -- 242 (14) (184)
------------- --------------- ------------- -----------
Net income .............................. $ (638) $ (53)(9) $ 401 $ (290)
============= =============== ============= ===========
Preferred stock dividends ...............
Weighted average shares outstanding
(in thousands) (20) ....................
Net income per common share (20) .......
EBITDA .................................. $ 17,933 (19)
=============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ADJUSTMENTS
------------------------ PRO FORMA
OTHER OFFERINGS AS ADJUSTED
----------- ----------- -----------
<S> <C> <C> <C>
Restaurant sales ........................ $ 0 $ 0 $153,427
Restaurant operating expenses:
Cost of sales .......................... -- -- 49,597
Restaurant labor and related costs .... -- -- 38,344
Depreciation and amortization .......... -- -- 5,603
Occupancy and other operating expenses -- -- 42,074
----------- ----------- --------------
Total restaurant operating expenses .. -- -- 135,618
----------- ----------- --------------
Restaurant contribution ................. -- -- 17,809
General and administrative expenses .... -- -- 6,021
----------- ----------- --------------
Operating income ...................... -- -- 11,788
Other income (expense):
Interest expense ....................... -- (173)(11) (8,509)
Amortization of deferred costs ........ -- 367 (13) (408)
Other income (expense), net ............ -- -- (87)
Other non-recurring expense ............ 3,064(15) -- --
----------- ----------- --------------
Total other income (expense) .......... 3,064 194 (9,004)
----------- ----------- --------------
Income before provision for income taxes 3,064 194 2,784
Provision for income taxes .............. 1,256 80 (16) 1,152
----------- ----------- --------------
Net income .............................. $1,808 $ 114 $ 1,632(17)(18)
=========== =========== ==============
Preferred stock dividends ............... 3,150
Weighted average shares outstanding
(in thousands) (20) .................... 1,031
Net income per common share (20) ....... $ (1.47)
==============
EBITDA .................................. $ 19,115 (19)
==============
</TABLE>
P-4
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
ADJUSTMENTS
-----------------------------------------
1996 1995 1996 1995 & 1996
ACTUAL ACQUISITIONS(1) ACQUISITIONS(2) ADJUSTMENTS
----------- ------------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Restaurant sales ........................ $186,099 $1,761 $13,860 $ 0
Restaurant operating expenses:
Cost of sales .......................... 60,048 561 4,408 --
Restaurant labor and related costs .... 46,114 488 3,621 --
Depreciation and amortization .......... 6,712 62 200 372 (3)
(524)(4)
Occupancy and other operating expenses 51,330 424 4,305 (56)(5)
----------- ------------- ------------- -----------
Total restaurant operating expenses .. 164,204 1,535 12,534 (208)
----------- ------------- ------------- -----------
Restaurant contribution ................. 21,895 226 1,326 208
(426)(7)
General and administrative expenses .... 7,609 114 (6) 733 (6) 35 (8)
----------- ------------- ------------- -----------
Operating income ...................... 14,286 112 (9) 593 (9) 599
Other income (expense):
Interest expense ....................... (10,981) -- -- (301)(10)
Amortization of deferred costs ........ (869) -- -- (164)(12)
Other income (expense), net ............ (91) -- -- --
Other income (expense), net ............ (3,064) -- -- --
----------- ------------- ------------- -----------
Total other income (expense) .......... (15,005) -- -- (465)
----------- ------------- ------------- -----------
Income before provision for income taxes (719) 112 (9) 593 (9) 134
Provision for income taxes(6) ........... (262) -- -- 344 (14)
----------- ------------- ------------- -----------
Net income .............................. $ (457) $ 112 (9) $ 593 (9) $(210)
=========== ============= ============= ===========
Preferred stock dividends ...............
Weighted average shares outstanding
(in thousands) (20) ....................
Net income per common share (20) .......
EBITDA .................................. $ 21,987 (19)
===========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ADJUSTMENTS
--------------------
PRO FORMA PRO FORMA
SUBTOTAL OTHER OFFERINGS AS ADJUSTED
--------- --------- --------- --------------
<S> <C> <C> <C> <C>
Restaurant sales ........................ $201,720 $ 0 $ 0 $201,720
Restaurant operating expenses:
Cost of sales .......................... 65,017 -- -- 65,017
Restaurant labor and related costs .... 50,223 -- -- 50,223
Depreciation and amortization .......... 7,346 -- -- 7,346
Occupancy and other operating expenses 55,479 -- -- 55,479
--------- --------- --------- --------------
Total restaurant operating expenses .. 178,065 -- -- 178,065
--------- --------- --------- --------------
Restaurant contribution ................. 23,655 -- -- 23,655
General and administrative expenses .... 8,065 -- -- 8,065
--------- --------- --------- --------------
Operating income ...................... 15,590 -- -- 15,590
Other income (expense):
Interest expense ....................... (11,282) -- (59)(11) (11,341)
Amortization of deferred costs ........ (1,033) -- 489 (13) (544)
Other income (expense), net ............ (91) -- -- (91)
Other income (expense), net ............ (3,064) 3,064 (15) -- --
--------- --------- --------- --------------
Total other income (expense) .......... (15,470) 3,064 430 (11,976)
--------- --------- --------- --------------
Income before provision for income taxes 120 3,064 430 3,614
Provision for income taxes(6) ........... 82 1,256 177 (16) 1,515
--------- --------- --------- --------------
Net income .............................. $ 38 $1,808 $253 $ 2,099 (17)(18)
========= ========= ========= ==============
Preferred stock dividends ............... 4,200
Weighted average shares outstanding
(in thousands) (20) .................... 1,031
Net income per common share (20) ....... $ (2.04)
==============
EBITDA .................................. $ 25,183 (19)
==============
</TABLE>
P-5
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The Pro Forma Consolidated Statements of Operations of the Company for
fiscal 1995, for the nine months ended October 2, 1995 and September 30, 1996
and for the twelve months ended September 30, 1996 gives effect to (i) the
Offerings and the application of the estimated net proceeds therefrom and
(ii) the acquisition of each of the 54 Burger King restaurants acquired by
the Company subsequent to January 1, 1995, as if each had occurred on January
1, 1995.
(1) Reflects restaurant contribution and the unaudited estimates of
general and administrative expenses for the restaurants acquired in
the 1995 Acquisitions for the period prior to their respective
acquisition by the Company, during which period such acquired
restaurants were operated by their prior owners. See the Historical
Schedules of Restaurant Contribution and the footnotes thereto
included elsewhere in this Prospectus. The "1995 Acquisitions"
consist of the September 12, 1995 asset purchase of five restaurants
in Colorado; the October 24, 1995 asset purchase of two restaurants
in Illinois; and the November 21, 1995 stock purchase of nine
restaurants in Tennessee and two in Georgia. Restaurant contribution
for acquired restaurants subsequent to their acquisition is included
under "Actual" for fiscal 1995.
(2) Reflects restaurant contribution and the unaudited estimates of
general and administrative expenses for the restaurants acquired in
the 1996 Acquisitions for the period prior to their respective
acquisition by the Company, during which period such acquired
restaurants were operated by their prior owners. See the Historical
Schedules of Restaurant Contribution and the footnotes thereto
included elsewhere in this Prospectus. The "1996 Acquisitions"
consist of two asset purchases as of February 7, 1996: (i) the
acquisition of seven restaurants in Kentucky, three in Ohio and two
in Indiana, and (ii) the acquisition of 21 restaurants in Virginia
and three in North Carolina. Restaurant contribution for acquired
restaurants subsequent to their acquisition is included under
"Actual" for the nine months ended September 30, 1996.
(3) Reflects an increase in depreciation and amortization expense arising
from the Company's increased basis in acquired tangible restaurant
assets (restaurant equipment, signs and decor) and intangible assets
(franchise agreements and goodwill). For fiscal 1995, the $1,355
adjustment for the 1995 and 1996 Acquisitions consists of $141 and
$1,214 pertaining to the 1995 Acquisitions and the 1996 Acquisitions,
respectively. For the nine months ended October 2, 1995, the $1,111
adjustment for the 1995 and 1996 Acquisitions consists of $152 and
$959 pertaining to the 1995 Acquisitions and 1996 Acquisitions,
respectively. For the twelve months ended September 30, 1996, the
$372 adjustment of the 1995 and 1996 Acquisitions consists of ($8)
and $380 pertaining to the 1995 Acquisitions and 1996 Acquisitions,
respectively.
(4) Reflects a decrease in occupancy and other operating expenses
resulting from a decrease in equipment rental expense relating to the
purchase of certain restaurant equipment previously leased in the
1996 Acquisitions. For fiscal 1995, the full amount of the $1,500
decrease for the 1995 and 1996 Acquisitions pertains to the 1996
Acquisitions. For the nine months ended October 2, 1995, the full
amount of the $1,125 decrease of the 1995 and 1996 Acquisitions
pertains to the 1996 Acquisitions. For the twelve months ended
September 30, 1996, the $524 decrease for the 1995 and 1996
Acquisitions pertains to the 1996 Acquisitions, respectively.
(5) Reflects an overall decrease in occupancy and other operating
expenses resulting from a decrease in rental expense reflecting more
favorable leasing terms negotiated by the Company in connection with
the acquisition of certain restaurants. For fiscal 1995, the $247
adjustment for the 1995 and 1996 Acquisitions consists of a $44
increase and $291 decrease in rental expense pertaining to the 1995
Acquisitions and the 1996 Acquisitions, respectively. For the nine
months ended October 30, 1995, the $187 adjustment of the 1995 and
1996 Acquisitions consists of a $25 increase and $212 decrease fin
rental expense pertaining to the 1995 Acquisitions and 1996
Acquisitions, respectively. For the twelve months ended September 30,
1996, the $56 adjustment for the 1995 and 1996 Acquisitions consists
of a $13 increase and $69 decrease in rental expense pertaining to
the 1995 Acquisitions and 1996 Acquisitions, respectively.
(6) The amounts set forth reflect the Company's estimates of general and
administrative expenses of the prior owners of the acquired
restaurants, based upon unaudited information provided by the prior
owners to the extent that such information was available. See Notes
to Historical Schedules of Restaurant Contribution.
(7) The adjustments to general and administrative expenses reflect cost
savings resulting from employee terminations and other consequences
of the acquisition of Burger King restaurants by the Company, net of
additional costs incurred by the Company to operate the acquired
restaurants. For fiscal 1995, the $1,324 decrease for the 1995 and
1996 Acquisitions consists of $375 and $949 for the 1995 Acquisitions
and 1996 Acquisitions, respectively. For the nine months ended
October 2, 1995, the $1,030 decrease for the 1995 and 1996
Acquisitions consists of $319 and $711 for the 1995 Acquisitions and
1996 Acquisitions, respectively. For the twelve months ended
September 30, 1996, the $426 decrease for the 1995 and 1996
Acquisitions consists of $84 and $342 for the 1995 Acquisitions and
1996 Acquisitions, respectivley.
(8) Reflects an increase in management fees payable under the management
consulting agreement (the "TJC Consulting Agreement") with an
affiliate of The Jordan Company. For fiscal 1995, the $121 adjustment
for the 1995 and 1996 Acquisitions consists of $21 and $100
pertaining to the 1995 Acquisitions and the 1996 Acquisitions,
respectively. See "Certain Transactions." For the nine months ended
October 2, 1995, the $97
P-6
<PAGE>
increase for the 1995 and 1996 Acquisitions consists of $18 and $79
for the 1995 Acquisitions and 1996 Acquisitions, respectively. For
the twelve months ended September 30, 1996, the $35 increase for the
1995 and 1996 Acquisitions consists of $6 and $29 for the 1995
Acquisitions and 1996 Acquisitions, respectively.
(9) Presented for informational and referencing purposes only.
(10) Reflects an increase in interest expense associated with an aggregate
increase in average net borrowings for the 1995 and 1996 Acquisitions
(in the case of the fiscal 1995, the nine months ended October 2,
1995 and the twelve months ended September 30, 1996 pro forma income
statements) and for the 1996 Acquisitions (in the case of the nine
months ended September 30, 1996). For fiscal 1995, the $4,045
adjustment for the 1995 and 1996 Acquisitions consists of $637 and
$3,408 pertaining to the 1995 Acquisitions and the 1996 Acquisitions,
respectively. For the nine months ended October 2, 1995, the $3,200
adjustment for the 1995 and 1996 Acquisitions consists of $545 and
$2,655 for the 1995 Acquisitions and 1996 Acquisitions, respectively.
For the twelve months ended September 30, 1996, the $301 adjustment
for the 1995 and 1996 Acquisitions consists of $34 and $267 for the
1995 Acquisitions and 1996 Acquisitions, respectively.
(11) Reflects reduction in interest expense resulting from the application
of a portion of the estimated net proceeds of the Offerings to pay or
prepay aggregate borrowings.
(12) Reflects the amortization of deferred financing and organizational
costs on a straight line basis over seven and five years,
respectively. For fiscal 1995, the $522 adjustment for the 1995 and
1996 Acquisitions consists of $14 and $508 pertaining to the 1995
Acquisitions and the 1996 Acquisitions, respectively. For the nine
months ended October 2, 1995, the $397 adjustment for the 1995 and
1996 Acquisitions consists of $11 and $386 pertaining to the 1995
Acquisitions and 1996 Acquisitions, respectively. For the twelve
months ended September 30, 1996, the $164 adjustment pertaining to
the 1995 and 1996 Acquisitions consists of $3 and $161 for the 1995
Acquisitions and 1996 Acquisitions, respectively.
(13) Reflects a change in amortization expense relating to the write-off
of deferred financing costs associated with the prepayment of the
Subordinated Debt and the repayment of the existing Credit Agreement,
offset by the amortization expense of the deferred financing costs of
the issuance.
(14) Represents the incremental tax effect of the pro forma adjustments
assuming an effective corporate tax rate of 41.0%. For fiscal 1995,
the $448 increase relates to $1,093 of incremental income before
income taxes comprised of $561 for the 1995 Acquisitions, $3,504 for
the 1996 Acquisitions and $(2,972) for the adjustments to restaurant
operating expenses, corporate overhead and capital structure arising
from the 1995 and 1996 Acquisitions. For the nine months ended
October 2, 1995, the $346 adjustment relates to $844 of incremental
income before income taxes comprised of $449 and $2,858 of
incremental income for the 1995 Acquisitions and 1996 Acquisitions,
respectively, and ($2,463) for the adjustments to restaurant
operating expenses, corporate overhead and capital structure arising
from the 1995 and 1996 Acquisitions, respectively. For the nine
months ended September 30, 1996, the $242 adjustment relates to $590
of incremental loss/income before income taxes comprised of $53 for
the 1996 Acquisitions and $643 for the adjustments to restaurant
operating expenses, corporate overhead and capital structure arising
for the 1996 Acquisitions. For the twelve months ended September 30,
1996, the $344 adjustment relates to $839 of incremental income
before income taxes comprised of $112 and $593 for the 1995
Acquisitions and 1996 Acquisitions, respectively, and $134 for the
adjustments to restaurant operating expenses, corporate overhead and
capital structure arising from the 1995 and 1996 Acquisitions,
respectively.
(15) The $3,024 adjustment relates to the reversal of non-recurring items
related to (i) $2,097 of expenses of the aborted offering attempted
by the Company in the third quarter of 1996 (ii) the accrual of the
$791 of compensation remaining under Mr. Osborn's prior employment
agreement, (see "Management--Employment Agreements") and (iii) and
$176 of compensation paid to Mr. Osborn for services rendered from
January 2, 1996 through May 10, 1996, the date of his resignation as
President of the Company.
(16) Represents the incremental tax effect of the Offerings pro forma
adjustments assuming an effective corporate tax rate of 41.0%.
(17) Does not reflect anticipated future increases in salary expenses
under the Company's employment agreements with its executive
officers. See "Management--Employment Agreements."
(18) The pro forma income statements do not give effect to an
extraordinary pre-tax charge which the Company expects to incur
immediately following the close of the Offerings. If such pre-tax
charge were taken at the beginning of fiscal 1995, such charge would
have been approximately $7,315 (approximately $4,316 on an after-tax
basis), consisting of (i) an approximate $6,565 (approximately $3,873
on an after-tax basis) write-off
P-7
<PAGE>
of deferred financing costs related to the repayment of the
Subordinated Debt and indebtedness under the Credit Agreement and
(ii) a write-off related to a prepayment penalty
of $750 ($443 net of applicable taxes) incurred in connection with the
retirement of the Senior Subordinated Notes.
(19) EBITDA represents operating income plus depreciation and
amortization, management and director's fees. For a description of
management and director's fees, see "Certain Transactions--The Jordan
Company." On a pro forma basis, EBITDA is adjusted for certain
non-recurring items, which consist of:
<TABLE>
<CAPTION>
PRO FORMA
------------------------------------------------------
NINE MONTHS ENDED TWELVE MONTHS
--------------------------- ENDED
FISCAL OCTOBER 2, SEPTEMBER 30, SEPTEMBER 30,
1995 1995 1996 1996
-------- ----------- -------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Change in estimate of disputed invoices ............ $(60) $(110) $144 $ 194
Excessive insurance premiums and long distance
costs ............................................. 420 314 377 483
Headcount reduction due to consolidated territories 396 243 393 546
-------- ----------- -------------- ---------------
Total addition to EBITDA ........................... $756 $ 447 $914 $1,223
======== =========== ============== ===============
</TABLE>
While EBITDA should not be construed as a substitute for operating
income or a better indicator of liquidity than cash flow from operating
activities, which are determined in accordance with generally accepted
accounting principles, EBITDA is included because management believes
that certain investors find it to be a useful tool for measuring the
ability of the Company to service its debt and because the Cash Flow
Coverage Ratio, when calculated on a Pro Forma Basis (each as defined in
the Indenture), is calculated on a similar basis. EBITDA is not
necessarily a measure of the Company's ability to fund its cash needs.
See the Consolidated Statements of Cash Flows of the Company and the
related notes to the Consolidated Financial Statements thereto included
herein.
(20) Net income per share was computed using the weighted average number
of shares of Common Stock outstanding assuming the issuance of 30,650
shares of Common Stock in the Units Offering in connection with
consummation of the Offerings.
P-8
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
OFFERINGS PRO FORMA, AS
ACTUAL ADJUSTMENTS ADJUSTED
---------- -------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ......... $ 2,705 $ 2,350(1) $ 5,055
Accounts receivable ............... 665 -- 665
Inventory ......................... 1,774 -- 1,774
Prepaid expenses .................. 1,456 -- 1,456
---------- -------------- -------------
Total current assets ............. 6,600 2,350 8,950
PROPERTY AND EQUIPMENT ............. 35,733 -- 35,733
GOODWILL ........................... 96,141 -- 96,141
OTHER ASSETS:
Deferred financing costs .......... 5,147 $ (320) (2) 4,827
Deferred organization costs ...... 185 -- 185
Development costs ................. 366 -- 366
Franchise agreements .............. 4,309 -- 4,309
Deferred income taxes ............. -- 1,589 (3) 1,589
---------- -------------- -------------
Total other assets ............... 10,007 1,269 11,276
---------- -------------- -------------
TOTAL ASSETS ....................... $148,481 $ 3,619 $152,100
========== ============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued
expenses ......................... $ 8,016 $ 0 $ 8,016
Accrued payroll ................... 2,909 -- 2,909
Accrued sales tax payabLe ......... 822 -- 822
Accrued interest payable .......... 1,477 -- 1,477
Current portion of long-term debt . 6,712 $ (6,200) (4) 512
Current portion of capital leases . 109 -- 109
---------- -------------- -------------
Total current liabilities ....... 20,045 (6,200) 13,845
LONG-TERM DEBT--Less current
portion ........................... 119,453 $(11,550)(5) 107,903
OBLIGATIONS UNDER
CAPITAL LEASE ...................... 89 -- 89
DEFERRED INCOME TAXES .............. 789 (789)(3) --
---------- -------------- -------------
TOTAL LIABILITIES .................. 140,376 (18,539) 121,837
---------- -------------- -------------
SENIOR EXCHANGEABLE PREFERRED STOCK -- 28,281 (6) 28,281
STOCKHOLDERS' EQUITY
Capital stock and additional
paid-in capital .................. 7,600 -- 7,600
Retained earnings ................. 505 (6,123)(7) (5,618)
---------- -------------- -------------
Total stockholders' equity ...... 8,105 (6,123) 1,982
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY ............................. $148,481 $ 3,619 $152,100
---------- -------------- -------------
</TABLE>
P-9
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
The Pro Forma Consolidated Balance Sheet of the Company as of September
30, 1996 gives effect to the consummation of the Offerings and the
application of the estimated net proceeds therefrom, as if each such
transaction had occurred on September 30, 1996.
(1) Reflects an increase in cash relating to the issuance of Senior Notes
and Preferred Stock. See "Use of Proceeds."
(2) Reflects an increase in deferred financing costs relating to the
issuance of the Senior Notes which is partially offset by a decrease
in financing costs pertaining to the Subordinated Debt and the Credit
Agreement. See Note 7.
(3) Reflects the net income tax benefit to be received upon the write-off
of deferred financing costs and a prepayment penalty paid in
connection with the prepayment of Subordinated Debt. See Note 7.
(4) Reflects the repayment of indebtedness under the Credit Agreement.
(5) Reflects the repayment of the Subordinated Debt and indebtedness
under the Credit Agreement which is partially offset by the issuance
of $100,000 of Senior Notes.
(6) Reflects the issuance of $30,000 of Senior Exchangeable Preferred
Stock which is partially offset by issuance costs.
(7) Reflects a warrant redemption payment of $2,700 and the extraordinary
pre-tax charge which the Company expects to incur immediately following
the close of the Offerings. If such pre-tax charge were taken at the end
of the third quarter ended September 30, 1996, such charge would have
been approximately $5,801 (approximately $3,423 on an after-tax basis),
consisting of (i) an approximate $5,051 (approximately $2,980 on an
after-tax basis) write-off of deferred financing costs related to the
repayment of the Subordinated Debt and indebtedness under the Credit
Agreement and (ii) a write-off related to a prepayment penalty of $750
in connection with the prepayment of the Senior Subordinated Notes.
P-10
<PAGE>
AMERIKING, INC.
(FORMERLY NAMED NRE HOLDINGS, INC.)
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Independent Auditors' Report .............................................................. F-2
Consolidated Balance Sheets as of September 30, 1996 (unaudited), January 1, 1996 and
December 31, 1994 ........................................................................ F-3
Consolidated Statements of Operations for the period January 1, 1995 to January 1, 1996
and the period August 17, 1994 (date of incorporation) to December 31, 1994 ............. F-4
Consolidated Statements of Operations for the period January 2, 1996 to September 30, 1996
and the period January 1, 1995 to October 2, 1995 (unaudited) ............................ F-5
Consolidated Statements of Stockholders' Equity for the period January 2, 1996 to
September 30, 1996 (unaudited), the period January 1, 1995 to January 1, 1996 and the
period August 17, 1994 (date of incorporation) to December 31, 1994 ...................... F-6
Consolidated Statements of Cash Flows for the period January 1, 1995 to January 1, 1996
and the period August 17, 1994 (date of incorporation) to December 31, 1994 ............. F-7
Consolidated Statements of Cash Flows for the period January 2, 1996 to September 30, 1996
and the period January 1, 1995 to October 2, 1995 (unaudited) ............................ F-8
Notes to Consolidated Financial Statements ................................................ F-9
</TABLE>
INDEX TO THE HISTORICAL SCHEDULES OF RESTAURANT CONTRIBUTION
<TABLE>
<CAPTION>
<S> <C>
INITIAL ACQUISITIONS
Independent Auditors' Report ................................................................ F-19
Historical Schedules of Restaurant Contribution for the BKC Restaurants, Jaro restaurants
and Osborn restaurants for the period January 1, 1994 through September 1, 1994 ........... F-20
Historical Schedules of Restaurant Contribution for the BKC Restaurants, Jaro restaurants
and Osborn restaurants for the year ended December 31, 1993 ................................ F-21
Notes to the Historical Schedules of Restaurant Contribution ................................ F-22
ACQUISITIONS
Independent Auditors' Report ................................................................ F-23
Historical Schedules of Restaurant Contribution for Curtis James Investments, Inc., and C&N
Dining, Inc. for the period January 1, 1996 through the date of acquisition ............... F-24
Historical Schedules of Restaurant Contribution for DMW, Inc., BKC, QSC, Inc. and Ro-Lank,
Inc., Curtis James Investments, Inc., and C&N Dining, Inc. for the year ended December 31,
1995 or the period January 1, 1995 through date of acquisition ............................. F-25
Historical Schedules of Restaurant Contribution for Friedman, QSC, Inc. and Ro-Lank, Inc.,
Curtis James Investments, Inc., and C&N Dining, Inc. for the year ended December 31, 1994
or the period January 1, 1994 through date of acquisition .................................. F-26
Historical Schedules of Restaurant Contribution for Friedman, QSC, Inc. and Ro-Lank, Inc.,
Curtis James Investments, Inc., and C&N Dining, Inc. for the year ended December 31, 1993 . F-27
Notes to the Historical Schedules of Restaurant Contribution ................................ F-28
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
AmeriKing, Inc.
Westchester, Illinois
We have audited the accompanying consolidated balance sheets of AmeriKing,
Inc. (formerly NRE Holdings, Inc.) and subsidiary as of January 1, 1996 and
December 31, 1994, and the related consolidated statements of operations,
stockholders' equity and cash flows for the period January 1, 1995 to January
1, 1996 and the period August 17, 1994 (date of incorporation) to December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of AmeriKing, Inc. and
subsidiary as of January 1, 1996 and December 31, 1994, and the results of
their operations and their cash flows for the period January 1, 1995 to
January 1, 1996 and the period August 17, 1994 (date of incorporation) to
December 31, 1994 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
March 12, 1996
Chicago, Illinois
F-2
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 (UNAUDITED), JANUARY 1, 1996 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
SEPTEMBER 30, JANUARY 1, DECEMBER 31,
1996 1996 1994
--------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................... $ 2,705,000 $ 1,887,000 $ 7,650,000
Accounts receivable .......................... 665,000 1,118,000 134,000
Inventory .................................... 1,774,000 1,009,000 1,001,000
Prepaid expenses ............................. 1,456,000 1,218,000 775,000
--------------- -------------- --------------
Total current assets ........................ 6,600,000 5,232,000 9,560,000
PROPERTY AND EQUIPMENT ........................ 35,733,000 28,457,000 23,471,000
GOODWILL ...................................... 96,141,000 66,847,000 61,739,000
OTHER ASSETS:
Deferred financing costs ..................... 5,147,000 3,096,000 3,509,000
Deferred organization costs .................. 185,000 220,000 272,000
Development costs ............................ 366,000
Franchise agreements ......................... 4,309,000 3,384,000 3,239,000
--------------- -------------- --------------
Total other assets .......................... 10,007,000 6,700,000 7,020,000
--------------- -------------- --------------
TOTAL ......................................... $148,481,000 $107,236,000 $101,790,000
=============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued expenses . $ 8,016,000 $ 5,399,000 $ 6,037,000
Accrued payroll .............................. 2,909,000 802,000 1,193,000
Accrued sales tax payable .................... 822,000 1,047,000 924,000
Accrued interest payable ..................... 1,477,000 346,000 1,041,000
Current portion of long-term debt (Note 5) .. 6,712,000 10,741,000 3,450,000
Current portion of capital leases (Note 6) .. 109,000 99,000
--------------- -------------- --------------
Total current liabilities ................... 20,045,000 18,434,000 12,645,000
LONG-TERM DEBT -- Less current portion (Note 5) 88,453,000 63,094,000 65,050,000
LONG-TERM DEBT -- Related Parties (Note 5) .... 31,000,000 16,000,000 16,000,000
OTHER LONG-TERM LIABILITIES (Note 6) ......... 89,000 176,000
DEFERRED INCOME TAXES ......................... 789,000 789,000 254,000
STOCKHOLDERS' EQUITY:
Preferred stock .............................. 75 75 75
Common stock ................................. 10 10 10
Additional paid-in capital ................... 7,599,915 7,599,915 7,599,915
Retained earnings ............................ 505,000 1,143,000 241,000
--------------- -------------- --------------
Total stockholders' equity .................. 8,105,000 8,743,000 7,841,000
--------------- -------------- --------------
TOTAL ......................................... $148,481,000 $107,236,000 $101,790,000
=============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
JANUARY 1, AUGUST 17,
1995 TO 1994 TO
JANUARY 1, PERCENTAGE DECEMBER 31, PERCENTAGE
1996 OF SALES 1994 OF SALES
-------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
RESTAURANT SALES .............................. $139,572,000 100.0% $33,931,000 100.0%
RESTAURANT OPERATING EXPENSES:
Cost of sales ................................ 44,798,000 32.1 10,807,000 31.8
Restaurant labor and related costs ........... 34,526,000 24.7 8,647,000 25.5
Occupancy .................................... 15,454,000 11.1 3,768,000 11.1
Depreciation and amortization of goodwill and
franchise agreements ........................ 4,927,000 3.6 1,193,000 3.5
Advertising .................................. 6,330,000 4.5 1,449,000 4.3
Royalties .................................... 4,788,000 3.4 1,162,000 3.4
Other operating expenses ..................... 12,358,000 8.9 2,850,000 8.4
-------------- ------------ -------------- ------------
Total restaurant operating expenses ....... 123,181,000 88.3 29,876,000 88.0
-------------- ------------ -------------- ------------
RESTAURANT CONTRIBUTION ....................... 16,391,000 11.7 4,055,000 12.0
GENERAL AND ADMINISTRATIVE
EXPENSES ..................................... 5,176,000 3.7 1,227,000 3.6
OTHER OPERATING EXPENSES:
Depreciation expense -- office ............... 199,000 0.1 15,000 0.1
Management and directors' fees ............... 529,000 0.4 132,000 0.4
-------------- ------------ -------------- ------------
Operating income ........................... 10,487,000 7.5 2,681,000 7.9
OTHER INCOME (EXPENSE):
Interest expense ............................. (6,296,000) (4.4) (1,256,000) (3.7)
Interest expense -- related party ............ (2,027,000) (1.5) (669,000) (2.0)
Amortization of deferred costs ............... (511,000) (0.4) (104,000) (0.3)
Other income ................................. 209,000 0.1 16,000 0.1
Other expense ................................ (135,000) (0.1) (236,000) (0.7)
-------------- ------------ -------------- ------------
Total other expense ........................ (8,760,000) (6.3) (2,249,000) (6.6)
-------------- ------------ -------------- ------------
INCOME BEFORE PROVISION FOR INCOME TAXES ..... 1,727,000 1.2 432,000 1.3
PROVISION FOR INCOME TAXES .................... 825,000 0.6 191,000 0.6
-------------- ------------ -------------- ------------
NET INCOME .................................... $ 902,000 0.6% $ 241,000 0.7%
============== ============ ============== ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD JANUARY 2, 1996 TO SEPTEMBER 30, 1996 AND
THE PERIOD JANUARY 1, 1995 TO OCTOBER 2, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
JANUARY 2 JANUARY 1,
1996 TO 1995 TO
SEPTEMBER 30, PERCENTAGE OCTOBER 2, PERCENTAGE
1996 OF SALES 1995 OF SALES
--------------- ------------ -------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
RESTAURANT SALES .............................. $149,973,000 100% $103,446,000 100%
RESTAURANT OPERATING EXPENSES:
Cost of sales ................................ 48,476,000 32.3 33,226,000 32.1
Restaurant labor and related costs ........... 37,406,000 24.9 25,818,000 25.0
Occupancy .................................... 15,938,000 10.7 11,440,000 11.1
Depreciation and amortization of goodwill and
franchise agreements ........................ 5,431,000 3.6 3,646,000 3.5
Advertising .................................. 7,219,000 4.8 4,416,000 4.3
Royalties .................................... 5,126,000 3.4 3,561,000 3.4
Other operating expenses ..................... 12,767,000 8.6 9,233,000 8.9
--------------- ------------ -------------- ------------
Total restaurant operating expenses ....... 132,363,000 88.3 91,340,000 88.3
--------------- ------------ -------------- ------------
RESTAURANT CONTRIBUTION ....................... 17,610,000 11.7 12,106,000 11.7
GENERAL AND ADMINISTRATIVE
EXPENSES ..................................... 5,108,000 3.4 3,664,000 3.5
OTHER OPERATING EXPENSES:
Depreciation expense -- office ............... 322,000 0.2 147,000 0.1
Management and directors' fees ............... 477,000 0.3 391,000 0.4
--------------- ------------ -------------- ------------
Operating income ........................... 11,703,000 7.8 7,904,000 7.6
OTHER INCOME (EXPENSE):
Interest expense ............................. (6,148,000) (4.1) (4,702,000) (4.5)
Interest expense -- related party ............ (2,732,000) (1.8) (1,520,000) (1.5)
Amortization of deferred costs ............... (736,000) (0.5) (378,000) (0.4)
Other income ................................. 180,000 0.2
Other expense ................................ (3,151,000) (2.1) (102,000) (0.1)
--------------- ------------ -------------- ------------
Total other expense ........................ (12,767,000) (8.5) (6,522,000) 6.3
--------------- ------------ -------------- ------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES ........................................ (1,064,000) (0.7) 1,382,000 1.3
PROVISION (BENEFIT) FOR INCOME TAXES ......... (426,000) (0.3) 661,000 (0.6)
--------------- ------------ -------------- ------------
NET INCOME (LOSS) ............................. $ (638,000) (0.4)% $ 721,000 0.7%
=============== ============ ============== ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994; AND
FOR THE PERIOD JANUARY 2, 1996 TO SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED COMMON PAID-IN RETAINED
STOCK STOCK CAPITAL EARNINGS TOTAL
----------- -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
INITIAL ISSUANCE OF STOCK .. $56 $10 $5,699,934 $5,700,000
Issuance of preferred stock 19 1,899,981 1,900,000
Net income ................. $ 241,000 241,000
----------- -------- ------------ ----------- ------------
BALANCE -- December 31, 1994 75 10 7,599,915 241,000 7,841,000
Net income ................. 902,000 902,000
----------- -------- ------------ ----------- ------------
BALANCE -- January 1, 1996 .. 75 10 7,599,915 1,143,000 8,743,000
Net loss (unaudited) ....... (638,000) (638,000)
----------- -------- ------------ ----------- ------------
BALANCE --September 30, 1996
(unaudited) ................ $75 $10 $7,599,915 $ 505,000 $8,105,000
=========== ======== ============ =========== ============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
JANUARY 1, 1995 AUGUST 17, 1994
TO TO
JANUARY 1, 1996 DECEMBER 31, 1994
--------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 902,000 $ 241,000
Adjustments to reconcile net income to net cash flows from
operating activities:
Depreciation and amortization ............................ 5,637,000 1,311,000
Deferred income taxes .................................... 535,000 171,000
Unrealized loss on property and equipment ................ 135,000
Changes in:
Accounts receivable ..................................... (984,000) (134,000)
Inventory ............................................... (8,000) (1,001,000)
Prepaid expenses ........................................ (443,000) (775,000)
Accounts payable and accrued expenses ................... (1,601,000) 7,845,000
--------------- -----------------
Net cash flows from operating activities ............... 4,173,000 7,658,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of restaurant franchise agreements, equipment and
goodwill ................................................. (11,305,000) (81,671,000)
Cash paid for organization costs .......................... (6,000) (290,000)
Cash paid for franchise agreements ........................ (60,000)
Cash paid for property and equipment ...................... (3,721,000) (597,000)
--------------- -----------------
Net cash flows from investing activities ............... (15,092,000) (82,558,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of preferred stock ............................... 5,900,000
Issuance of common stock .................................. 71,000
Proceeds from short-term debt ............................. 6,920,000
Proceeds from long-term debt .............................. 1,865,000 68,500,000
Proceeds from subordinated debt -- related party .......... 11,600,000
Cash paid for financing costs ............................. (135,000) (3,521,000)
Advances under line of credit ............................. 2,000,000 3,500,000
Payments on line of credit ................................ (2,000,000) (3,500,000)
Payments on long-term debt ................................ (3,450,000)
Payments on capital leases ................................ (44,000)
--------------- -----------------
Net cash flows from financing activities ............... 5,156,000 82,550,000
--------------- -----------------
NET CHANGE IN CASH AND CASH EQUIVALENTS .................... (5,763,000) 7,650,000
CASH AND CASH EQUIVALENTS -- Beginning of period ........... 7,650,000
--------------- -----------------
CASH AND CASH EQUIVALENTS -- End of period ................. $ 1,887,000 $ 7,650,000
=============== =================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest .................. $ 9,018,000 $ 884,000
=============== =================
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
On September 1, 1994, in connection with the purchase of
restaurant franchises from certain members of the
Company's management, the Company issued the following
noncash consideration:
Preferred stock (including additional paid-in capital) .. $ 1,600,000
Common stock (including additional paid-in capital) ..... 29,000
Subordinated debt --related party ........................ 4,400,000
New capital leases ........................................ $ 319,000
--------------- -----------------
TOTAL ...................................................... $ 319,000 $ 6,029,000
=============== =================
On September 1, 1994, in connection with the purchase of
restaurant franchises from Burger King Corporation, the
Company received a purchase price allowance for deferred
maintenance which was recorded as other accrued expenses . $ 1,350,000
=================
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 2, 1996 TO SEPTEMBER 30, 1996 AND
THE PERIOD JANUARY 1, 1995 TO OCTOBER 2, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
JANUARY 2, 1996 JANUARY 1, 1995
TO TO
SEPTEMBER 30, 1996 OCTOBER 2, 1995
(UNAUDITED) (UNAUDITED)
------------------ ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .......................................... $ (638,000) $ 721,000
Adjustments to reconcile net income (loss) to net cash
flows from operating activities:
Depreciation and amortization ............................. 6,489,000 4,171,000
Changes in:
Accounts receivable ...................................... 453,000 (616,000)
Inventory ................................................ (765,000) 85,000
Prepaid expenses ......................................... (238,000) (62,000)
Accounts payable and accrued expenses .................... 5,630,000 (1,401,000)
------------------ ---------------
Net cash flows from operating activities ................ 10,931,000 2,898,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of restaurant franchise agreements, equipment and
goodwill .................................................. (39,415,000) (2,626,000)
Cash paid for franchise agreements ......................... (300,000)
Cash paid for property and equipment ....................... (4,725,000) (2,768,000)
Proceeds from disposal of property and equipment .......... 817,000
------------------ ---------------
Net cash flows from investing activities ................ (43,623,000) (5,394,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ............................... 91,900,000
Proceeds from subordinated debt ............................ 15,000,000
Cash paid for financing costs .............................. (2,743,000)
Advances under line of credit .............................. 5,000,000
Payments on line of credit ................................. (2,500,000)
Payments on long-term debt ................................. (73,070,000) (2,587,000)
Payments on capital leases ................................. (77,000) (38,000)
------------------ ---------------
Net cash flows from financing activities ................ 33,510,000 (2,625,000)
------------------ ---------------
NET CHANGE IN CASH AND CASH EQUIVALENTS ..................... 818,000 (5,121,000)
CASH AND CASH EQUIVALENTS --Beginning of period ............ 1,887,000 7,650,000
------------------ ---------------
CASH AND CASH EQUIVALENTS --End of period ................... $ 2,705,000 $ 2,529,000
================== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest ................... $ 7,749,000 $ 6,049,000
================== ===============
New capital leases ......................................... 319,000
================== ===============
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994; AND
FOR THE PERIOD JANUARY 2, 1996 TO SEPTEMBER 30, 1996 AND THE PERIOD
JANUARY 1, 1995 TO OCTOBER 2, 1995 (UNAUDITED)
1. DESCRIPTION OF BUSINESS
AmeriKing, Inc. (formerly NRE Holdings, Inc.) ("AmeriKing") and its wholly
owned subsidiary, National Restaurant Enterprises, Inc. d/b/a/ AmeriKing
Corporation ("Enterprises") (consolidated, the "Company"), were formed on
August 17, 1994 to acquire and operate Burger King restaurants in five states
(Illinois, Indiana, Colorado, Texas and Wisconsin) and to grow through the
development or acquisition of additional Burger King restaurants in these and
other states.
Effective September 2, 1994, the Company acquired 68 Burger King
restaurants located in the Chicago metropolitan area from Burger King
Corporation ("BKC") for $41,500,000 in cash, and 14 restaurants in Colorado
and Texas from certain members of the Company's current management for
$6,029,000 of subordinated debt and preferred and common stock in the Company
and $1,975,000 in cash, (collectively the "Initial Acquisitions"). Effective
December 1, 1994, Enterprises acquired 39 Burger King restaurants from a
third-party franchisee in Chicago for $37,000,000 in cash.
During 1995, the Company purchased 18 restaurants in Colorado, Illinois,
Tennessee and Georgia for $10,769,000 in cash and opened one restaurant
located in Texas (the "1995 Acquisitions"). As a result of these acquisitions
and developments, the Company is one of the largest independent Burger King
franchisees in the United States, operating 140 restaurants at January 1,
1996.
ORGANIZATIONAL STRUCTURE -- Enterprises is a wholly owned subsidiary of
AmeriKing. Enterprises is comprised of the following subsidiaries: AmeriKing
Colorado Corporation I, AmeriKing Illinois Corporation I, AmeriKing Tennessee
Corporation I, and, subsequent to January 1, 1996 (see Note 10), AmeriKing
Cincinnati Corporation I and AmeriKing Virginia Corporation I.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR -- In 1995, the Company converted its fiscal year to a
52/53-week fiscal year. Due to this conversion, the 1995 fiscal year ended
January 1, 1996 included 366 days of operating activity. The comparative
fiscal period ended December 31, 1994 included 136 days with 121 days of
operating activity. The period ended September 30, 1996 included 273 days of
operating activity while the comparative period ended October 2, 1995
included 275 days of operating activity.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
PRINCIPLES OF CONSOLIDATION -- The accompanying consolidated financial
statements include the accounts of AmeriKing and its wholly owned subsidiary,
Enterprises. All significant intercompany accounts and transactions have been
eliminated in consolidation.
CASH EQUIVALENTS -- The Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
INVENTORIES -- Inventories consist primarily of restaurant food and
supplies and are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.
F-9
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994; AND
FOR THE PERIOD JANUARY 2, 1996 TO SEPTEMBER 30, 1996 AND THE PERIOD
JANUARY 1, 1995 TO OCTOBER 2, 1995 (UNAUDITED) (CONTINUED)
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
PROPERTY AND EQUIPMENT -- Property and equipment is stated at cost. Normal
repairs and maintenance cost are expensed as incurred. Depreciation is being
recorded using the straight-line method over the following estimated useful
lives:
<TABLE>
<CAPTION>
<S> <C>
Restaurant equipment and furnishings ... 5-15 years
Office furniture and equipment .......... 5-9 years
Buildings ............................... 40 years
Leasehold improvement ................... Life of lease
</TABLE>
FRANCHISE AGREEMENTS --The franchise agreements with BKC require the
Company's subsidiaries to pay a franchise fee for each restaurant opened.
Amortization is recorded on the straight-line method over the terms of the
related franchise agreements. The franchise agreements generally provide for
a term of 20 years with renewal options upon expiration. Accumulated
amortization as of January 1, 1996 and December 31, 1994 was approximately
$309,000 and $60,000, respectively. Accumulated amortization as of September
30, 1996 was approximately $571,000 (unaudited).
GOODWILL --Goodwill represents the excess of cost over fair value of the
net assets acquired in conjunction with the acquisitions described in Note 1.
Goodwill is being amortized over 35 years using the straight-line method.
Accumulated amortization as of January 1, 1996 and December 31, 1994 was
approximately $2,203,000 and $394,000, respectively. Accumulated amortization
as of September 30, 1996 was approximately $4,260,000 (unaudited).
The Company reviews regularly the operations of its subsidiaries and the
potential for impairment of franchise agreements and goodwill.
DEFERRED COSTS --Costs associated with the organization of the Company and
its subsidiaries have been deferred and are being amortized on a
straight-line basis over five years. Costs incurred by the Company in
obtaining the financing for the acquisitions have been deferred and are being
amortized on a straight-line basis over seven years. Accumulated amortization
as of January 1, 1996 and December 31, 1994 was approximately $76,000 and
$18,000, respectively, for deferred organization costs and approximately
$569,000 and $86,000, respectively, for deferred financing costs. Accumulated
amortization as of September 30, 1996 was approximately $121,000 for deferred
organization costs and approximately $1,200,000 for deferred financing costs
(unaudited).
RECLASSIFICATIONS --Certain information in the consolidated financial
statements for fiscal 1994 has been reclassified to conform with the current
reporting format.
PRO FORMA OPERATING RESULTS (UNAUDITED) --The following are the pro forma
operating results for the periods ended September 30, 1996, January 1, 1996
and December 31, 1994 as if the acquisitions by the Company described above
had occurred on August 17, 1994. The pro forma results give effect to changes
in depreciation and amortization resulting from valuing property and
franchise agreements at their estimated fair value and recording the excess
of purchase price over the net assets acquired (000's omitted):
<TABLE>
<CAPTION>
PERIOD ENDED
---------------------------------------------
SEPTEMBER 30, JANUARY 1, DECEMBER 31,
1996 1996 1994
--------------- ------------ --------------
<S> <C> <C> <C>
Net sales .............. $153,427 $153,971 $37,891
Restaurant contribution 17,896 17,752 4,681
</TABLE>
The pro forma results of operations are not necessarily indicative of the
actual operating results that would have occurred had the acquisitions been
consummated at the beginning of the respective periods.
F-10
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994; AND
FOR THE PERIOD JANUARY 2, 1996 TO SEPTEMBER 30, 1996 AND THE PERIOD
JANUARY 1, 1995 TO OCTOBER 2, 1995 (UNAUDITED) (CONTINUED)
3. FRANCHISE AGREEMENTS
In connection with the purchase of the Burger King restaurants, the
Company's subsidiaries entered into franchise agreements with BKC for the
operation of Burger King restaurants. The franchise agreements provide BKC
with significant rights regarding the business and operations of the
subsidiaries. The franchise agreements with BKC require the subsidiaries to
pay monthly royalty and advertising fees equal to 3.5% and 4.0%,
respectively, of restaurant sales.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JANUARY 1, DECEMBER 31,
1996 1996 1994
--------------- ------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Restaurant equipment and furnishings $38,015,000 $28,020,000 $23,663,000
Office furniture and equipment ..... 2,706,000 1,941,000 302,000
Leasehold improvements .............. 1,480,000 756,000 67,000
Land ................................ 423,000
Buildings ........................... 456,000 850,000
New restaurant development .......... 347,000 313,000 98,000
--------------- ------------- --------------
Total ............................... 43,004,000 32,303,000 24,130,000
Less accumulated depreciation ...... 7,271,000 3,846,000 659,000
--------------- ------------- --------------
Property and equipment --net ....... $35,733,000 $28,457,000 $23,471,000
=============== ============= ==============
</TABLE>
The Company included in accumulated depreciation an unrealized loss on
property and equipment of $135,000 due to the forced disposition of a
Company-owned restaurant that will occur in May 1997. Such loss represents
the difference between the salvage value and the book value of the equipment,
decor, landscaping and signs of the restaurant at the date of disposition.
The loss on disposition is included in other expenses on the consolidated
statements of operations.
F-11
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994; AND
FOR THE PERIOD JANUARY 2, 1996 TO SEPTEMBER 30, 1996 AND THE PERIOD
JANUARY 1, 1995 TO OCTOBER 2, 1995 (UNAUDITED) (CONTINUED)
5. LONG TERM DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 JANUARY 1, 1996 DECEMBER 31, 1994
--------------------------- ---------------------------- ---------------------------
CURRENT LONG-TERM CURRENT LONG-TERM CURRENT LONG-TERM
------------ ------------- ------------- ------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Term Loan A, at a variable interest rate,
8.687% at January 1, 1996, due 2002 ..... $2,500,000 $41,750,000 $ 3,500,000 $41,750,000 $3,250,000 $45,250,000
Term Loan B, at a variable interest rate,
9.187% at January 1, 1996, due 2004 ..... 400,000 39,400,000 200,000 19,600,000 200,000 19,800,000
Letter of Credit, at a variable interest
rate, 8.6871, at January 1, 1996,
due 2002 ................................. 2,500,000
Franchise Acceptance Corporation
Limited note, at a variable interest
rate, 8.56% at January 1, 1996, due 2005.. 129,000 1,647,000 121,000 1,744,000
Burger King Corporation note,
9.75%, due 1996 .......................... 6,920,000
Franchise Acceptance Corporation Limited
note, 9.86%, due 2006 .................... 383,000 5,656,000
Franchise Acceptance Corporation Revolving
Facility at a variable interest rate,
10.52% at September 30, 1996
due ...................................... 800,000
------------ ------------- ------------- ------------- ------------ -------------
Total ..................................... $6,712,000 $88,453,000 $10,741,000 $63,094,000 $3,450,000 $65,050,000
============ ============= ============= ============= ============ =============
</TABLE>
Debt to related parties consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 JANUARY 1, 1996 DECEMBER 31, 1994
--------------------------- ------------------------ ------------------------
CURRENT LONG-TERM CURRENT LONG-TERM CURRENT LONG-TERM
------------ ------------- --------- ------------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Subordinated notes,
12.75%, due 2005 ........ $15,400,000 $15,400,000 $15,400,000
Junior subordinated notes,
6.00%, due 2005 ......... 600,000 600,000 600,000
Senior subordinated notes,
12.5%, due 2005 ......... 15,000,000
------------ ------------- --------- ------------- --------- -------------
Total .................... $31,000,000 $16,000,000 $16,000,000
============ ============= ========= ============= ========= =============
</TABLE>
On September 1, 1994, the Company entered into a revolving credit and term
loan agreement with a lender (the "Agent Bank"). On November 30, 1994, the
loan agreement was amended and restated (the "Loan Agreement"). Under the
terms of the Loan Agreement, a consortium of banks led by the Agent Bank (the
"Consortium") provided two term loans, one for $48,500,000 ("Term Loan A")
and one for $20,000,000 ("Term Loan B"), and a $6,000,000 revolving credit
facility to the Company (collectively, the "Loans"). The original proceeds
from the Loans were used to acquire the BKC Restaurants and the Management
Restaurants, and the additional proceeds from the Loans were used to acquire
the Franchise Restaurants (see Note 1). The Loans are secured by all of the
assets of Enterprises and a guaranty from AmeriKing.
Term Loan A and Term Loan B (collectively, the "Term Loans") provide for
quarterly principal payments as provided by the Loan Agreement until final
maturity. Term Loan A matures November 30, 2001. Term Loan B matures November
30, 2002. The Company may prepay the Term Loans, in whole or in part, at any
time, provided such prepayments are at least $500,000 or a larger multiple of
$100,000.
The Term Loans bear interest at the lower of two variable rates which are
determined by reference to either (i) the Agent Bank's prime rate, or (ii)
the adjusted Eurodollar rate as determined by the Agent Bank, plus certain
interest rate spreads as specified in the Loan Agreement.
F-12
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994; AND
FOR THE PERIOD JANUARY 2, 1996 TO SEPTEMBER 30, 1996 AND THE PERIOD
JANUARY 1, 1995 TO OCTOBER 2, 1995 (UNAUDITED) (CONTINUED)
5. LONG TERM DEBT (CONTINUED)
In connection with the Loan Agreement, the Company entered into a
three-year interest rate cap agreement with the Agent Bank expiring December 29,
1997. Under the terms of this agreement, the maximum Eurodollar rate to
be used in the determination of the interest rates on 40% of the outstanding
principal of the Term Loans is limited to 9% per annum. The Company paid the
Agent Bank $242,000 in connection with the Loan Agreement, which is being
amortized over the term of the Loan Agreement. Accumulated amortization as of
January 1, 1996 was approximately $81,000. No amortization was recorded prior
to December 31, 1994.
Under the Loan Agreement, the revolving line of credit facility provides
for revolving borrowings bearing interest at the lower of two variable rates
which are determined by reference to either (i) the Agent Bank's prime rate,
or (ii) the adjusted Eurodollar rate as determined by the Agent Bank, plus
certain interest rate spreads as specified in the Loan Agreement. All
outstanding principal under the line of credit is due November 30, 2001. No
amounts were outstanding under the revolving credit facility at January 1,
1996 or December 31, 1994.
The Loan Agreement contains, among other provisions, certain covenants for
maintaining defined levels of tangible net worth and various financial
ratios, including debt service coverage and interest coverage. As of January
1, 1996, the Company was in compliance with all such covenants.
On September 1, 1994, the Company issued subordinated notes (the
"Subordinated Notes") to certain stockholders. Such Subordinated Notes bear
interest at a rate of 12.75% per annum and are subordinated to amounts due to
the consortium and to BKC. All principal of the Subordinated Notes is due
August 2005.
On November 30, 1994, the Company issued junior subordinated notes (the
"Junior Subordinated Notes") to the Agent Bank. Such Junior Subordinated
Notes bear interest at a rate of 6% per annum and are subordinated to the
amounts due to the Consortium and the Senior Subordinated Notes. All
principal of the Junior Subordinated Notes is due March 2005.
On November 21, 1995, AmeriKing Tennessee Corporation I ("ATCI"), a
wholly-owned subsidiary of the Company, issued a note to BKC in connection
with its acquisition of 11 restaurants located in Tennessee and Georgia. Such
note bears interest at a rate of 9.75% per annum and is secured by a pledge
of all capital stock of ATCI. All principal of the note is due May 1996.
On November 29, 1995, AmeriKing Colorado Corporation I ("ACCI"), a
wholly-owned subsidiary of the Company, issued a note to Franchise Acceptance
Corporation Limited in connection with its acquisition of five restaurants
located in Colorado. Such note bears interest at the 30-day commercial paper
rate plus 2.75% and is secured by certain assets of ACCI. Principal
installments of the note are due monthly through December 2005.
On February 7, 1996, the Company amended and restated the Loan Agreement
("the Amended and Restated Loan Agreement"). The Amended and Restated Loan
Agreement provides for an increase of principal of $20 million and $9 million
for the Term Loans and the revolving credit facility, respectively, resulting
in additional borrowing capacity of $29 million. The Amended and Restated
Loan Agreement provides for a principal balance of $45 million for Term Loan
A, $40 million for Term Loan B and $15 million for the revolving credit
facility. Interest on the new agreements remains unchanged from the prior
agreements; however, the new agreements provide for changes to existing and
additional covenants. In addition, beginning in 1996, the Company is required
to make additional principal payments on the Term Loans of 75% of the
Company's consolidated excess cash flow as defined by the Amended and
Restated Loan Agreement.
F-13
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994; AND
FOR THE PERIOD JANUARY 2, 1996 TO SEPTEMBER 30, 1996 AND THE PERIOD
JANUARY 1, 1995 TO OCTOBER 2, 1995 (UNAUDITED) (CONTINUED)
5. LONG TERM DEBT (CONTINUED)
On July 18, 1996, ATCI, issued a $7.0 million note ("TN Note") to Franchise
Acceptance Corporation Limited in connection with the repayment of the BKC note.
Such TN note consists of a $6.1 million facility which bears interest at a fixed
rate of 9.86% and is secured by certain assets of ACTI. Principal installments
of the note are due monthly. The remaining $900,000 represents a revolving
credit facility. The TN Note bears interest at a variable rate with payments due
monthly based on a seven year amortization. At September 30, 1996, the Company
had $800,000 outstanding on the revolving credit facility (unaudited). The TN
Note matures in July, 2006.
Aggregate maturities of the Company's long-term debt are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, JANUARY 1,
1996 1996
--------------- -------------
(UNAUDITED)
<S> <C> <C>
1996 ........ $ 6,712,000 $10,741,000
1997 ........ 3,923,000 5,832,000
1998 ........ 5,975,000 6,944,000
1999 ........ 9,159,000 8,408,000
2000 ........ 11,597,000 11,673,000
Thereafter . 88,799,000 46,237,000
--------------- -------------
Total ....... $126,165,000 $89,835,000
=============== =============
</TABLE>
6. LEASES
The Company leases restaurant space under noncancelable operating leases
with remaining lease terms of one to twenty years. In many cases, the leases
provide for rent escalations and for one or more five-year renewal options.
The leases generally require the Company to pay property taxes, insurance,
maintenance and other operating costs of the properties, as well as
contingent rentals based upon a percentage (generally 8.5%) of net sales. In
addition, the Company leases office space, office equipment, restaurant
equipment and vehicles under noncancelable operating leases.
Rent expense amounted to:
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31,
1996 1994
------------- --------------
<S> <C> <C>
Minimum rentals under operating leases $11,072,000 $2,691,000
Contingent rentals .................... 958,000 253,000
------------- --------------
Total ................................. $12,030,000 $2,944,000
============= ==============
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, OCTOBER 2,
1996 1995
--------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Minimum rentals under operating leases $11,346,000 $8,213,000
Contingent rentals .................... 1,517,000 835,000
--------------- ------------
Total ................................. $12,683,000 $9,048,000
=============== ============
</TABLE>
F-14
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994; AND
FOR THE PERIOD JANUARY 2, 1996 TO SEPTEMBER 30, 1996 AND THE PERIOD
JANUARY 1, 1995 TO OCTOBER 2, 1995 (UNAUDITED) (CONTINUED)
6. LEASES (CONTINUED)
Future minimum lease payments under noncancelable operating leases are as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, JANUARY 1,
1996 1996
--------------- -------------
(UNAUDITED)
<S> <C> <C>
1996 ........ $ 4,093,000 $ 12,229,000
1997 ........ 16,325,000 12,164,000
1998 ........ 16,193,000 11,997,000
1999 ........ 15,913,000 11,748,000
2000 ........ 15,309,000 11,157,000
Thereafter . 144,852,000 93,921,000
--------------- -------------
Total ....... $212,685,000 $153,216,000
--------------- -------------
</TABLE>
Future minimum lease payments under noncancelable capital leases are as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, JANUARY 1,
1996 1996
--------------- ------------
(UNAUDITED)
<S> <C> <C>
1996 .............................. $ 33,000 $129,000
1997 .............................. 129,000 129,000
1998 .............................. 66,000 66,000
--------------- ------------
Total minimum lease payments ..... 228,000 324,000
Less amount representing interest 30,000 49,000
--------------- ------------
Present value of the minimum lease
obligation ....................... $198,000 $275,000
=============== ============
</TABLE>
Payments on capital leases for the period ended September 30, 1996
(unaudited) and January 1, 1996 were $99,000 and $63,000, respectively; no
payments were made in the period ended December 31, 1994.
F-15
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994; AND
FOR THE PERIOD JANUARY 2, 1996 TO SEPTEMBER 30, 1996 AND THE PERIOD
JANUARY 1, 1995 TO OCTOBER 2, 1995 (UNAUDITED) (CONTINUED)
7. CAPITAL STOCK
At September 30, 1996 (unaudited), January 1, 1996 and December 31, 1994, the
Company's authorized capital stock was as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NUMBER OF ISSUED VOTING
VALUE SHARES AND RIGHTS
PER SHARE AUTHORIZED OUTSTANDING PER SHARE
----------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Class A Common Stock .......... $0.01 2,000.0 634.0 1
Class B Common Stock .......... 0.01 100.0 0.0 0
Class C Common Stock .......... 0.01 700 0.0 0
Class D Common Stock .......... 0.01 700 366.0 1
------------ -------------
Total common stock ............ 3,500.0 1,000.0
============ =============
Special Voting Preferred Stock $0.01 1.0 1.0 716
Class A1 Preferred Stock ..... 0.01 5,000.0 4,425.0 0
Class A2 Preferred Stock ..... 0.01 2,500.0 1,200.0 0
Class B Preferred Stock ...... 0.01 3,000.0 1,875.0 0
------------ -------------
Total preferred stock ......... 10,501.0 7,501.0
============ =============
</TABLE>
The preferred stock pays dividends at 6% per annum on the total issuance
price of each share, payable quarterly when allowed under the Loan Agreement.
Any preferred dividends not paid when due are cumulative. Any preferred
dividends not paid in cash will be paid in preferred stock.
The Special Voting Preferred Stock was eliminated from the Company's
Certificate of Incorporation on February 7, 1996.
In connection with entering into the original Loan Agreement, the Company
issued warrants to purchase 112.36 shares of Class B Common Stock for an
exercise price of $0.01 per share to an affiliate of the Agent Bank. The
warrants are exercisable at any time and expire the earlier of (i) the date
such warrants are exercised in full, or (ii) November 30, 2002.
During 1994, the Company granted stock options to purchase 11.24 shares of
Class D Common Stock at $100 per share in connection with employment
agreements with two members of the Company's management. All of these options
vest ratably over a two-year period ending September 1, 1996 at which time
all become exercisable. The options expire at the earlier of (i) 90 to 180
days after separation of the employee from the Company, or (ii) December 31,
2004. At January 1, 1996, all of these options remained outstanding; fifty
percent (50%) of such options were currently excercisable as of September,
1995.
The Company has never declared or paid dividends on its capital stock, as
stipulated by the Loan Agreement.
F-16
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994; AND
FOR THE PERIOD JANUARY 2, 1996 TO SEPTEMBER 30, 1996 AND THE PERIOD
JANUARY 1, 1995 TO OCTOBER 2, 1995 (UNAUDITED) (CONTINUED)
8. INCOME TAXES
The components of the income tax provision are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, OCTOBER 2, JANUARY 1, DECEMBER 31,
1996 1995 1996 1994
--------------- ------------ ------------ --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current -- state .. $(426,000) $661,000 $290,000 $ 20,000
Deferred -- federal 535,000 171,000
--------------- ------------ ------------ --------------
Total ............. $(426,000) $661,000 $825,000 $191,000
=============== ============ ============ ==============
</TABLE>
The Company's assumed effective tax rate on pretax income for the periods
ended January 1, 1996 and December 31, 1994 differs from the U.S. federal
statutory rate of 35% primarily due to state taxes and nondeductible
expenses.
The deferred tax liability at January 1, 1996 and December 31, 1994
results primarily from the use of accelerated depreciation methods for income
tax purposes and differences between the financial reporting basis and the
tax basis of the Company's assets, reduced by the tax benefit of the net
operating loss carry-forward.
On September 1, 1994, the Company acquired the assets of the restaurants
from the Predecessors in a transaction which involved a partial carry-over of
basis for income tax purposes. The Company recorded goodwill and a long-term
deferred income tax liability since the income tax basis of the restaurants
acquired from the Predecessors is lower than the financial reporting basis of
such assets.
The Company has a net operating loss carry-forward for tax purposes at
January 1, 1996 of approximately $8,735,000 which carry-forward will expire
in 2009.
9. RELATED PARTIES
At January 1, 1996, the Company has Subordinated Notes payable to certain
stockholders totaling $15,400,000 (see Note 5). During the periods ended
January 1, 1996 and December 31, 1994 the Company recorded interest expense
on the Subordinated Notes totaling $1,982,000 and $660,000, respectively.
During the periods ended September 30, 1996 and October 2, 1995, the Company
recorded interest expense on the Subordinated Notes totaling $1,470,000 and
$1,493,000, respectively, (unaudited).
The Company leases two restaurants under noncancelable operating leases
from an entity which is owned by a member of the Company's management. The
leases expire in March 2006 and January 2007, respectively, and require total
monthly rental payments of $20,600. During the periods ended January 1, 1996
and December 31, 1994, the Company recorded rent expense of $248,000 and
$82,000, respectively, under these leases. During the periods ended September
30, 1996 and October 2, 1995, the Company recorded rent expense of $185,000
under those leases (unaudited).
The Company has entered into a management consulting agreement with an
affiliate of a stockholder. Under the terms of the agreement, the Company is
required to pay the consultant an annual management fee equal to the higher
of (i) $300,000, or (ii) 0.35% of food sales. During the periods ended
January 1, 1996 and December 31, 1994, the Company recorded expense of
$479,000 and $116,000, respectively, under this agreement. On February 7,
1996, the Company amended the management consulting agreement changing the
annual management fee calculation to the higher of $500,000 or 2.5% of
EBITDA. During the periods ended September 30, 1996 and October 2, 1995, the
Company recorded expense of $439,000 and $353,000 respectively, under this
agreement (unaudited).
F-17
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994; AND
FOR THE PERIOD JANUARY 2, 1996 TO SEPTEMBER 30, 1996 AND THE PERIOD
JANUARY 1, 1995 TO OCTOBER 2, 1995 (UNAUDITED) (CONTINUED)
NOTE 10. SUBSEQUENT EVENTS
ISSUANCE OF SUBORDINATED NOTES -- On February 7, 1996, the Company's subsidiary
issued Senior Subordinated Notes of $15.0 million to PMI Mezzanine Fund, L.P.
("PMI"). Such Subordinated Notes bear interest at a rate of 12.5% per annum and
are subordinated to amounts due to the Agent Bank and its consortium and
certain amounts due BKC. All principal of the subordinated notes is due January
31, 2005. The Subordinated Note Agreement contains, among other provisions,
certain covenants for maintaining defined levels of tangible net worth and
various financial ratios, including debt service coverage and interest coverage.
Concurrent with the issuance of the Subordinated Notes, the Company issued
common stock purchase warrants for the purchase of shares of Class C Common
Stock to PMI.
ACQUISITION OF RESTAURANTS --Concurrent with the refinancing on February
7, 1996 (see Note 5) and issuance of Senior Subordinated Notes, the Company
acquired 36 Burger King restaurants located in Virginia, North Carolina,
Kentucky, Indiana and Ohio. The purchase price aggregated $36.9 million for
the 36 restaurants and $4.1 million for transaction fees and expenses. The
acquisitions were financed through net borrowings of $20.0 million under Term
Loans A and B, $5.0 million under the revolving credit facility and $15.0
million from the Senior Subordinated Notes and warrants issued to PMI. The
acquisitions will be accounted for using the purchase method. The excess of
the purchase price over the acquired tangible and intangible net assets, when
determined, will be allocated to goodwill and amortized on a straight-line
basis over 35 years. In addition, concurrent with the acquisitions, the
Company entered into operating leases on all 36 properties.
* * * * * *
F-18
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
AmeriKing, Inc.
Westchester, Illinois
We have audited the Historical Schedules of Restaurant Contribution (the
"Schedules") of the restaurants purchased by National Restaurant Enterprises,
Inc., a wholly-owned subsidiary of AmeriKing, Inc. (formerly NRE Holdings,
Inc.), from Burger King Corporation ("BKC") and from entities owned or
controlled by Lawrence E. Jaro ("Jaro") and William C. Osborn ("Osborn") for
the period January 1, 1994 through September 1, 1994 and the year ended
December 31, 1993. These schedules are the responsibility of the management
of the entities from whom the restaurants were acquired. Our responsibility
is to express an opinion on these schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Schedules are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Schedules. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
Schedules. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying Schedules were prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in the registration statement on Form S-1 of AmeriKing, Inc.) as
described in Note 2 and are not intended to be a complete presentation of the
earnings of the restaurants purchased from BKC, Jaro and Osborn.
In our opinion, the Schedules referred to above present fairly, in all
material respects, the restaurant contribution for the restaurants purchased
by National Restaurant Enterprises, Inc. from BKC, Jaro and Osborn for the
period January 1, 1994 through September 1, 1994 and the year ended December
31, 1993, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
October 10, 1995
Chicago, Illinois
F-19
<PAGE>
HISTORICAL SCHEDULES OF RESTAURANT CONTRIBUTION
FOR THE PERIOD JANUARY 1, 1994 THROUGH SEPTEMBER 1, 1994
<TABLE>
<CAPTION>
BKC JARO OSBORN
RESTAURANTS RESTAURANTS RESTAURANTS TOTAL
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
RESTAURANT SALES ..................... $47,762,000 $7,400,000 $1,558,000 $56,720,000
RESTAURANT OPERATING EXPENSES:
Cost of sales ....................... 15,589,000 2,534,000 479,000 18,602,000
Restaurant labor and related costs . 13,253,000 1,849,000 427,000 15,529,000
Occupancy ........................... 6,211,000 843,000 152,000 7,206,000
Depreciation and amortization of
franchise agreements ............... 1,161,000 179,000 26,000 1,366,000
Advertising ......................... 2,091,000 386,000 94,000 2,571,000
Royalties ........................... 1,642,000 254,000 54,000 1,950,000
Other operating expenses ............ 5,310,000 673,000 144,000 6,127,000
------------- ------------- ------------- -------------
Total restaurant operating expenses 45,257,000 6,718,000 1,376,000 53,351,000
------------- ------------- ------------- -------------
RESTAURANT CONTRIBUTION .............. $ 2,505,000 $ 682,000 $ 182,000 $ 3,369,000
============= ============= ============= =============
</TABLE>
See notes to historical schedules of restaurant contribution.
F-20
<PAGE>
HISTORICAL SCHEDULES OF RESTAURANT CONTRIBUTION
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
BKC JARO OSBORN
RESTAURANTS RESTAURANTS RESTAURANTS TOTAL
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
RESTAURANT SALES ..................... $70,667,000 $10,115,000 $2,113,000 $82,895,000
RESTAURANT OPERATING EXPENSES:
Cost of sales ....................... 21,844,000 3,344,000 644,000 25,832,000
Restaurant labor and related costs . 18,921,000 2,510,000 567,000 21,998,000
Occupancy ........................... 9,063,000 1,221,000 216,000 10,500,000
Depreciation and amortization of ...
franchise agreements ............... 1,722,000 292,000 48,000 2,062,000
Advertising ......................... 3,711,000 567,000 117,000 4,395,000
Royalties ........................... 2,434,000 348,000 73,000 2,855,000
Other operating expenses ............ 7,568,000 884,000 203,000 8,655,000
------------- ------------- ------------- -------------
Total restaurant operating expenses 65,263,000 9,166,000 1,868,000 76,297,000
------------- ------------- ------------- -------------
RESTAURANT CONTRIBUTION .............. $ 5,404,000 $ 949,000 $ 245,000 $ 6,598,000
============= ============= ============= =============
</TABLE>
See notes to historical schedules of restaurant contribution.
F-21
<PAGE>
NOTES TO THE HISTORICAL SCHEDULES OF
RESTAURANT CONTRIBUTION
FOR THE PERIOD JANUARY 1, 1994 THROUGH SEPTEMBER 1, 1994
AND THE YEAR ENDED DECEMBER 31, 1993
1. DESCRIPTION OF BUSINESS
AmeriKing, Inc. (formerly NRE Holdings, Inc.) ("AmeriKing") and its
wholly-owned subsidiary, National Restaurant Enterprises, Inc. d/b/a
AmeriKing Corporation (consolidated, the "Company"), were formed on August
17, 1994 to acquire and operate Burger King restaurants in five states
(Illinois, Indiana, Colorado, Texas and Wisconsin) and grow through the
development and acquisition of additional Burger King restaurants in these
and other states.
Effective September 2, 1994, the Company acquired 68 Burger King
restaurants located in the Chicago metropolitan area from Burger King
Corporation ("BKC") for $41,500,000 in cash, and 14 Burger King restaurants
in Colorado and Texas from entities owned or controlled by Lawrence E. Jaro
("Jaro") and William C. Osborn ("Osborn"), who are members of the Company's
current management, for $6,029,000 of subordinated debt and preferred and
common stock of AmeriKing and $1,975,000 in cash.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Historical Schedules of Restaurant Contribution (the "Schedules"),
include operations of the acquired restaurants for the periods prior to their
purchase by the Company, and have been prepared pursuant to Article 3 of
Regulation S-X, Section 210.3-02(a).
SALES -- Sales consist primarily of food and premium sales.
COST OF SALES -- Costs of sales consist primarily of restaurant and food
supplies, determined using the first-in, first-out (FIFO) method of inventory
valuation.
RESTAURANT LABOR AND RELATED COSTS -- Restaurant labor and related costs
include managers' salaries, hourly wages and related payroll taxes and
benefits.
OCCUPANCY -- Occupancy costs consist of rents, licenses and permits, real
estate taxes and common area maintenance.
DEPRECIATION AND AMORTIZATION OF FRANCHISE AGREEMENTS -- Depreciation is
recorded using accelerated methods permissible under generally accepted
accounting principles over the following useful lives:
<TABLE>
<CAPTION>
<S> <C>
Building improvements ............................ 10-20years
Furniture, fixtures and restaurant equipment .... 5-10years
</TABLE>
The franchise agreements with BKC require the Predecessors to pay a
franchise fee for each restaurant opened. Amortization is recorded on the
straight-line method over the terms of the related franchise agreements. The
franchise agreements generally provide for a term of 20 years with renewal
options upon expiration.
ADVERTISING -- Under the franchise agreements with BKC, monthly advertising
fees are to be paid at 4% of restaurant food sales.
ROYALTIES -- Under the franchise agreements with BKC, monthly royalties are
to be paid at 3.5% of restaurant food sales.
OTHER OPERATING EXPENSES -- Other operating expenses include utilities,
repairs and maintenance, cleaning, security, uniforms, workmen's compensation
and training expenses.
The Schedules of Restaurant Contribution do not include amounts relative
to general and administrative expenses, such as supervisory management and
overhead expenses. As the individual acquisitions primarily represented
acquisitions of a portion of a larger business (or, in other words, carve-out
acquisitions), any attempted allocation of such expenses would be assumption
driven. As a result, such expenses have been excluded from the statement of
restaurant contribution.
F-22
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
AmeriKing, Inc.
Westchester, Illinois
We have audited the Historical Schedules of Restaurant Contribution (the
"Schedules") of the restaurants purchased by National Restaurant Enterprises,
Inc., a wholly-owned subsidiary of AmeriKing, Inc. (formerly NRE Holdings,
Inc.,) ("AmeriKing") from Sheldon T. Friedman ("Friedman"), QSC, Inc. and
Ro-Lank, Inc., Curtis James Investments, Inc., and C&N Dining, Inc.
(collectively, the "Entities") for the periods indicated in the accompanying
Schedules. These Schedules are the responsibility of the Entities'
management. Our responsibility is to express an opinion on these Schedules
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Schedules are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Schedules. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
Schedules. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying Schedules were prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in the registration statement on Form S-1 of AmeriKing) as
described in Note 2 and are not intended to be a complete presentation of the
Entities' restaurant earnings.
In our opinion, the Schedules referred to above present fairly, in all
material respects, the restaurant contribution for the restaurants purchased
by National Restaurant Enterprises, Inc. for the periods indicated in the
accompanying Schedules, in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
May 8, 1996
Chicago, Illinois
F-23
<PAGE>
HISTORICAL SCHEDULES OF RESTAURANT CONTRIBUTION
<TABLE>
<CAPTION>
CURTIS JAMES C&N
INVESTMENTS, INC. DINING, INC.
FOR THE PERIOD FOR THE PERIOD
JANUARY 1, 1996 JANUARY 1, 1996
THROUGH THROUGH
FEBRUARY 6, 1996 FEBRUARY 6, 1996
----------------- ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
RESTAURANT SALES ...................................... $1,372,000 $2,082,000
RESTAURANT OPERATING EXPENSES:
Cost of sales ........................................ 458,000 663,000
Restaurant labor and related costs ................... 395,000 543,000
Occupancy ............................................ 129,000 392,000
Depreciation and amortization of franchise agreements 32,000 12,000
Advertising .......................................... 66,000 97,000
Royalties ............................................ 47,000 72,000
Other operating expenses ............................. 123,000 243,000
----------------- ----------------
Total restaurant operating expenses ................. 1,250,000 2,022,000
----------------- ----------------
RESTAURANT CONTRIBUTION ............................... $ 122,000 $ 60,000
================= ================
</TABLE>
See notes to historical schedules of restaurant contribution.
F-24
<PAGE>
HISTORICAL SCHEDULES OF RESTAURANT CONTRIBUTION
<TABLE>
<CAPTION>
QSC, INC. AND
RO-LANK, INC. FOR
DMW, INC. FOR THE BKC FOR THE THE PERIOD
PERIOD JANUARY 1, PERIOD JANUARY JANUARY 1, 1995
1995 THROUGH 1, 1995 THROUGH THROUGH NOVEMBER
SEPTEMBER 12, 1995 OCTOBER 24, 1995 20, 1995
------------------ ---------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
RESTAURANT SALES .................... $2,814,000 $1,324,000 $10,261,000
RESTAURANT OPERATING EXPENSES:
Cost of sales ...................... 942,000 543,000 3,361,000
Restaurant labor and related costs 739,000 486,000 2,812,000
Occupancy .......................... 272,000 34,000 959,000
Depreciation and amortization of
franchise agreements .............. 71,000 0 250,000
Advertising ........................ 173,000 46,000 490,000
Royalties .......................... 97,000 40,000 352,000
Other operating expenses ........... 220,000 179,000 972,000
------------------ ---------------- -----------------
Total restaurant operating
expenses ......................... 2,514,000 1,328,000 9,196,000
------------------ ---------------- -----------------
RESTAURANT CONTRIBUTION ............. $ 300,000 $ (4,000) $ 1,065,000
================== ================ =================
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
CURTIS JAMES C&N
INVESTMENTS, INC. DINING, INC.
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1995
------------------ ------------------
<S> <C> <C>
RESTAURANT SALES .................... $14,766,000 $26,955,000
RESTAURANT OPERATING EXPENSES:
Cost of sales ...................... 4,753,000 8,363,000
Restaurant labor and related costs 4,100,000 6,154,000
Occupancy .......................... 1,369,000 4,274,000
Depreciation and amortization of
franchise agreements .............. 353,000 83,000
Advertising ........................ 616,000 1,159,000
Royalties .......................... 509,000 926,000
Other operating expenses ........... 1,276,000 2,264,000
------------------ ------------------
Total restaurant operating
expenses ......................... 12,976,000 23,223,000
------------------ ------------------
RESTAURANT CONTRIBUTION ............. $ 1,790,000 $ 3,732,000
================== ==================
</TABLE>
See notes to historical schedules of restaurant contribution.
F-25
<PAGE>
HISTORICAL SCHEDULES OF RESTAURANT CONTRIBUTION
<TABLE>
<CAPTION>
FRIEDMAN FOR THE QSC, INC. AND CURTIS JAMES
PERIOD JANUARY 1, RO-LANK, INC. FOR INVESTMENTS, INC. C&N DINING, INC.
1994 THROUGH THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
NOVEMBER 30, 1994 DECEMBER 31, 1994 DECEMBER 31, 1994 DECEMBER 31, 1994
----------------- ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
RESTAURANT SALES ..................................... $43,494,000 $10,627,000 $13,242,000 $23,918,000
RESTAURANT OPERATING EXPENSES:
Cost of sales ....................................... 14,133,000 3,451,000 4,203,000 7,221,000
Restaurant labor and related costs .................. 10,733,000 2,810,000 3,664,000 5,428,000
Occupancy ........................................... 3,607,000 903,000 1,234,000 3,991,000
Depreciation and amortization of franchise
agreements ......................................... 4,294,000 257,000 221,000 40,000
Advertising ......................................... 2,166,000 475,000 538,000 1,027,000
Royalties ........................................... 1,499,000 365,000 457,000 822,000
Other operating expenses ............................ 3,486,000 1,002,000 1,261,000 2,048,000
----------------- ------------------ ------------------ ----------------
Total restaurant operating expenses ................ 39,918,000 9,263,000 11,578,000 20,577,000
----------------- ------------------ ------------------ ----------------
RESTAURANT CONTRIBUTION .............................. $ 3,576,000 $ 1,364,000 $ 1,664,000 $ 3,341,000
================= ================== ================== ==================
</TABLE>
See notes to historical schedules of restaurant contribution.
F-26
<PAGE>
HISTORICAL SCHEDULES OF RESTAURANT CONTRIBUTION
<TABLE>
<CAPTION>
QSC, INC. AND CURTIS JAMES
FRIEDMAN FOR THE RO-LANK, INC. FOR INVESTMENTS, INC. C&N DINING, INC.
YEAR ENDED THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1993 DECEMBER 31, 1993 DECEMBER 31, 1993 DECEMBER 31, 1993
------------------ ------------------ ----------------- -------------------
<S> <C> <C> <C> <C>
RESTAURANT SALES ..................................... $33,365,000 $9,035,000 $11,252,000 $21,635,000
RESTAURANT OPERATING EXPENSES:
Cost of sales ....................................... 10,825,000 2,857,000 3,618,000 6,440,000
Restaurant labor and related costs .................. 8,319,000 2,529,000 3,188,000 5,129,000
Occupancy ........................................... 3,037,000 794,000 1,047,000 3,778,000
Depreciation and amortization of franchise
agreements ......................................... 4,299,000 481,000 226,000 39,000
Advertising ......................................... 1,870,000 407,000 481,000 978,000
Royalties ........................................... 1,151,000 310,000 388,000 743,000
Other operating expenses ............................ 2,686,000 965,000 1,091,000 2,024,000
------------------ ------------------ ------------------ ------------------
Total restaurant operating expenses ................ 32,187,000 8,343,000 10,039,000 19,131,000
------------------ ------------------ ------------------ ------------------
RESTAURANT CONTRIBUTION .............................. $ 1,178,000 $ 692,000 $ 1,213,000 $ 2,504,000
================== ================== ================== =================
</TABLE>
See notes to historical schedules of restaurant contribution.
F-27
<PAGE>
NOTES TO THE HISTORICAL SCHEDULES OF
RESTAURANT CONTRIBUTION
1. DESCRIPTION OF BUSINESS
AmeriKing, Inc. (formerly NRE Holdings, Inc.) and its wholly-owned
subsidiary, National Restaurant Enterprises, Inc. d/b/a AmeriKing Corporation
(consolidated, the "Company"), were formed on August 17, 1994 to acquire and
operate Burger King restaurants in five states (Illinois, Indiana, Colorado,
Texas and Wisconsin) and grow through the development and acquisition of
additional Burger King restaurants in these and other states.
Effective December 1, 1994, the Company acquired 39 Burger King
restaurants located in the Chicago metropolitan area from Sheldon T. Friedman
("Friedman") for $37,000,000 in cash.
Effective September 13, 1995, the Company acquired 4 existing and 1
developmental Burger King restaurants located in Colorado from DMW, Inc. for
$2,629,000 in cash. On October 25, 1995, the Company acquired 2 restaurants
located in the Chicago metropolitan area from Burger King Corporation ("BKC")
for nominal consideration. Effective November 21, 1995, the Company acquired
11 Burger King restaurants located in Tennessee and Georgia from QSC, Inc.
and Ro-Lank, Inc. for $8,142,000 in cash.
Effective February 7, 1996, the Company acquired 24 Burger King
restaurants located in Virginia and North Carolina from C&N Dining, Inc. for
$27,469,000 in cash. Concurrent with the C&N Dining acquisition, the Company
acquired 12 restaurants located in the Cincinnati metropolitan area from
Curtis James Investments, Inc. for $9,400,000 in cash.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Historical Schedules of Restaurant Contribution (the "Schedules")
include operations of the acquired restaurants for the periods to the earlier
of the date of purchase by the Company or December 31, 1995, and have been
prepared pursuant to Article 3 of Regulation S-X, Section 210.3-02(a).
SALES -- Sales consist primarily of food and premium sales.
COST OF SALES -- Costs of sales consist primarily of restaurant and food
supplies, determined using the first-in, first-out (FIFO) method of inventory
valuation.
RESTAURANT LABOR AND RELATED COSTS -- Restaurant labor and related costs
include managers' salaries, hourly wages and related payroll taxes and
benefits.
OCCUPANCY -- Occupancy costs consist of rents, licenses and permits, real
estate taxes and common area maintenance.
DEPRECIATION AND AMORTIZATION OF FRANCHISE AGREEMENTS -- Depreciation is
recorded using accelerated methods permissible under generally accepted
accounting principles over the following useful lives:
BUILDING IMPROVEMENTS ........................... 10-20 YEARS
FURNITURE, FIXTURES AND RESTAURANT EQUIPMENT ... 5-10 YEARS
The franchise agreements with BKC require the Entities to pay a franchise
fee for each restaurant opened. Amortization is recorded on the straight-line
method over the terms of the related franchise agreements. The franchise
agreements generally provide for a term of 20 years with renewal options upon
expiration.
ADVERTISING -- Under the franchise agreements with BKC, monthly advertising
fees are to be paid at 4% of restaurant food sales.
ROYALTIES -- Under the franchise agreements with BKC, monthly royalties are
to be paid at 3.5% of restaurant food sales.
OTHER OPERATING EXPENSES -- Other operating expenses include utilities,
repairs and maintenance, cleaning, security, uniforms, workmen's compensation
and training expenses.
GENERAL AND ADMINISTRATIVE EXPENSES (UNAUDITED) -- The Schedules of
Restaurant Contribution do not include amounts relative to general and
administrative expenses, such as supervisory management
F-28
<PAGE>
and overhead expenses. As the individual acquisitions primarily represented
acquisitions of a portion of a larger business (or, in other words, carve-out
acquisitions), any attempted allocation of such expenses would be
assumption-driven. As a result, such expenses have been excluded from the
statement of restaurant contribution. Estimates of such expenses for each of
the acquisitions reflected above (except the acquisition of 2 restaurants
from BKC in 1995, for which estimates were not available) are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
JANUARY 1 THROUGH JANUARY 1 THROUGH JANUARY 1 THROUGH JANUARY 1 THROUGH
APRIL 1, 1996 OR DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993
THROUGH DATE OF OR THROUGH DATE OF OR THROUGH DATE OF OR THROUGH THE DATE
ACQUISITION ACQUISITION ACQUISITION OF ACQUISITION
----------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C>
1994 ACQUISITIONS
Friedman .................... $ -- $ -- $ 605,000 $ 652,000
================= ================== ================== ===================
1995 ACQUISITIONS
DMW, Inc. ................... $ -- $ 75,000 $ -- $ --
BKC ......................... -- -- -- --
QSC, Inc. and Ro-Lank, Inc. -- 724,000 756,000 562,000
----------------- ------------------ ------------------ -------------------
Total ...................... $ -- $ 799,000 $ 756,000 $ 562,000
================= ================== ================== ===================
1996 ACQUISITIONS
Curtis James ................ $ 81,000 $ 759,000 $ 628,000 $ 540,000
C&N Dining .................. 154,000 1,233,000 1,042,000 864,000
----------------- ------------------ ------------------ -------------------
Total ...................... $235,000 $1,992,000 $1,670,000 $1,404,000
================= ================== ================== ===================
</TABLE>
* * * * * *
F-29
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON IS AUTHORIZED IN CONNECTION WITH
ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDER WRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN SECURITIES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO
ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO
THE DATE HEREOF.
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Summary .......................................... 3
Summary Pro Forma Consolidated Financial
Information ..................................... 8
Risk Factors ..................................... 10
Use of Proceeds .................................. 18
Capitalization ................................... 19
Dividend Policy .................................. 19
Selected Consolidated Financial Information ..... 20
Management's Discussion and Analysis of Financial
Condition and Results of Operations ............. 23
Business ......................................... 31
Management ....................................... 41
Principal Stockholders ........................... 46
Description of Securities ........................ 48
Description of Capital Stock ..................... 96
Description of Certain Indebtedness .............. 101
Certain Transactions ............................. 104
Underwriting ..................................... 106
Legal Matters .................................... 107
Experts .......................................... 107
Available Information ............................ 107
Pro Forma Consolidated Financial Statements ..... P-1
Index to Consolidated Financial Statements ...... F-1
</TABLE>
- -----------------------------------------------------------------------------
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
$100,000,000
AMERIKING
LOGO
% SENIOR NOTES DUE 2006
PROSPECTUS
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
JEFFERIES & COMPANY, INC.
, 1996
<PAGE>
Information contained herein is 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
the solicitation of an offer to buy, nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
[ALTERNATE PAGE FOR PREFERRED STOCK PROSPECTUS]
SUBJECT TO COMPLETION, DATED NOVEMBER 8, 1996
PROSPECTUS
, 1996
AMERIKING
LOGO
UNITS CONSISTING OF
$30,000,000
% SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2008
AND
SHARES OF COMMON STOCK
The Units (the "Units"), each consisting of shares of % Senior
Exchangeable Preferred Stock due 2008 (the "Senior Preferred Stock") of
AmeriKing, Inc. (the "Company") and shares of Common Stock, $0.01 par
value per share (the "Common Stock"), of the Company, are being offered
hereby (the "Units Offering"). The Senior Preferred Stock and the Common
Stock will not be separately transferrable until the Separation Date.
Concurrent with the Units Offering, the Company is offering $100,000,000
aggregate principal amount of its % Senior Notes due 2006 (the "Senior
Notes") to the public (the "Notes Offering" and, together with the Units
Offering, the "Offerings"). The Units Offering is contingent upon the
consummation of the Notes Offering, and there can be no assurance that the
Notes Offering will be consummated. See "Summary--Concurrent Offering."
Each share of Senior Preferred Stock will have a liquidation preference of
$25 per share. Dividends on the Senior Preferred Stock will accrue in each
period ending on , , and of each year at a rate of % per
annum of the liquidation preference. On or before , 2001, the Company
may, at its option, pay dividends in cash or in additional fully paid and
non-assessable shares of Senior Preferred Stock having an aggregate
liquidation preference equal to the amount of such dividends. Thereafter,
dividends may be paid in cash only. The Senior Preferred Stock will be
redeemable at the option of the Company, in whole or in part, at any time on
or after , 2001 at the redemption prices set forth herein, plus an amount
in cash equal to all accumulated and unpaid dividends per share to the date
of redemption. In addition, at the option of the Company, the Senior
Preferred Stock may be redeemed in whole, but not in part, at any time at the
redemption price set forth herein, plus an amount in cash equal to all
accumulated and unpaid dividends per share to the date of redemption, with
the proceeds of an Equity Offering. Upon the occurrence of a Change of
Control, each holder of Senior Preferred Stock will have the right to require
the Company to purchase all or any part of such holder's Senior Preferred
Stock at an offer price in cash equal to 101% of the liquidation preference
thereof, plus an amount in cash equal to all accumulated and unpaid dividends
per share to the date of purchase. In addition, the Company's obligations
under the Preferred Stock are subject to the terms of the BKC Intercreditor
Agreement. See "Risk Factors--BKC Intercreditor Agreement" and "Description
of Securities--Senior Preferred Stock."
On any scheduled dividend payment date, the Company may, at its option,
exchange all but not less than all of the shares of Senior Preferred Stock
then outstanding for the Company's % Subordinated Exchange Debentures due
2008 (the "Exchange Debentures"). See "Description of Securities--Senior
Preferred Stock--Exchange." The Exchange Debentures will bear interest at a
rate of % per annum, payable semi-annually in arrears on and of
each year, commencing with the first such date to occur after the date of
exchange. On or before , 2001, the Company may, at its option, pay
interest in cash or in additional Exchange Debentures having an aggregate
principal amount equal to the amount of such interest. Thereafter, interest
may be paid in cash only. The Exchange Debentures will be redeemable at the
option of the Company, in whole or in part, at any time on or after ,
2001 at the redemption prices set forth herein, plus accrued and unpaid
interest thereon to the date of redemption. In addition, at the option of the
Company, the Exchange Debentures may be redeemed in whole, but not in part,
at any time at the redemption price set forth herein, plus accrued and unpaid
interest thereon to the date of redemption, with the proceeds of an Equity
Offering. Upon the occurrence of a Change of Control, each holder of Exchange
Debentures will have the right to require the Company to purchase all or any
part of such holder's Exchange Debentures at an offer price in cash equal to
101% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon to the date of purchase. In addition, the Company's
obligations under the Exchangeable Debentures are subject to the terms of the
BKC Intercreditor Agreement. See "Risk Factors--BKC Intercreditor Agreement"
and "Description of Securities--Exchange Debentures."
The Units, the Senior Preferred Stock, the Exchange Debentures, the Common
Stock and the Senior Notes are sometimes referred to collectively herein as
the "Securities."
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DESCRIPTION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS IN EVALUATING AN
INVESTMENT IN THE SECURITIES.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO THE DISCOUNTS AND PROCEEDS TO THE
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
<S> <C> <C> <C>
Per Unit ..... $ $ $
Total ........ $ $ $
</TABLE>
(1) Plus accumulated dividends, if any, from the date of issuance.
(2) The Company has agreed to indemnify the Underwriter (as defined)
against, and to provide contribution with respect to, certain
liabilities under the Securities Act. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $ .
The Units are being offered by Donaldson, Lufkin & Jenrette Securities
Corporation (the "Underwriter"), subject to prior sale and various prior
conditions, including the Underwriter's right to reject orders in whole or in
part. It is expected that delivery of the Units will be made in New York, New
York on or about , 1996 against payment therefor in immediately available
funds.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE>
[ALTERNATIVE PAGE FOR PREFERRED STOCK PROSPECTUS]
GRAPHIC OMITTED
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCOUNTED AT ANY TIME.
BURGER KING(REGISTERED TRADEMARK) IS A REGISTERED TRADEMARK AND SERVICE
MARK, WHOPPER(REGISTERED TRADEMARK) AND "HAVE IT YOUR WAY(REGISTERED
TRADEMARK)" ARE REGISTERED TRADEMARKS, AND "GET YOUR BURGER'S
WORTH(TRADEMARK)" IS A TRADEMARK OF BURGER KING BRANDS, INC., A WHOLLY OWNED
SUBSIDIARY OF BURGER KING CORPORATION. BURGER KING CORPORATION IS WHOLLY
OWNED BY GRAND METROPOLITAN PLC. NEITHER BURGER KING CORPORATION NOR ANY OF
ITS SUBSIDIARIES OR AFFILIATES IS IN ANY WAY PARTICIPATING IN OR APPROVING
THE OFFERINGS. FOR A FULL DISCUSSION OF THE BURGER KING CORPORATION
DISCLAIMER, SEE PAGE 115.
2
<PAGE>
[ALTERNATIVE PAGE FOR PREFERRED STOCK PROSPECTUS]
THE UNITS OFFERING
UNITS:
Securities Offered ... Units, consisting of $30,000,000 of Senior
Preferred Stock of the Company and
shares of Common Stock of the Company. Each
Unit will consist of shares of Senior
Preferred Stock and shares of Common
Stock.
Separability ......... The Senior Preferred Stock and the Common
Stock will not be separately transferrable
until the Separation Date (as defined).
Use of Proceeds ...... The proceeds from the Offerings will be used
to repay borrowings under the Credit
Agreement, to repay outstanding Subordinated
Debt (as defined) (including a prepayment
penalty and a warrant redemption payment),
to repay certain senior debt, to pay the
fees and expenses of the Offerings and for
general corporate purposes. See "Use of
Proceeds" and "Description of Certain
Indebtedness."
PREFERRED STOCK:
Securities Offered ... shares of % Senior Exchangeable
Preferred Stock due 2008 of the Company.
Dividends ............ Dividends on the Senior Preferred Stock will
accrue in each period ending on , ,
and of each year at a rate of % per
annum of the liquidation preference. On or
before , 2001 the Company may, at its
option, pay dividends in cash or in
additional fully paid and non-assessable
shares of Senior Preferred Stock having an
aggregate liquidation preference equal to
the amount of such dividends. Thereafter,
dividends may be paid in cash only.
Liquidation Preference $25 per share.
Ranking .............. The Senior Preferred Stock will rank senior
in right of payment with respect to all
Junior Securities (as defined) and pari
passu in right of payment with respect to
all Parity Securities (as defined). In
addition, the Company's obligations under
the Senior Preferred Stock are subject to
the terms of the BKC Intercreditor
Agreement. See "Risk Factors--BKC
Intercreditor Agreement,"
"Business--Obligations to Burger King
Corporation" and "Description of
Securities--Senior Preferred Stock--BKC
Intercreditor Agreement."
Optional Redemption .. The Senior Preferred Stock will be
redeemable at the option of the Company, in
whole or in part, at any time on or after
, 2001 at the redemption prices
set forth herein, plus an amount in cash
equal to all accumulated and unpaid
dividends per share to the date of
redemption.
In addition, at the option of the Company,
the Senior Preferred Stock may be redeemed
in whole, but not in part, at any time at
the redemption price set forth herein, plus
an amount in cash
3
<PAGE>
[ALTERNATIVE PAGE FOR PREFERRED STOCK PROSPECTUS]
equal to all accumulated and unpaid
dividends per share to the date of
redemption, with the proceeds of an Equity
Offering (as defined). See "Description of
Securities--Senior Preferred
Stock--Redemption of Senior Preferred
Stock--Optional Redemption."
Change of Control .... Upon the occurrence of a Change of Control
(as defined), each holder of Senior
Preferred Stock will have the right to
require the Company to purchase all or any
part of such holder's Senior Preferred Stock
at an offer price in cash equal to 101% of
the liquidation preference thereof, plus an
amount in cash equal to all accumulated and
unpaid dividends per share to the date of
purchase. See "Description of
Securities--Senior Preferred
Stock--Redemption of Senior Preferred
Stock--Change of Control."
Covenants ............ The Certificate of Designation for the
Senior Preferred Stock (the "Certificate of
Designation") will contain customary
covenants that limit the ability of the
Company to redeem or repurchase Junior
Securities or Parity Securities and pay
dividends thereon, to merge or consolidate
with any other entity, to sell assets and to
enter into transactions with affiliates. The
Certificate of Designation will also require
the Company to deliver certain reports and
information to the holders of the Senior
Preferred Stock. See "Description of
Securities--Senior Preferred Stock--Certain
Covenants."
Exchange Feature ..... On any scheduled dividend payment date, the
Company may, at its option, exchange all but
not less than all of the shares of Senior
Preferred Stock then outstanding for the
Company's % Subordinated Exchange
Debentures due 2008 (the "Exchange
Debentures"). See "Description of
Securities--Senior Preferred
Stock--Exchange."
EXCHANGE DEBENTURES:
Securities Offered ... % Subordinated Exchange Debentures due
2008 of the Company.
Maturity ............. , 2008.
Interest ............. The Exchange Debentures will bear interest
at a rate of % per annum, payable
semi-annually in arrears on and
of each year, commencing with the first such
date to occur after the date of exchange. On
or before , 2001, the Company may, at
its option, pay interest in cash or in
additional Exchange Debentures having an
aggregate principal amount equal to the
amount of such interest. Thereafter,
interest may be paid in cash only.
Ranking .............. The Exchange Debentures will be unsecured
obligations of the Company, subordinate to
all existing and future Senior Indebtedness
(as defined), including the Senior Notes and
the Credit Agreement (as defined). At
September 30, 1996, on a pro
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<PAGE>
[ALTERNATIVE PAGE FOR PREFERRED STOCK PROSPECTUS]
forma basis after giving effect to the
Offerings and the application of the net
proceeds therefrom, the aggregate amount of
outstanding Senior Indebtedness would have been
approximately $108.0 million. The Company's
obligations under the Exchange Debentures
will also be subject to the terms of the BKC
Intercreditor Agreement. See "Risk
Factors--BKC Intercreditor Agreement,"
"Business--Obligations to Burger King
Corporation" and "Description of
Securities--Exchange Debentures--Intercreditor
Agreement."
Optional Redemption .. The Exchange Debentures will be redeemable
at the option of the Company, in whole or in
part, at any time on or after ,
2001 at the redemption prices set forth
herein, plus accrued and unpaid interest
thereon to the date of redemption.
In addition, at the option of the Company,
the Exchange Debentures may be redeemed in
whole, but not in part, at any time at the
redemption price set forth herein, plus
accrued and unpaid interest thereon to the
date of redemption, with the proceeds of an
Equity Offering. See "Description of
Securities--Exchange Debentures--Redemption
of Exchange Debentures--Optional
Redemption."
Change of Control .... Upon the occurrence of a Change of Control,
each holder of Exchange Debentures will have
the right to require the Company to purchase
all or any part of such holder's Exchange
Debentures at an offer price in cash equal
to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest
thereon to the date of purchase. See
"Description of Securities--Exchange
Debentures--Mandatory Offers to Purchase
Exchange Debentures--Change of Control."
Certain Covenants .... The indenture relating to the Exchange
Debentures (the "Exchange Debenture
Indenture") will contain covenants that,
among other things, limit the ability of the
Company and its Restricted Subsidiaries (as
defined) to pay dividends or make certain
Restricted Payments (as defined), including
Restricted Investments (as defined), to
incur additional Indebtedness (as defined),
to encumber or sell assets, to enter into
transactions with affiliates, to enter into
certain guarantees of Indebtedness, to merge
or consolidate with any other entity and to
transfer or lease all or substantially all
of their assets. In addition, under certain
circumstances, the Company will be required
to offer to purchase Exchange Debentures at
a price equal to 100% of the principal
amount thereof, plus accrued and unpaid
interest to the date of purchase with the
proceeds of certain Asset Sales (as
defined). See "Description of
Securities--Exchange Debentures--Certain
Covenants" and "--Mandatory Offers to
Purchase Exchange Debentures--Asset Sales."
CONCURRENT OFFERING
Concurrent with the Units Offering, the Company is offering $100,000,000
aggregate principal amount of its % Senior Notes due 2006 to the public.
The Units Offering is contingent upon the consummation of the Notes Offering,
and there can be no assurance that the Notes Offering will be consummated.
ALT-5
<PAGE>
[ALTERNATIVE PAGE FOR PREFERRED STOCK PROSPECTUS]
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the material United States
federal income tax considerations relevant to the purchase, ownership and
disposition of the Units, Senior Preferred Stock and Common Stock by holders
acquiring Units on original issue for cash, but does not purport to be a
complete analysis of all potential tax effects. The discussion is based upon
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations, Internal Revenue Service ("IRS") rulings and pronouncements and
judicial decisions all in effect as of the date hereof, all of which are
subject to change at any time, and any such change may be applied
retroactively in a manner that could adversely affect a holder of the Units,
Senior Preferred Stock or Common Stock. Certain proposed tax legislation, if
enacted in substantially the same form as proposed, may affect some of the
tax consequences discussed herein. See "--Proposed Legislation." The
discussion does not address all of the federal income tax consequences that
may be relevant to a holder in light of such holder's particular
circumstances or to holders subject to special rules, such as certain
financial institutions, insurance companies, dealers in securities, foreign
corporations, nonresident alien individuals and persons holding the Units,
Senior Preferred Stock or Common Stock as part of a "straddle," "hedge" or
"conversion transaction." Moreover, the effect of any applicable state, local
or foreign tax laws is not discussed. The discussion deals only with Units,
Senior Preferred Stock and Common Stock held as "capital assets" within the
meaning of section 1221 of the Code.
The Company has not sought and will not seek any rulings from the IRS with
respect to the position of the Company discussed below. There can be no
assurance that the IRS will not take a different position concerning the tax
consequences of the purchase, ownership or disposition of the Units, Senior
Preferred Stock or Common Stock or that any such position would not be
sustained.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO
THE APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW TO THEIR PARTICULAR
SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER
TAX LAWS.
ALLOCATION OF BASIS
Each holder of a Unit will have an aggregate tax basis in the Unit equal
to the amount of cash paid by the holder for such Unit. For federal income
tax purposes, a holder's aggregate tax basis in the Units will be allocated
between the Senior Preferred Stock and the Common Stock represented by such
Units based on their relative fair market values at the time of the issuance.
The Company will determine and provide holders with its estimate of the fair
market values of the Senior Preferred Stock and Common Stock and the holders
will allocate the basis of the Units between the Senior Preferred Stock and
Common Stock, in proportion to these relative fair market values. There can
be no assurance, however, that the IRS will respect the Company's
determination.
CLASSIFICATION OF SENIOR PREFERRED STOCK
Although the characterization of an instrument as debt or equity is a
facts and circumstances determination that cannot be predicted with
certainty, the Senior Preferred Stock should be treated as stock for federal
income tax purposes. Accordingly, the Company intends to treat the Senior
Preferred Stock as stock for federal income tax purposes, and the remainder
of this discussion assumes that such treatment will be respected.
DISTRIBUTIONS ON SENIOR PREFERRED STOCK AND COMMON STOCK
Distributions on the Senior Preferred Stock, whether paid in cash or in
additional shares of Senior Preferred Stock, or distributions on Common
Stock, if any, will be taxable as ordinary dividend income to the extent that
the cash amount or the fair market value of any Senior Preferred Stock
distributed on the Senior Preferred Stock or the cash amount distributed on
the Common Stock does not exceed the Company's current or accumulated
earnings and profits (as determined for federal income tax purposes). To the
extent that the amount of such distributions paid on the Senior Preferred
Stock or Common Stock
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<PAGE>
[ALTERNATIVE PAGE FOR PREFERRED STOCK PROSPECTUS]
exceeds the Company's current or accumulated earnings and profits (as
determined for federal income tax purposes), the distributions will be
treated as a return of capital, thus reducing the holder's adjusted tax basis
in such Senior Preferred Stock or Common Stock. The amount of any such excess
distribution that is greater than the holder's adjusted basis in the Senior
Preferred Stock or Common Stcok will be taxed as capital gain and will be
long-term capital gain if the holder's holding period for such Senior
Preferred Stock or Common Stock exceeds one year. There can be no assurance
that the Company will have sufficient earnings and profits (as determined for
federal income tax purposes) to cause distributions on the Senior Preferred
Stock or Common Stock to be treated as dividends for federal income tax
purposes. For purposes of the remainder of this discussion, the term
"dividend" refers to a distribution paid out of allocable earnings and
profits, unless the context indicates otherwise.
A stockholder's initial tax basis in any additional shares of Senior
Preferred Stock distributed by the Company will be equal to the fair market
value of such additional shares on their date of distribution. A
stockholder's holding period for such additional shares will commence with
their distribution, and will not include his holding period for the shares of
Senior Preferred Shares with respect to which the additional shares were
distributed.
To the extent that dividends are treated as ordinary income, dividends
received by corporate holders will be eligible for the 70% dividends-received
deduction under Section 243 of the Code, subject to limitations generally
applicable to the dividends-received deductions, including those contained in
Section 246 and 246A of the Code and the corporate alternative minimum tax.
The 70% dividends-received deduction may be reduced if a holder's shares of
Senior Preferred Stock or Common Stock are debt financed. Under Section
246(c) of the Code, the 70% dividends-received deduction will not be
available with respect to stock that is held for 45 days or less (90 days in
the case of a dividend on preferred stock attributable to a period or periods
aggregating more that 366 days). The length of time that a holder is deemed
to have held stock for these purposes is reduced for periods during which the
holder's risk of loss with respect to the stock is diminished by reason of
the existence of certain options, contracts to sell, short sales or other
similar transactions. Section 246(c) also denies the 70% dividends-received
deduction to the extent that a corporate holder is under an obligation, with
respect to substantially similar or related property, to make payments
corresponding to the dividend received. The Clinton Administration has
proposed legislation which, if enacted, would affect the availability of the
dividends-received deduction for dividends on Senior Preferred Stock or
Common Stock . See "--Proposed Legislation."
Under Section 1059 of the Code, the tax basis of Senior Preferred Stock or
Common Stock that has been held by a corporate shareholder for two years or
less (ending on the earliest of the date on which the Company declares,
announces or agrees to the payment of an actual or constructive dividend) is
reduced (but not below zero) by the non-taxed portion of an "extraordinary
dividend" for which a dividends-received deduction is allowed. To the extent
a corporate holder's tax basis would have been reduced below zero but for the
foregoing limitation, such holder must increase the amount of gain recognized
on the ultimate sale or exchange of such Senior Preferred Stock or Common
Stock. Generally, an "extraordinary dividend" is a dividend that (i) equals
or exceeds, in the case of Senior Preferred Stock, 5% of the holder's basis
in such stock, or, in the case of Common Stock, 10% of the holder's basis in
such stock, (treating all dividends having ex-dividend dates within an 85-day
period as a single dividend) or (ii) exceeds 20% of the holder's adjusted
basis in the Senior Preferred Stock or Common Stock (treating all dividends
having ex-dividend dates within a 365-day period as a single dividend). If an
election is made by the holder, under certain circumstances the fair market
value of the Senior Preferred Stock or Common Stock as of the day before the
ex-dividend date may be substituted for the holder's basis in applying these
tests.
Special rules exist with respect to extraordinary dividends for "qualified
preferred dividends," which are any fixed dividends payable with respect to
any share of stock which (i) provides for fixed preferred dividends payable
not less frequently than annually and (ii) is not in arrears as to dividends
at the time the holder acquires such stock. A qualified preferred dividend
does not include any dividend payable with respect to any share if the actual
rate of return of such stock for the period the stock has been held by the
holder receiving the dividend exceeds 15%.
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<PAGE>
[ALTERNATIVE PAGE FOR PREFERRED STOCK PROSPECTUS]
REDEMPTION PREMIUM ON SENIOR PREFERRED STOCK
If the redemption price of redeemable preferred stock exceeds its issue
price by more than a de minimis amount, such excess may be treated as a
constructive distribution of additional stock on preferred stock over the
term of the preferred stock using a constant interest rate method similar to
that described below for accruing original issue discount. See discussions
below under "--Original Issue Discount on Exchange Debentures." A preferred
stock discount will generally be considered de minimis as long as it is less
than the redemption price of the preferred stock multiplied by 1/4 of 1%
multiplied by the number of years until the issuer must redeem the preferred
stock. Although not entirely clear, the Company believes that for purposes of
determining the issue price of the Senior Preferred Stock initially issued, a
Unit is considered an investment unit consisting of the Senior Preferred
Stock and the Common Stock, and the issue price of the Senior Preferred Stock
is determined by allocating the issue price of a Unit between the Senior
Preferred Stock and Common Stock based on the relative fair market values of
the Senior Preferred Stock and the Common Stock. See discussion above under
"--Allocation of Basis." There is no assurance, however, that the IRS will
not challenge such allocation.
As a result of the allocation of a portion of the purchase price of the
Units to the Common Stock, the Senior Preferred Stock initially purchased by
holders may have a redemption price that exceeds its issue price by more than
a de minimis amount, resulting in constructive distributions under the above
rules. In addition, because the issue price of the Senior Preferred Stock
distributed in lieu of payments of cash dividends will be equal to its fair
market value at the time of distribution it is possible, depending on its
fair market value at that time, that such Senior Preferred Stock will be
issued with a redemption premium large enough to be considered a dividend
under the above rules. In such event, as noted above, holders would be
required to include such premium in income as a distribution over some period
in advance of receiving the cash attributable to such income and such Senior
Preferred Stock might trade separately, which might adversely affect the
liquidity of the Senior Preferred Stock.
In addition to the mandatory redemption feature, the Senior Preferred
Stock is also redeemable (either in whole or in part, or in whole but not in
part under certain circumstances) at the option of the Company prior to 2008.
Furthermore, each holder of the Senior Preferred Stock has the right to
require the Company to repurchase the Senior Preferred Stock upon the
occurrence of a Change of Control. Although such optional redemption or
holder put may result in constructive distributions to the holders under
certain circumstances, the Company believes that neither the optional
redemption nor the holder put of the Senior Preferred Stock will be subject
to those rules.
REDEMPTION, SALE OR EXCHANGE OF SENIOR PREFERRED STOCK OR COMMON STOCK
A redemption of shares of Senior Preferred Stock in exchange for Exchange
Debentures or shares of Senior Preferred Stock or Common Stock for cash, and
a sale of Senior Preferred Stock or Common Stock will be taxable events.
A redemption of shares of Senior Preferred Stock or Common Stock for cash
will generally be treated as a sale or exchange if the holder does not own,
actually or constructively within the meaning of Section 318 of the Code, any
stock of the Company other than the stock redeemed. If a holder does own,
actually or constructively, such other stock (including Senior Preferred
Stock or Common Stock not redeemed), a redemption of Senior Preferred Stock
or Common Stock may be treated as a dividend to the extent of the Company's
current or accumulate earnings and profits (as determined for federal income
tax purposes). Such dividend treatment would not be applied if the redemption
is "substantially disproportionate" with respect to the holder under Section
302(b)(2) of the Code or is "not essentially equivalent to a dividend" with
respect to the holder under Section 302(b)(1) of the Code. A distribution to
a holder will be "not essentially equivalent to a dividend" if it results in
a "meaningful reduction" in the holder's stock interest in the Company. For
these purposes, a redemption of Senior Preferred Stock or Common Stock for
cash that results in a reduction in the proportionate interest in the Company
(taking into account any constructive ownership) of a holder whose relative
stock interest in the Company is minimal and who exercises no control over
corporate affairs should be regarded as a meaningful reduction in the
holder's stock interest in the Company.
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<PAGE>
[ALTERNATIVE PAGE FOR PREFERRED STOCK PROSPECTUS]
If the redemption of the Senior Preferred Stock or Common Stock for cash
is not treated as a distribution taxable as a dividend or if the Senior
Preferred Stock or Common Stock is sold, the redemption or sale would result
in capital gain or loss equal to the difference between the amount of cash
and the fair market value of other proceeds received in such sale or
redemption and the holder's adjusted tax basis in the Senior Preferred Stock
or Common Stock sold or redeemed.
If a redemption of Senior Preferred Stock for cash is not treated as a
distribution taxable as a dividend, the redemption would result in capital
gain or loss equal to the difference between the amount of cash received and
the holder's adjusted tax basis in the Senior Preferred Stock or Common Stock
redeemed.
A redemption of Senior Preferred Stock in exchange for Exchange Debentures
will be subject to the same general rules as a redemption for cash, except
that the holder would have capital gain or loss equal to the difference
between the issue price of the Exchange Debentures received and the holder's
adjusted tax basis in the Senior Preferred Stock redeemed. The issue price of
the Exchange Debentures would be determined in the manner described below for
purposes of computing original issue discount (if any) on the Exchange
Debentures. See the discussion below under "--Original Issue Discount on
Exchange Debenture."
If a redemption of Senior Preferred Stock or Common Stock is treated as a
distribution that is taxable as a dividend, the amount of the distribution
will be measured by the amount of cash received by the holder. The holder's
adjusted tax basis in the redeemed Senior Preferred Stock or Common Stock
will be transferred to any remaining stock holdings in the Company. If the
holder does not retain any stock ownership in the Company, the holder may
lose such basis entirely. Under the "extraordinary dividend" provision of
Section 1059 of the Code, a corporate holder may, under certain
circumstances, be required to reduce its basis in its remaining shares of
stock of the Company (and possibly recognize gain upon a disposition of such
shares) to the extent the holder claims the 70% dividends-received deduction
with respect to the dividend.
ORIGINAL ISSUE DISCOUNT ON EXCHANGE DEBENTURES
If the Senior Preferred Stock is exchanged for Exchange Debentures at a
time when the stated redemption price at maturity of the Exchange Debentures
exceeds their issue price by more than a de minimis amount, the Exchange
Debentures will be treated as having original issue discount ("OID") equal to
the entire amount of such excess. OID will generally be considered de minimis
as long as it is less than the stated redemption price at maturity of the
Exchange Debentures multiplied by 1/4 of 1% multiplied by the number of years
to maturity. If the Exchange Debentures are deemed to be traded on an
established securities market on or at any time during the 60-day period
ending 30 days after their issue date, the issue price of the Exchange
Debentures will be their fair market value as determined as of their issue
date. Subject to certain limitations described in the regulations, the
Exchange Debentures will be deemed to be traded on an established securities
market if, among other things, price quotations are readily available from
dealers, brokers or traders. Similarly, if the Senior Preferred Stock, but
not the Exchange Debentures issued and exchanged therefor, is deemed to be
traded on an established securities market at the time of the exchange, then
the issue price of each Exchange Debenture should be the fair market value of
the Senior Preferred Stock exchanged therefor at the time of the exchange.
The Preferred Stock will generally be deemed to be traded on an established
securities market if it appears on a system of general circulation that
provides a reasonable basis to determine fair market value based either on
recent price quotations or recent sales transactions. In the event that
neither the Senior Preferred Stock nor the Exchange Debentures are deemed to
be traded on an established securities market, the issue price of the
Exchange Debentures will be their stated principal amount or, in the event
the Exchange Debentures do not bear "adequate stated interest" within the
meaning of Section 1274 of the Code, their "imputed principal amount," which
is generally the sum of the present values of all payments due under the
Exchange Debentures, discounted from the date of payment to their issue date
at the appropriate "applicable federal rate."
The stated redemption price at maturity of the Exchange Debentures would
equal the total of all payments required to be made thereon, other than
payments of qualified stated interest. Qualified stated
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<PAGE>
[ALTERNATIVE PAGE FOR PREFERRED STOCK PROSPECTUS]
interest generally is stated interest that is unconditionally payable in
cash or other property (other than debt instruments of the issuer) at least
annually at a single fixed rate. Therefore, Exchange Debentures that are
issued when the Company has the option to pay interest thereon for certain
periods in additional Exchange Debentures should be treated as having been
issued without any qualified stated interest. Accordingly, the sum of all
interest payable pursuant to the stated interest rate on such Exchange
Debentures over the entire term should be treated as OID and accrued into
income under a constant yield method by the holder, and the holder should not
treat the receipt of stated interest on the Debentures as interest for
federal income tax purposes.
An additional Exchange Debenture (a "Secondary Debenture") issued in
payment of interest with respect to an initially issued Exchange Debenture
(an "Initial Debenture") will not be considered as a payment made on the
Initial Debenture and will be aggregated with the Initial Debenture for
purposes of computing and accruing OID on the Initial Debenture. As between
the Initial Debenture and the Secondary Debenture, the Company will allocate
the adjusted issue price of the Initial Debenture between the Initial
Debenture and the Secondary Debenture in proportion to their respective
principal amounts. That is, upon its issuance of a Secondary Debenture with
respect to an Initial Debenture, the Company intends to treat the Initial
Debenture and the Secondary Debenture derived from the Initial Debenture as
initially having the same adjusted issue price and inherent amount of OID per
dollar of principal amount. The Initial Debenture and the Secondary Debenture
derived therefrom will be treated as having the same yield to maturity.
Similar treatment will be applied when additional Exchange Debentures are
issued on Secondary Debentures.
In the event the Exchange Debentures are not issued with OID, because they
are issued at a time when the Company does not have the option to pay
interest thereon in additional Exchange Debentures and the redemption price
of the Exchange Debentures does not exceed their issue price by more than a
de minimis amount, stated interest should be included in income by a holder
in accordance with his method of accounting.
BOND PREMIUM ON EXCHANGE DEBENTURES
If the Senior Preferred Stock is exchanged for Exchange Debentures at a
time when the issue price of the Exchange Debentures exceeds the amount
payable at the maturity date (or earlier call date, if appropriate) of the
Exchange Debentures, such excess will be deductible by the holder of the
Exchange Debentures as amortizable bond premium over the term of the Exchange
Debentures (taking into account earlier call dates, as appropriate), under a
yield-to-maturity formula, only if an election by the holder under Section
171 of the Code is made or is already in effect. An election under Section
171 is available only if the Exchange Debentures are held as capital assets.
This election is revocable only with the consent of the IRS and applies to
all obligations owned or subsequently acquired by the holder. To the extent
the excess is deducted as amortizable bond premium, the holder's adjusted tax
basis in the Exchange Debentures will be reduced.
REDEMPTION OR SALE OF EXCHANGE DEBENTURES
Generally, any redemption or sale of Exchange Debentures by a holder would
result in taxable gain or loss equal to the difference between the amount of
cash received (except to the extent that cash received is attributable to
accrued, but previously untaxed, interest) and the holder's tax basis in the
Exchange Debentures. The tax basis of a holder who receives an Exchange
Debenture in exchange for Senior Preferred Stock will generally be equal to
the issue price of the Exchange Debenture on the date the Exchange Debenture
is issued plus any OID on the Exchange Debenture included in the holder's
income prior to sale or redemption of the Exchange Debenture, reduced by any
amortizable bond premium applied against the holder's income prior to sale or
redemption of the Exchange Debenture and payments other than payments of
"qualified stated interest." Such gain or loss would be long-term capital
gain or loss if the holding period exceeded one year.
APPLICABLE HIGH YIELD DISCOUNT OBLIGATIONS
Pursuant to Section 163 of the Code, the "disqualified portion" of the OID
accruing on certain debt instruments may be treated as a dividend eligible
for the dividends-received deduction. The corporation
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<PAGE>
[ALTERNATIVE PAGE FOR PREFERRED STOCK PROSPECTUS]
issuing such debt instrument would not be entitled to deduct this
"disqualified portion" on the OID accruing on such debt instrument and would
be allowed to deduct the remainder of the OID only when paid.
This treatment would apply to "applicable high yield discount obligations"
("AHYDO"), which generally are debt instruments that have a term of more than
five years, have a yield to maturity that equals or exceeds five percentage
points over the "applicable federal rate" and have "significant" OID. A debt
instrument is treated as having "significant" OID if the aggregate amount
that would be includible in gross income with respect to such debt instrument
for periods before the close of any accrual period ending five years or more
after the date of issue exceeds the sum of (i) the aggregate amount of
interest to be paid in cash under the debt instrument before the close of
such accrual period and (ii) the product of the initial issue price of such
debt instrument and its yield to maturity. For purposes of determining
whether an Exchange Debenture is an AHYDO, holders are bound by the issuer's
determination of the appropriate accrual period. It is impossible to
determine at the present time whether an Exchange Debenture will be treated
as an AHYDO.
If an Exchange Debenture is treated as an AHYDO, a corporate holder would
be treated as receiving dividend income (to the extent of the Company's
current and accumulated earnings and profits) solely for purposes of the
dividends-received deduction in an amount equal to the "dividend equivalent
portion" of the "disqualified portion" of the OID of such AHYDO. The Clinton
Administration has proposed legislation that, if enacted, would affect the
availability of the dividends-received deduction for a corporate holder of an
Exchange Debenture that is treated as an AHYDO. See "--Proposed Legislation."
The "disqualified portion" of the OID is equal to the lesser of (i) the
amount of the OID or (ii) the portion of the "total return" (the excess of
all payments to be made with respect to such obligation over its issue price)
on such obligation that bears the same ratio to the obligation's total return
as the "disqualified yield" (the extent to which the yield exceeds the
applicable federal rate plus 6%) bears to the obligation's yield to maturity.
The dividend equivalent portion of the disqualified portion is the portion of
such portion that would be treated as a dividend if distributed by the issuer
with respect to its stock. The Company's deduction for OID will be
substantially deferred with respect to an Exchange Debenture that is treated
as an AHYDO. In addition, such deduction will be disallowed if and to the
extent that the yield on such AHYDO exceeds the applicable federal rate by
more than 6%.
PROPOSED LEGISLATION
On March 19, 1996, and on August 29, 1996, the Clinton Administration
released versions of the President's Fiscal Year 1997 Budget Proposal (the
"1997 Budget Proposal"). The 1997 Budget Proposal contains certain
revenue-raising items in the form of proposed tax law changes. Among these
proposed tax law changes are several items that, if enacted into law
substantially as proposed, would affect the tax treatment of corporate
holders of Senior Preferred Stock, Common Stock or Exchange Debentures that
are treated as AHYDOs. In particular, the Clinton Administration has proposed
to eliminate the 70% and the 80% dividends-received deduction for certain
debt-like preferred stock, effective for stock issued after the date of
enactment of such legislation. The Clinton Administration also has proposed
to reduce the 70% dividends-received deduction to 50% for dividends received
or accrued 30 days or more after such date of enactment. It cannot be
predicted with certainty whether these proposals will be introduced in
Congress as proposed legislation, or, if so introduced, whether such proposed
legislation would be enacted or, if enacted, what the effective date or dates
would be. Corporate holders of Senior Preferred Stock, Common Stock or
Exchange Debentures are urged to consult their own tax advisors regarding the
possible effects of this proposed legislation.
BACKUP WITHHOLDING
A holder of the Senior Preferred Stock or the Common Stock may be subject
to backup withholding at a rate of 31% with respect to dividends on Senior
Preferred Stock or Common Stock and gross proceeds upon sale or retirement of
the Senior Preferred Stock or Common Stock unless such holder (i) is a
corporation or other exempt recipient and, when required, demonstrates that
fact, or (ii) provides a correct taxpayer identification number, certifies,
when required, that such holder is not subject to backup
ALT-11
<PAGE>
[ALTERNATIVE PAGE FOR PREFERRED STOCK PROSPECTUS]
withholding, and otherwise complies with applicable requirements of the
backup withholding rules. Backup withholding is not an additional tax; any
amounts so withheld are creditable against the holder's federal income tax,
provided the required information is provided to the IRS.
SUBSEQUENT PURCHASERS
The foregoing does not discuss special rules which may affect the
treatment of purchasers that acquire the Senior Preferred Stock or the
Exchange Debentures other than through purchasing the Senior Preferred Stock
at the time of original issuance at the issue price, including those
provisions of the Code relating to the treatment of "market discount,"
"acquisition premium" and "amortizable bond premium." For example, the market
discount provisions of the Code may require a subsequent purchaser of an
Exchange Debenture at a market discount to treat all or a portion of any gain
recognized upon sale or other disposition of the Exchange Debenture as
ordinary income and to defer a portion of any interest expense that would
otherwise be deductible on any indebtedness incurred or maintained to
purchase or carry such Exchange Debenture until the holder disposes of the
Exchange Debenture in a taxable transaction.
ALT-12
<PAGE>
[ALTERNATIVE PAGE FOR PREFERRED STOCK PROSPECTUS]
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") between the Company and Donaldson,
Lufkin & Jenrette Securities Corporation (the "Underwriter"), the Company has
agreed to issue and sell to the Underwriter, and the Underwriter has agreed
to purchase from the Company, all of the Units being offered hereby.
The Underwriting Agreement provides that the obligations of the
Underwriter to purchase the Units are subject to the approval of certain
legal matters by counsel and to certain other conditions. If any of the Units
are purchased by the Underwriter pursuant to the Underwriting Agreement, all
such Units must be so purchased.
The Underwriter has advised the Company that the Underwriter proposes to
offer the Units to the public initially at the price set forth on the cover
page of this Prospectus and to certain dealers (who may include the
Underwriter) at such offering price less a concession not to exceed $ per
Unit. The Underwriter may allow and such dealers may reallow discounts not in
excess of $ per Unit to certain dealers. After the initial public
offering, the public offering price and such concessions may be changed at
any time without notice.
The Units, the Senior Preferred Stock and the Common Stock will constitute
new classes of securities with no established trading market. The Company
does not intend to list such securities on any national securities exchange
or on the Nasdaq National Market. The Company has been advised by the
Underwriter that following the completion of the Units Offering, the
Underwriter currently intends to make a market in the Units, the Senior
Preferred Stock and the Common Stock. However, the Underwriter is not
obligated to do so and any such market-making may be discontinued at any time
without notice in its sole discretion. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act. Accordingly, no assurance can be given as to the liquidity of,
or the trading market for, the Units, the Senior Preferred Stock or the
Common Stock. See "Risk Factors--Absence of Public Market; Liquidity."
The Company has agreed to indemnify the Underwriter against certain
liabilities and expenses in connection with the offer and sale by the Company
of the Units, including liabilities under the Securities Act, and to
contribute to payments that the Underwriter may be required to make in
respect thereof.
Donaldson, Lufkin & Jenrette Securities Corporation is also acting as one
of the underwriters of the Notes Offering. See "Summary--Concurrent
Offering."
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<PAGE>
[ALTERNATIVE PAGE FOR PREFERRED STOCK PROSPECTUS]
NO DEALER, SALESMAN OR ANY OTHER PERSON IS AUTHORIZED IN CONNECTION WITH
ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN SECURITIES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO
ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO
THE DATE HEREOF.
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Summary .......................................... 3
Summary Consolidated Financial Information ...... 9
Risk Factors ..................................... 11
Use of Proceeds .................................. 19
Capitalization ................................... 20
Dividend Policy .................................. 20
Selected Consolidated Financial Information ..... 21
Management's Discussion and Analysis of Financial
Condition and Results of Operations ............. 24
Business ......................................... 32
Management ....................................... 42
Principal Stockholders ........................... 47
Description of Securities ........................ 49
Description of Capital Stock ..................... 97
Description of Certain Indebtedness .............. 102
Certain Transactions ............................. 105
Certain Federal Income Tax Considerations ....... 107
Underwriting ..................................... 114
Legal Matters .................................... 115
Experts .......................................... 115
Available Information ............................ 115
Pro Forma Consolidated Financial Statements ..... P-1
Index to Consolidated Financial Statements ...... F-1
</TABLE>
- -----------------------------------------------------------------------------
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
AMERIKING
LOGO
UNITS
CONSISTING OF
$30,000,000
% SENIOR EXCHANGEABLE
PREFERRED STOCK DUE 2008
AND
SHARES
OF COMMON STOCK
PROSPECTUS
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
, 1996
ALT-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the estimated expenses in connection with the
distribution of the securities being registered:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission Registration Fee ...... $ [40,000]
NASD Filing Fee ...........................................
Printing and Engraving Expenses ........................... [300,000]
Accounting Fees and Expenses .............................. 300,000
Attorneys' Fees and Expenses .............................. 600,000
Trustee Fees ..............................................
Rating Agency Fees ........................................
Blue Sky Fees and Expenses (including attorneys' fees) ... 20,000
Miscellaneous ............................................. [ ]
Total ................................................... $ [ ]
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) The Delaware General Corporation Law (Section 145) gives Delaware
corporations broad powers to indemnify their present and former directors and
officers and those of affiliated corporations against expenses incurred in
the defense of any lawsuit to which they are made parties by reason of being
or having been such directors or officers, subject to specified conditions
and exclusions; gives a director or officer who successfully defends an
action the right to be so indemnified; and authorizes the Company to buy
directors' and officers' liability insurance. Such indemnification is not
exclusive of any other rights to which those indemnified may be entitled
under any by-laws, agreement, vote of stockholders or otherwise.
(b) The Amended and Restated Certificate of Incorporation of the Company
requires, and the Amended and Restated By-Laws of the Company provides for,
indemnification of directors, officers, employees and agents to the full
extent permitted by law.
(c) The Underwriting Agreement for the Notes Offering and the Underwriting
Agreement for the Units Offering (the forms of which are included as Exhibits
1.1 and 1.2 to this Registration Statement) provide for the indemnification
under certain circumstances of the Company, its directors and certain of its
officers by the Underwriters.
(d) In accordance with Section 102(b)(7) of the Delaware General
Corporation Law, the Company's Amended and Restated Certificate of
Incorporation provides that directors shall not be personally liable for
monetary damages for breaches of their fiduciary duty as directors except for
(1) breaches of their duty of loyalty to the Company or its stockholders, (2)
acts or omissions not in good faith or which involve intentional misconduct
or knowing violations of law, (3) under Section 174 of the Delaware General
Corporation Law (unlawful payment of dividends or stock purchase or
redemption) or (4) transactions from which a director derives an improper
personal benefit.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since its incorporation in August 1994, the Company has issued the
following securities:
(a) In connection with its acquisition of certain Burger King restaurants
from the Burger King Corporation and affiliates of Lawrence Jaro and William
Osborn on September 1, 1994 and related financing, the Company issued to (i)
the Jordan Investors 285.31 shares of Class A Common Stock, 500 shares of
Class B Preferred Stock and 1 share of Special Voting Preferred Stock (which
was subsequently cancelled), (ii) advisors to the Company 63.4 shares of
Class A Common Stock, (iii) The First National Bank of Boston warrants to
purchase 31.28 shares of Class B Common Stock, (iv) MCIT PLC 285.31 shares of
Class C Common Stock (which were subsequently converted into Class A Common
Stock), 3,000 shares of Class A(1 Preferred Stock and 500 shares of Class B
Preferred Stock, (v) the management of the Company (and affiliates of
management) 366.00 shares of Class D Common Stock, 1,200 shares of Class A(2)
Preferred Stock and 400 shares of Class B Preferred Stock, (v) options to
purchase 5.62 shares of Class D Common Stock to each of two executives of the
Company. The Company also issued to MCIT, PLC $11,000,000 aggregate principal
amount
II-1
<PAGE>
of the Company's 12.75% Note due August 31, 2004 and to affiliates of
Management a series of 12.75% Notes each due August 31, 2004 with an
aggregate principal amount of $4,400,000. Exemption from registration was
claimed on the grounds that the issuance of such securities did not involve a
public offering within the meaning of Section 4(2) of the Securities Act of
1933, as amended.
(b) In connection with its acquisition of certain Burger King restaurants
from Shelley Friedman and affiliates on November 30, 1994 and related
financing, the Company issued to (i) BancBoston Capital Inc. warrants to
purchase 81.08 shares of Class B Common Stock, (ii) BancBoston Investments,
Inc. 1,425 shares of Class A(1 Preferred Stock, 475 shares of Class B
Preferred Stock and $600,000 aggregate principal amount of the Company's 6%
Junior Subordinated Note due March 31, 2005. Exemption from registration was
claimed on the grounds that the issuance of such securities did not involve a
public offering within the meaning of Section 4(2) of the Securities Act of
1933, as amended.
(c) In connection with its acquisition of certain Burger King restaurants
from C&N Dining, Inc. and its affiliates Thirty-Forty, Inc., Houston, Inc.
and Fifth & Race, Inc. on February 7, 1996 and related financing, the Company
issued to PMI Mezzanine Fund, L.P. warrants to purchase 71.72 shares of Class
C Common Stock and $15,000,000 in aggregate principal amount of the Company's
12.5% Senior Subordinated Notes due January 31, 2005. Exemption from
registration was claimed on the grounds that the issuance of such securities
did not involve a public offering within the meaning of Section 4(2) of the
Securities Act of 1933, as amended.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
A list of the exhibits included as part of this Registration Statement is
set forth in the Exhibit Index that immediately precedes such exhibits and is
incorporated herein by reference.
(b) Financial Statement Schedules:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted
because they are not required, are inapplicable or the required information
has already been provided elsewhere in the registration statement.
ITEM 17. UNDERTAKINGS
The undersigned Company hereby undertakes to provide to the Underwriters
at the closings specified in the Underwriting Agreement for the Notes
Offering and the Underwriting Agreement for the Units Offering, respectively,
certificates in such denominations and registered in such names as required
by the Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Company pursuant to the provisions referred to in Item 14, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by a director, officer or
controlling person of the Company 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 Company will,
unless in the opinion of its counsel 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 policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this amended registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Westchester, State of Illinois, on November 8, 1996.
AMERIKING, INC.
By *
-----------------------------------
Lawrence E. Jaro
Managing Owner, Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amended registration state ment has been signed by the following persons
in the capacities indicated on the 8th day of November, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------- ---------------------------------------------------
<S> <C>
*
- ----------------------------------- Managing Owner, Chairman and Chief Executive
Lawrence E. Jaro Officer (Principal Executive Officer)
*
- -----------------------------------
William C. Osborn Vice Chairman
*
- -----------------------------------
Gary W. Hubert Director and Chief Operating Officer
*
- ----------------------------------- Chief Financial Officer and Corporate Secretary
Joel Aaseby (Principal Financial and Accounting Officer)
*
- -----------------------------------
A. Richard Caputo, Jr. Director and Vice President
*
- -----------------------------------
Thomas H. Quinn Director
*
- -----------------------------------
John W. Jordan II Director
*
- -----------------------------------
David W. Zalaznick Director
By: /s/ A. Richard Caputo, Jr.
- -----------------------------------
As Attorney-in-Fact
</TABLE>
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
1.1++++ Form of Underwriting Agreement for Notes Offering .................................... +
1.2++++ Form of Underwriting Agreement for Units Offering .................................... +
2.1++ Purchase and Sale Agreement, dated September 1, 1994, between Burger King Corporation
("BKC") and National Restaurant Enterprises, Inc. ("Enterprises") .................. *
2.2++ Purchase and Sale Agreement, dated September 1, 1994, between Jaro Enterprises, Inc.
and AmeriKing, Inc. (formerly known as NRE Holdings, Inc.) ("AmeriKing") ........... *
2.3++ Purchase and Sale Agreement, dated September 1, 1994, between Jaro Restaurants, Inc.
and AmeriKing ...................................................................... *
2.4++ Purchase and Sale Agreement, dated September 1, 1994, between Tabor Restaurants
Associates, Inc. and AmeriKing ..................................................... *
2.5++ Purchase and Sale Agreement, dated September, 1, 1994, between JB Restaurants, Inc.
and AmeriKing ...................................................................... *
2.6++ Purchase and Sale Agreement, dated September 1, 1994, between CastleKing, Inc. and
AmeriKing .......................................................................... *
2.7++ Purchase and Sale Agreement, dated September 1, 1994, between Osburger, Inc. and
AmeriKing .......................................................................... *
2.8++ Purchase and Sale Agreement, dated September 1, 1994, between White-Osborn
Restaurants, Inc. and AmeriKing .................................................... *
2.9++ Purchase and Sale Agreement, dated November 30, 1994, by and among Sheldon T.
Friedman, BNB Land Venture, Inc. and Enterprises ................................... *
2.10++ Asset Purchase Agreement, dated July 5, 1995, by and among DMW, Inc., Daniel L. White
and AmeriKing Colorado Corporation I ............................................... *
2.11++ Asset Purchase Agreement, dated July 5, 1995, by and among WSG, Inc., Daniel L.
White, Susan J. Wakeman, George Alaiz, Jr. and AmeriKing Colorado Corporation I .... *
2.12++ Purchase Agreement, dated November 21, 1995, by and among QSC, Inc., the shareholders
of QSC, Inc. and AmeriKing Tennessee Corporation I ................................. *
2.13++ Purchase Agreement, dated November 21, 1995, by and among Ro-Lank, Inc., the
shareholders of Ro-Lank, Inc. and AmeriKing Tennessee Corporation I ................ *
2.14++ Purchase and Sale Agreement, dated November 30, 1995, by and among C&N Dining, Inc.
and affiliates and AmeriKing Virginia Corporation I ................................ *
2.15++ Amendment No. 1 to Purchase and Sale Agreement, dated February 7, 1996, by and among
C&N Dining, Inc. and affiliates and AmeriKing Virginia Corporation I ............... *
2.16++ Asset Purchase Agreement, dated February 7, 1996, between Thirty-Forty, Inc. and
AmeriKing Cincinnati Corporation I ................................................. *
2.17++ Asset Purchase Agreement, dated February 7, 1996, between Houston, Inc. and AmeriKing
Cincinnati Corporation I ........................................................... *
2.18++ Asset Purchase Agreement, dated February 7, 1996, between Fifth & Race, Inc. and
AmeriKing Cincinnati Corporation I ................................................. *
3.1++++ Amended and Restated Certificate of Incorporation of AmeriKing .......................
3.2 Amended and Restated Bylaws of AmeriKing ............................................. *
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
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4.1 Stockholders Agreement, dated September 1, 1994, by and among AmeriKing and the
stockholders appearing on the signature pages thereto .............................. *
4.2 Consent and Amendment No. 1 to Stockholders Agreement, dated November 30, 1994, by
and among AmeriKing and the stockholders appearing on the signature pages thereto .. *
4.3 Consent and Amendment No. 2 to Stockholders Agreement, dated February 7, 1996, by and
among AmeriKing and the stockholders appearing on the signature pages thereto ...... *
4.4 Form of Amended and Restated Stockholders Agreement, dated , 1996, by and among
AmeriKing and the stockholders appearing on the signature pages thereto ............
4.5 Management Subscription Agreement, dated September 1, 1994, by and among AmeriKing,
Tabor Restaurant Associates, Inc., Jaro Enterprises, Inc., Jaro Restaurants, Inc.,
JB Restaurants, Inc., Castleking, Inc., White-Osborn Restaurants, Inc., Osburger,
Inc., Lawrence Jaro, William Osborn, Gary Hubert, Joel Aaseby, Donald Stahurski and
Scott Vasatka ...................................................................... *
4.6 Stock Option Agreement, dated September 1, 1994, between AmeriKing and Scott Vasatka *
4.7 Stock Option Agreement, dated September 1, 1994, between AmeriKing and Donald
Stahurski .......................................................................... *
4.8 Warrant Agreement, dated September 1, 1994, between AmeriKing and The First National
Bank of Boston ..................................................................... *
4.9 Common Stock Purchase Warrant, dated September 1, 1994, between AmeriKing and
BancBoston Investments Inc. ........................................................ *
4.10 First Amendment to Common Stock Purchase Warrant, dated November 30, 1994 ........... *
4.11 Second Amendment to Common Stock Purchase Warrant, dated February 7, 1996 ........... *
4.12 Amended and Restated Note, dated February 7, 1996, from AmeriKing to MCIT PLC in the
aggregate principal amount of $11,000,000 .......................................... *
4.13 Amended and Restated Deferred Limited Interest Guaranty, dated February 7, 1996, from
Enterprises to MCIT PLC ............................................................ *
4.14 Amended and Restated Note, dated February 7, 1996, from AmeriKing to Jaro
Enterprises, Inc. in the aggregate principal amount of $1,224,000 .................. *
4.15 Amended and Restated Note, dated February 7, 1996, from AmeriKing to Jaro
Restaurants, Inc. in the aggregate principal amount of $112,000 .................... *
4.16 Amended and Restated Note, dated February 7, 1996, from AmeriKing to JB Restaurants,
Inc. in the aggregate principal amount of $2,019,000 ............................... *
4.17 Amended and Restated Note, dated February 7, 1996, from AmeriKing to CastleKing, Inc.
in the aggregate principal amount of $385,769 ...................................... *
4.18 Amended and Restated Note, dated February 7, 1996, from AmeriKing to White-Osborn
Restaurants, Inc. in the aggregate principal amount of $659,231 .................... *
4.19 Securities Purchase Agreement, dated November 30, 1994, between AmeriKing and
BancBoston Investments, Inc. ....................................................... *
4.20 Common Stock Purchase Warrant, dated November 30, 1994, between AmeriKing and
BancBoston Investments, Inc. ....................................................... *
</TABLE>
<TABLE>
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4.21 Junior Subordinated Note, dated November 30, 1994, from AmeriKing to BancBoston
Investments, Inc. in the aggregate principal amount of $600,000 .................... *
4.22 Secured Promissory Note, dated November 21, 1995, from AmeriKing Tennessee
Corporation I to BKC in the aggregate principal amount of $6,920,700 ............... *
4.23 Amendment to Secured Promissory Note, dated May 21, 1996, from AmeriKing Tennessee
Corporation I to BKC in the aggregate principal amount of $6,093,067 ............... *
4.24 Guaranty, dated November 21, 1995, from Lawrence Jaro and William Osborn to BKC ..... *
4.25 Ratification of Guaranty, May 21, 1996, from Lawrence Jaro and William Osborn to BKC *
4.26 Promissory Note, dated November 29, 1995, from AmeriKing Colorado Corporation I to
Franchise Acceptance Corporation Limited in the aggregate principal amount of
$1,865,000 ......................................................................... *
4.27 Amendment to Promissory Note, dated December 14, 1995, from AmeriKing Colorado
Corporation I to Franchise Acceptance Corporation Limited .......................... *
4.28 Common Stock Purchase Warrant, dated February 7, 1996, from AmeriKing to PMI
Mezzanine Fund, L.P. ............................................................... *
4.29 Senior Subordinated Note, dated February 7, 1996, from Enterprises to PMI Mezzanine
Fund, L.P in the aggregate principal amount of $15,000,000. ........................ *
4.30 Subordinated Guaranty, dated February 7, 1996, from AmeriKing Virginia Corporation I
and AmeriKing Cincinnati Corporation I to PMI Mezzanine Fund, L.P. ................. *
4.31 Second Amended and Restated Revolving Credit Note, dated February 7, 1996, from
Enterprises to The First National Bank of Boston, the other lending institutions
listed on Schedule 1 thereto, and The First National Bank of Boston, as agent ...... *
4.32 Second Amended and Restated Term Loan A Note, dated February 7, 1996, from
Enterprises to The First National Bank of Boston, the other lending institutions
listed on Schedule 1 thereto, and The First National Bank of Boston, as agent ...... *
4.33 Second Amended and Restated Term Loan B Note, dated February 7, 1996, from
Enterprises to The First National Bank of Boston, the other lending institutions
listed on Schedule 1 thereto, and The First National Bank of Boston, as agent ...... *
4.34 Limited Guaranty, dated September 1, 1994, from AmeriKing to The First National Bank
of Boston, the other lending institutions listed on Schedule 1 thereto, and The
First National Bank of Boston, as agent ............................................ *
4.35 Guaranty, dated February 7, 1996, from AmeriKing Virginia Corporation I and AmeriKing
Cincinnati Corporation I to the First National Bank of Boston, the other lending
institutions listed on Schedule 1 thereto, and The First National Bank of Boston, as
agent .............................................................................. *
4.36 Unconditional Guaranty of Payment and Performance, dated February 7, 1996, from
Enterprises to FFCA Acquisition Corporation ........................................ *
4.37 Form of Amendment No. 1 to Common Stock Purchase Warrant, dated , 1996, from
AmeriKing to PMI Mezzanine Fund, L.P. .............................................. *
4.38 Indenture, dated November , 1996, between AmeriKing and [Trustee] with respect to
Senior Notes .......................................................................
</TABLE>
<TABLE>
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NUMBER DESCRIPTION NUMBERED PAGE
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4.39 Form of Senior Notes (attached to Exhibit 4.38) ...................................... +
4.40 Indenture, dated November , 1996, between AmeriKing and [Trustee] with respect to
Exchange Debentures ................................................................
4.41 Form of Senior Preferred Stock Certificate ........................................... +
4.42 Form of Exchange Debentures (attached to Exhibit 4.40) ............................... +
4.43 Promissory Note, dated July 18, 1996, from AmeriKing Tennessee Corporation I to
Franchise Acceptance Corporation Limited in the aggregate principal amount of
$6,100,000 .........................................................................
4.44 Certificate of Designations relating to the Senior Preferred Stock ...................
4.45 Promissory Note, dated July 18, 1996, from AmeriKing Tennessee Corporation I to
Franchise Acceptance Corporation Limited in the aggregate principal amount of
$900,000 ...........................................................................
4.46 Form of Amendment No. 1 to Stock Option Agreement, dated November , 1996 by and among
AmeriKing, Scott Vasatka and Donald Stahurski ......................................
4.47 Form of Amendment No. 1 to Management Subscription Agreement, dated November , 1996 .
5 Opinion of Mayer, Brown & Platt ...................................................... +
9.1 Jaro Proxy Agreement, dated September 1, 1994, by and among Lawrence Jaro, Tabor
Restaurant Associates, Inc., Jaro Enterprises, Inc., Jaro Restaurants, Inc. and JB
Restaurants, Inc. .................................................................. *
9.2 Osborn Proxy Agreement, dated September 1, 1994, by and among William Osborn,
Castleking, Inc., Osburger, Inc. and White-Osborn, Inc. ............................ *
10.1 Second Amended and Restated Revolving Credit and Term Loan Agreement, dated February
7, 1996, by and among AmeriKing, Enterprises, The First National Bank of Boston, the
other lending institutions listed on Schedule 1 thereto, and The First National Bank
of Boston, as agent ................................................................ *
10.2 Security Agreement, dated September 1, 1994, by and among Enterprises and The First
National Bank of Boston, the other lending institutions listed on Schedule 1
thereto, and The First National Bank of Boston, as agent ........................... *
10.3 Amendment to Security Agreement, dated February 7, 1996, by and among Enterprises and
The First National Bank of Boston, the other lending institutions listed on Schedule
1 thereto, and The First National Bank of Boston, as agent ......................... *
10.4 Stock Pledge Agreement, dated September 1, 1994, by and among AmeriKing and The First
National Bank of Boston, the other lending institutions listed on Schedule 1
thereto, and The First National Bank of Boston, as agent ........................... *
10.5 Amendment to Stock Pledge Agreement, dated February 7, 1996, by and among AmeriKing
and The First National Bank of Boston, the other lending institutions listed on
Schedule 1 thereto, and The First National Bank of Boston, as agent ................ *
10.6 Security Agreement, dated February 7, 1996, by and among AmeriKing Virginia
Corporation I, AmeriKing Cincinnati Corporation I and The First National Bank of
Boston ............................................................................. *
10.7 Stock Pledge Agreement, dated February 7, 1996, by and among Enterprises, AmeriKing
Virginia Corporation I, AmeriKing Cincinnati Corporation I and The First National
Bank of Boston ..................................................................... *
</TABLE>
<TABLE>
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10.8 Amended and Restated Purchase Agreement, dated February 7, 1996, between AmeriKing
and MCIT PLC ....................................................................... *
10.9 Pledge Agreement, dated September 1, 1994, between AmeriKing and MCIT PLC ........... *
10.10 Subordination Agreement, dated September 1, 1994, by and among BKC, MCIT PLC and
AmeriKing .......................................................................... *
10.11 Amendment and Consent No. 1 to Securities Purchase Agreement, dated February 7, 1996,
between AmeriKing and BancBoston Investments, Inc. ................................. *
10.12 Intercreditor Agreement, dated February 7, 1996, by and among BKC, AmeriKing Virginia
Corporation I, AmeriKing Cincinnati Corporation I, Lawrence Jaro, William Osborn,
Gary Hubert, Enterprises, AmeriKing and The First National Bank of Boston .......... *
10.13 Stock Pledge Agreement, dated November 21, 1995, between Enterprises and BKC ........ *
10.14 Ratification of Stock Pledge Agreement, dated May 21, 1996, between Enterprises and
BKC ................................................................................ *
10.15 Stock Pledge Agreement, dated November 21, 1995, between Enterprises and The First
National Bank of Boston, the other lending institutions listed on Schedule 1
thereto, and The First National Bank of Boston, as agent ........................... *
10.16 Note Purchase Agreement, dated February 7, 1996, by and among AmeriKing, Enterprises
and PMI Mezzanine Fund, L.P. ....................................................... *
10.17 Form of Amendment No. 1 to Note Purchase Agreement, by and among AmeriKing,
Enterprises and PMI Mezzanine Fund, L.P. ...........................................
10.18 Subordination Agreement, dated February 7, 1996, by and among AmeriKing, Enterprises,
AmeriKing Virginia Corporation I, AmeriKing Cincinnati Corporation I, AmeriKing
Tennessee Corporation I, AmeriKing Colorado Corporation I, Lawrence Jaro, William
Osborn, Gary Hubert and BKC ........................................................ *
10.19 Sale-Leaseback Agreement, dated February 7, 1996, by and among AmeriKing Virginia
Corporation I, AmeriKing Tennessee Corporation I and FFCA Acquisition Corporation .. *
10.20 Lease, dated February 7, 1996, by and among AmeriKing Virginia Corporation I,
AmeriKing Tennessee Corporation I and FFCA Acquisition Corporation ................. *
10.21 Form of Franchise Agreement between BKC and Franchisee ............................... *
10.22 Schedule of AmeriKing Franchise Agreements ........................................... *
10.23 Form of Lease Agreement between BKC and Lessee ....................................... *
10.24 Schedule of AmeriKing Lease Agreements ............................................... *
10.25 Form of Guarantee, Indemnification and Acknowledgment of BKC Franchise Agreement .... *
10.26 Form of Guarantee, Indemnification and Acknowledgment of BKC Lease Agreement ........ *
10.27 Capital Expenditure Agreement, dated September 1, 1994, by and among AmeriKing,
Enterprises and BKC ................................................................ *
10.28 Capital Expenditure Agreement, dated November 21, 1995, by and among Enterprises,
AmeriKing Tennessee Corporation I and BKC .......................................... *
10.29 Letter Agreement, dated February 7, 1996, between Enterprises and BKC ............... *
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
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10.30 Naparlo Development Agreement, dated February 7, 1996, between AmeriKing Virginia
Corporation I and Joseph J. Naparlo ................................................ *
10.31 Management Consulting Agreement, dated September 1, 1994, by and among TJC Management
Corporation, AmeriKing and Enterprises ............................................. *
10.32 Intentionally Omitted ................................................................
10.33 Intercompany Management Consulting Agreement, dated September 1, 1994 between
Enterprises and AmeriKing .......................................................... *
10.34 Amended and Restated Tax Sharing Agreement, dated February 7, 1996, between
Enterprises and AmeriKing .......................................................... *
10.35 Employment and Non-Interference Agreement, dated September 1, 1994, between Lawrence
Jaro and Enterprises ............................................................... *
10.36 Employment and Non-Interference Agreement, dated September 1, 1994, between William
Osborn and Enterprises ............................................................. *
10.37 Employment and Non-Interference Agreement, dated September 1, 1994, between Gary
Hubert and Enterprises ............................................................. *
10.38 Employment and Non-Interference Agreement, dated September 1, 1994, between Joel
Aaseby and Enterprises ............................................................. *
10.39 Employment and Non-Interference Agreement, dated September 1, 1994, between Scott
Vasatka and Enterprises ............................................................ *
10.40 Intentionally Omitted ................................................................
10.41 Form of Indemnification Agreement by and among AmeriKing and each of the signatories
to this Registration Statement ..................................................... *
10.42 Intentionally Omitted ................................................................
10.43 Intentionally Omitted ................................................................
10.44 Lease Agreement for Westchester, Illinois headquarters ............................... *
10.45 Loan and Security Agreement, dated November 29, 1995, between AmeriKing Colorado
Corporation I and Franchise Acceptance Corporation Limited ......................... +
10.46 Loan and Security Agreement, dated July 21, 1996, between AmeriKing Tennessee
Corporation I and Franchise Acceptance Corporation Limited .........................
10.47 Form of Intercreditor Agreement, dated November , 1996, by and among BKC, AmeriKing,
and the Trustee as representative of the holders of Senior Notes under the Indenture +
10.48 Form of Employment and Non-Interference Agreement, dated November , 1996, between
William Osborn and Enterprises ..................................................... +
10.49 Form of Recapitalization Agreement, dated November , 1996, among AmeriKing and the
stockholders appearing on the signature pages thereto ..............................
21 Subsidiaries of AmeriKing ............................................................ *
23.1 Consent of Mayer, Brown & Platt (included in the Opinion of Mayer, Brown & Platt,
filed as Exhibit 5)
23.2 Consent of Deloitte & Touche .........................................................
24 Power of Attorney (included on the signature page in Part II of the initial
Registration Statement)
25 T-1 for Exchange Debenture Indenture .................................................
26 T-1 for Senior Note Indenture ........................................................
27++++ Financial Data Schedule ..............................................................
</TABLE>
<PAGE>
- ------------
* Previously filed.
++ The schedules and exhibits to these agreements have not been filed
pursuant to Item 601(b)(2) of Regulation S-K. Such schedules and
exhibits will be filed supplementally upon the request of the
Securities and Exchange Commission.
++++ Superceding exhibit.
+ To be filed by amendment.
L&W DRAFT OF 11/4/94
$100,000,000
AMERIKING, INC.
___% SENIOR NOTES DUE 2006
UNDERWRITING AGREEMENT
__________, 1996
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
JEFFERIES & COMPANY, INC.
As representatives of the
several underwriters
named in Schedule I hereto
140 Broadway
New York, New York 10005
Dear Sirs:
AmeriKing, Inc., a Delaware corporation (the "Company"), proposes to issue
and sell $100,000,000 principal amount of its ___% Senior Notes due 2006 (the
"Securities") to the several underwriters named in Schedule I hereto (the
"Underwriters"). The Securities are to be issued pursuant to the provisions of
an Indenture to be dated as of ___________, 1996 (the "Indenture") between the
Company and ____________, as Trustee (the "Trustee").
1. Registration Statement and Prospectus. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively called the
"Act"), a registration statement on Form S-1 including a prospectus relating to
the Securities,
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<PAGE>
which may be amended. The registration statement as amended at the time when it
becomes effective, including a registration statement (if any) filed pursuant
to Rule 462(b) under the Act increasing the size of the offering registered
under the Act and information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the Act, is
hereinafter referred to as the Registration Statement; and the prospectus in
the form first used to confirm sales of Securities is hereinafter referred as
the Prospectus.
2. Agreements to Sell and Purchase. On the basis of the representations
and warranties contained in this Agreement, and subject to its terms and
conditions, the Company agrees to issue and sell, and each Underwriter agrees,
severally and not jointly, to purchase from the Company the principal amount of
Securities set forth opposite the name of such Underwriter in Schedule I
hereto, at ____% of the principal amount thereof (the "Purchase Price") plus
accrued interest thereon, if any, from ____________, 1996 to the date of
payment and delivery.
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose (i) to make a public offering of their respective portions
of the Securities as soon after the effective date of the Registration
Statement as in your judgment is advisable and (ii) initially to offer the
Securities upon the terms set forth in the Prospectus.
4. Delivery and Payment. Delivery to the Underwriters of and payment for
the Securities shall be made at 10:00 A.M., New York City time, on the third or
fourth business day unless otherwise permitted by the Commission pursuant to
Rule 15c6-1 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), following the date of the initial public offering (the "Closing Date"),
at the offices of Latham & Watkins, 885 Third Avenue, Suite 1000, New York, New
York. The Closing Date and the location of delivery of and the form of payment
for the Securities may be varied by agreement between you and the Company.
Certificates for the Securities shall be registered in such names and
issued in such denominations as you shall request in writing not later than two
full business days prior to the Closing Date. Such certificates shall be made
available to you for inspection not later than 9:30 A.M., New York City time,
on the business day immediately preceding the Closing Date. Certificates in
definitive form evidencing the Securities shall be delivered to you on the
Closing Date with any transfer taxes thereon duly paid by the Company, for the
respective accounts of the several Underwriters, against payment of the
Purchase Price therefor by certified or official bank checks payable in next
day funds to the order of the Company.
2
<PAGE>
5. Agreements of the Company. The Company agrees with you:
(a) To use its best efforts to cause the Registration Statement to
become effective at the earliest possible time.
(b) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) when the Registration Statement has become
effective and when any post-effective amendment to it becomes effective,
(ii) of any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the
suspension of qualification of the Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purposes, and
(iv) of the happening of any event during the period referred to in
paragraph (e) below which makes any statement of a material fact made in
the Registration Statement or the Prospectus untrue or which requires the
making of any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal or lifting of such order at the
earliest possible time.
(c) To furnish to you, without charge, three signed copies of the
Registration Statement as first filed with the Commission and of each
amendment to it, including all exhibits, and to furnish to you and each
Underwriter designated by you such number of conformed copies of the
Registration Statement as so filed and of each amendment to it, without
exhibits, as you may reasonably request.
(d) Not to file any amendment or supplement to the Registration
Statement, whether before or after the time when it becomes effective, or
to make any amendment or supplement to the Prospectus of which you shall
not previously have been advised or to which you shall reasonably object;
and to prepare and file with the Commission, promptly upon your reasonable
request, any amendment to the Registration Statement or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Securities by you, and to use its best efforts to
cause the same to become promptly effective.
(e) Promptly after the Registration Statement becomes effective, and
from time to time thereafter for such period as in the opinion of counsel
for the Underwriters a prospectus is required by law to be delivered in
connection with sales by an Underwriter or a dealer, to furnish to each
Underwriter and dealer as
3
<PAGE>
many copies of the Prospectus (and of any amendment or supplement to the
Prospectus) as such Underwriter or dealer may reasonably request.
(f) If during the period specified in paragraph (e) any event shall
occur as a result of which, in the opinion of counsel for the Underwriters
it becomes necessary to amend or supplement the Prospectus in order to
make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement the Prospectus to comply with any law,
forthwith to prepare and file with the Commission an appropriate amendment
or supplement to the Prospectus so that the statements in the Prospectus,
as so amended or supplemented, will not in the light of the circumstances
when it is so delivered, be misleading, or so that the Prospectus will
comply with law, and to furnish to each Underwriter and to such dealers as
you shall specify, such number of copies thereof as such Underwriter or
dealers may reasonably request.
(g) Prior to any public offering of the Securities, to cooperate with
you and counsel for the Underwriters in connection with the registration
or qualification of the Securities for offer and sale by the several
Underwriters and by dealers under the state securities or Blue Sky laws of
such jurisdictions as you may request, to continue such qualification in
effect so long as required for distribution of the Securities and to file
such consents to service of process or other documents as may be necessary
in order to effect such registration or qualification.
(h) To mail and make generally available to its security holders as
soon as reasonably practicable an earnings statement covering a period of
at least twelve months after the effective date of the Registration
Statement (but in no event commencing later than 90 days after such date)
which shall satisfy the provisions of Section 11(a) of the Act, and to
advise you in writing when such statement has been so made available.
(i) During the period of five years after the date of this Agreement,
(i) to mail as soon as reasonably practicable after the end of each fiscal
year to the record holders of its Securities a financial report of the
Company and its subsidiaries on a consolidated basis (and a similar
financial report of all unconsolidated subsidiaries, if any), all such
financial reports to include a consolidated balance sheet, a consolidated
statement of operations, a consolidated statement of cash flows and a
consolidated statement of shareholders' equity as of the end of and for
such fiscal year, together with comparable information as of the end of
and for the preceding year, certified by independent certified public
accountants, and (ii) to mail and make generally available as soon as
practicable after the end of each quarterly period (except for the last
quarterly period of each
4
<PAGE>
fiscal year) to such holders, a consolidated balance sheet, a consolidated
statement of operations and a consolidated statement of cash flows (and
similar financial reports of all unconsolidated subsidiaries, if any) as
of the end of and for such period, and for the period from the beginning
of such year to the close of such quarterly period, together with
comparable information for the corresponding periods of the preceding
year.
(j) During the period referred to in paragraph (i), to furnish to you
as soon as available a copy of each report or other publicly available
information of the Company mailed to the security holders of the Company
or filed with the Commission and such other publicly available information
concerning the Company and its subsidiaries as you may reasonably request.
(k) To pay all costs, expenses, fees and taxes incident to (i) the
preparation, printing, filing and distribution under the Act of the
Registration Statement (including financial statements and exhibits), each
preliminary prospectus and all amendments and supplements to any of them
prior to or during the period specified in paragraph (e), (ii) the
printing and delivery of the Prospectus and all amendments or supplements
to it during the period specified in paragraph (e), (iii) the printing and
delivery of this Agreement, the Preliminary and Supplemental Blue Sky
Memoranda and all other agreements, memoranda, correspondence and other
documents printed and delivered in connection with the offering of the
Securities (including in each case any disbursements of counsel for the
Underwriters relating to such printing and delivery), (iv) the
registration or qualification of the Securities for offer and sale under
the securities or Blue Sky laws of the several states (including in each
case the fees and disbursements of counsel for the Underwriters relating
to such registration or qualification and memoranda relating thereto), (v)
filings and clearance with the National Association of Securities Dealers,
Inc. in connection with the offering, (vi) the listing of the Securities
on the National Association of Securities Dealers Automated Quotation
system ("NASDAQ") National Market System and (vii) furnishing such copies
of the Registration Statement, the Prospectus and all amendments and
supplements thereto as may be requested for use in connection with the
offering or sale of the Securities by the Underwriters or by dealers to
whom Securities may be sold.
(l) To use its best efforts to maintain the inclusion of the
Securities in the NASDAQ National Market System (or on a national
securities exchange) for a period of five years after the effective date
of the Registration Statement.
(m) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell contract to sell or
otherwise dispose of any debt securities of the Company or warrants to
purchase debt securities of
5
<PAGE>
the Company substantially similar to the Securities (other than (i) the
Securities and (ii) commercial paper issued in the ordinary course of
business), without your prior written consent.
(n) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company
prior to the Closing Date and to satisfy all conditions precedent to the
delivery of the Securities.
6. Representations and Warranties of the Company. The Company represents
and warrants to each Underwriter that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or threatened by
the Commission.
(b) (i) Each part of the Registration Statement, when such part
became effective, did not contain and each such part, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii)
the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the
Act and (iii) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and warranties
set forth in this paragraph (b) do not apply to statements or omissions in
the Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 424 under the Act, and each Registration Statement
filed pursuant to Rule 462(b) under the Act, if any, complied when so
filed in all material respects with the Act; and did not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(d) The Company and each of its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of its
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jurisdiction of incorporation and has the corporate power and authority to
carry on its business as it is currently being conducted and to own, lease
and operate its properties, and each is duly qualified and is in good
standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure
to be so qualified would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole.
(e) All of the outstanding shares of capital stock of, or other
ownership interests in, each of the Company's subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable, and
are owned by the Company, free and clear of any security interest, claim,
lien, encumbrance or adverse interest of any nature.
(f) The Securities have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and
delivered to the Underwriters against payment therefor as provided by this
Agreement, will be entitled to the benefits of the Indenture, and will be
valid and binding obligations of the Company, enforceable in accordance
with their terms except as (i) the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(g) This Agreement has been duly authorized, executed and delivered
by the Company and is a valid and binding agreement of the Company
enforceable in accordance with its terms (except as rights to indemnity
and contribution hereunder may be limited by applicable law).
(h) The Indenture has been duly qualified under the Trust Indenture
Act of 1939, as amended, and has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company, enforceable in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability.
(i) The Securities conform as to legal matters to the description
thereof contained in the Prospectus.
(j) Neither the Company nor any of its subsidiaries is in violation
of its respective charter or by-laws or in default in the performance of
any obligation, agreement or condition contained in any bond, debenture,
note or any other
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evidence of indebtedness or in any other agreement, indenture or
instrument material to the conduct of the business of the Company and its
subsidiaries, taken as a whole, to which the Company or any of its
subsidiaries is a party or by which it or any of its subsidiaries or their
respective property is bound.
(k) The execution, delivery and performance of this Agreement, the
Indenture and the Securities and compliance by the Company with all the
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not require any consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body (except as such may be required under
the securities or Blue Sky laws of the various states) and will not
conflict with or constitute a breach of any of the terms or provisions of,
or a default under, the charter or by-laws of the Company or any of its
subsidiaries or any agreement, indenture or other instrument to which it
or any of its subsidiaries is a party or by which it or any of its
subsidiaries or their respective property is bound, or violate or conflict
with any laws, administrative regulations or rulings or court decrees
applicable to the Company, any of its subsidiaries or their respective
property.
(l) Except as otherwise set forth in the Prospectus, there are no
material legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any of their respective
property is the subject, and, to the best of the Company's knowledge, no
such proceedings are threatened or contemplated. No contract or document
of a character required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement
is not so described or filed as required.
(m) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), nor any federal or state law relating to discrimination in the
hiring, promotion or pay of employees nor any applicable federal or state
wages and hours laws, nor any provisions of the Employee Retirement Income
Security Act or the rules and regulations promulgated thereunder, which in
each case might result in any material adverse change in the business,
prospects, financial condition or results of operation of the Company and
its subsidiaries, taken as a whole.
(n) The Company and each of its subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits"), including, without limitation, under any
applicable Environmental Laws, as are necessary to own, lease and operate
its respective properties and to conduct its business; the Company and
each of its subsidiaries has fulfilled and
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performed all of its material obligations with respect to such permits and
no event has occurred which allows, or after notice or lapse of time would
allow, revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such permit; and, except as
described in the Prospectus, such permits contain no restrictions that are
materially burdensome to the Company or any of its subsidiaries.
(o) In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its subsidiaries, in the
course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties). On the basis of such review, the Company has reasonably
concluded that such associated costs and liabilities would not, singly or
in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(p) Except as otherwise set forth in the Prospectus or such as are
not material to the business, prospects, financial condition or results of
operation of the Company and its subsidiaries, taken as a whole, the
Company and each of its subsidiaries has good and marketable title, free
and clear of all liens, claims, encumbrances and restrictions except liens
for taxes not yet due and payable, to all property and assets described in
the Registration Statement as being owned by it. All leases to which the
Company or any of its subsidiaries is a party are valid and binding and no
default has occurred or is continuing thereunder, which might result in
any material adverse change in the business, prospects, financial
condition or results of operation of the Company and its subsidiaries
taken as a whole, and the Company and its subsidiaries enjoy peaceful and
undisturbed possession under all such leases to which any of them is a
party as lessee with such exceptions as do not materially interfere with
the use made by the Company or such subsidiary.
(q) The Company and each of its subsidiaries maintains reasonably
adequate insurance.
(r) Deloitte & Touche LLP are independent public accountants with
respect to the Company as required by the Act.
(s) The financial statements, together with related schedules and
notes forming part of the Registration Statement and the Prospectus (and
any amendment or supplement thereto), present fairly the consolidated
financial
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position, results of operations and changes in financial position of the
Company and its subsidiaries on the basis stated in the Registration
Statement at the respective dates or for the respective periods to which
they apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; and the other financial and statistical information and data set
forth in the Registration Statement and the Prospectus (and any amendment
or supplement thereto) is, in all material respects, accurately presented
and prepared on a basis consistent with such financial statements and the
books and records of the Company.
(t) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(u) No holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the
Company.
(v) The Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida).
(w) The Company has filed a registration statement pursuant to
Section 12(g) of the Exchange Act, to register the Securities.
(x) There are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or liens
related to or entitling any person to purchase or otherwise to acquire any
shares of the capital stock of, or other ownership interest in, the
Company or any subsidiary thereof except as otherwise disclosed in the
Registration Statement.
(y) Except as disclosed in the Prospectus, there are no business
relationships or related party transactions required to be disclosed
therein by Item 404 of Regulation S-K of the Commission.
(z) There is (i) no significant unfair labor practice complaint
pending against the Company or any of its subsidiaries or, to the best
knowledge of the Company, threatened against any of them, before the
National Labor Relations Board or any state or local labor relations
board, and no significant grievance or more significant arbitration
proceeding arising out of or under any collective bargaining agreement is
so pending against the Company or any of its subsidiaries or, to the best
knowledge of the Company, threatened against any of them, and (ii) no
significant strike, labor dispute, slowdown or stoppage pending against
the Company or any of its subsidiaries or, to the best knowledge of the
Company,
10
<PAGE>
threatened against it or any of its subsidiaries except for such actions
specified in clause (i) or (ii) above, which, singly or in the aggregate,
could not reasonably be expected to have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(aa) The Company and each of its subsidiaries maintains a system
of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions
are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
(ab) All material tax returns required to be filed by the
Company and each of its subsidiaries in any jurisdiction have been
filed, other than those filings being contested in good faith, and
all material taxes, including withholding taxes, penalties and
interest, assessments, fees and other charges due pursuant to such
returns or pursuant to any assessment received by the Company or any
of its subsidiaries have been paid, other than those being contested
in good faith and for which adequate reserves have been provided.
7. Indemnification. (a) The Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Act or Section 20 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), from and against any and all
losses, claims, damages, liabilities and judgments caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information
relating to any Underwriters furnished in writing to the Company by or on
behalf of any Underwriter through you expressly for use therein; provided,
however, that the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, claims, damages and liabilities and judgments
purchased Securities, or any person controlling such Underwriter, if a copy of
the Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or
11
<PAGE>
given by or on behalf of such Underwriter to such person, if required by
law so to have been delivered, at or prior to the written confirmation of
the sale of the Securities to such person, and if the Prospectus (as so
amended and supplemented) would have cured the defect giving rise to such
loss, claim, damage, liability or judgment.
(b) In case any action shall be brought against any Underwriter or
any person controlling such Underwriter, based upon any preliminary
prospectus, the Registration Statement or the Prospectus or any amendment
or supplement thereto and with respect to which indemnity may be sought
against the Company, such Underwriter shall promptly notify the Company in
writing and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such indemnified party
and payment of all fees and expenses. Any Underwriter or any such
controlling person shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or
such controlling person unless (i) the employment of such counsel shall
have been specifically authorized in writing by the Company, (ii) the
Company shall have failed to assume the defense and employ counsel or
(iii) the named parties to any such action (including any impleaded
parties) include both such Underwriter or such controlling person and the
Company and such Underwriter or such controlling person shall have been
advised by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those available
to the Company (in which case the Company shall not have the right to
assume the defense of such action on behalf of such Underwriter or such
controlling person, it being understood, however, that the Company shall
not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any
local counsel) for all such Underwriters and controlling persons, which
firm shall be designated in writing by Donaldson, Lufkin & Jenrette
Securities Corporation and that all such fees and expenses shall be
reimbursed as they are incurred). The Company shall not be liable for any
settlement of any such action effected without its written consent but if
settled with the written consent of the Company, the Company agrees to
indemnify and hold harmless any Underwriter and any such controlling
person from and against any loss or liability by reason of such
settlement. Notwithstanding the immediately preceding sentence, if in any
case where the fees and expenses of counsel are at the expense of the
indemnifying party and an indemnified party shall have requested the
indemnifying party to reimburse the indemnified party for such fees and
expenses of counsel as incurred, such indemnifying party agrees that it
shall be liable for any settlement of any action effected without its
written consent if (i) such settlement is entered into more than ten
business days after the receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall have failed to
reimburse the indemnified party in accordance with such request for
reimbursement prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect
any settlement of any
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pending or threatened proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceeding.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and any person controlling the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the
same extent as the foregoing indemnity from the Company to each
Underwriter but only with reference to information relating to such
Underwriter furnished in writing by or on behalf of such Underwriter
through you expressly for use in the Registration Statement, the
Prospectus or any preliminary prospectus. In case any action shall be
brought against the Company, any of its directors, any such officer or any
person controlling the Company based on the Registration Statement, the
Prospectus or any preliminary prospectus and in respect of which indemnity
may be sought against any Underwriter, the Underwriter shall have the
rights and duties given to the Company (except that if the Company shall
have assumed the defense thereof, such Underwriter shall not be required
to do so, but may employ separate counsel therein and participate in the
defense thereof but the fees and expenses of such counsel shall be at the
expense of such Underwriter), and the Company, its directors, any such
officers and any person controlling the Company shall have the rights and
duties given to the Underwriter, by Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and judgments (i) in
such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other
hand from the offering of the Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company
and the Underwriters in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or judgments, as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Underwriters shall be deemed to be in the
same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company, and the total underwriting
discounts and commissions received by the Underwriters, bear to the total
price to the public of the Securities, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault of the
Company and the Underwriters shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information
supplied by the Company or
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the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by
pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, liabilities or judgments referred
to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations
to contribute pursuant to this Section 7(d) are several in proportion to
the respective number of Securities purchased by each of the Underwriters
hereunder and not joint.
8. Conditions of Underwriters' Obligations. The several obligations of the
Underwriters to purchase the Securities under this Agreement are subject to the
satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained
in this Agreement shall be true and correct on the Closing Date with the
same force and effect as if made on and as of the Closing Date.
(b) The Registration Statement shall have become effective not later
than 5:00 P.M. (and in the case of a Registration Statement filed under
Rule 462(b) of the Act, not later than 10:00 p.m.), New York City time, on
the date of this Agreement or at such later date and time as you may
approve in writing, and at the Closing Date no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have been any downgrading, nor
shall any notice have been given of any intended or potential downgrading
or of any review for a possible change that does not indicate the
direction of the possible change, in
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the rating accorded any of the Company's securities by any "nationally
recognized statistical rating organization", as such term is defined for
purposes of Rule 436(g)(2) under the Securities Act.
(d)(i) Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, there shall not have been any
material adverse change, or any development involving a prospective
material adverse change, in the condition, financial or otherwise, or in
the earnings, affairs or business prospects, whether or not arising in the
ordinary course of business, of the Company, (ii) since the date of the
latest balance sheet included in the Registration Statement and the
Prospectus there shall not have been any change, or any development
involving a prospective material adverse change, in the capital stock or
in the long-term debt of the Company from that set forth in the
Registration Statement and Prospectus, (iii) the Company and its
subsidiaries shall have no liability or obligation, direct or contingent,
which is material to the Company and its subsidiaries, taken as a whole,
other than those reflected in the Registration Statement and the
Prospectus and (iv) on the Closing Date you shall have received a
certificate dated the Closing Date, signed by _______________ and
_______________, in their capacities as the _______________ and
_______________ of the Company, confirming the matters set forth in
paragraphs (a), (b), (c) and (d) of this Section 8.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of Mayer, Brown & Platt counsel for the Company, to the effect that:
(i) the Company and each of its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has the
corporate power and authority required to carry on its business as it
is currently being conducted and to own, lease and operate its
properties;
(ii) the Company and each of its subsidiaries is duly qualified
and is in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or
its ownership or leasing of property requires such qualification,
except where the failure to be so qualified would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole;
(iii) all of the outstanding shares of capital stock of, or
other ownership interests in, each of the Company's subsidiaries have
been duly and validly authorized and issued and are fully paid and
non-assessable,
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and are owned by the Company, free and clear of any security
interest, claim, lien, encumbrance or adverse interest of any nature;
(iv) the Securities have been duly authorized and, when executed
and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Underwriters in accordance with
the terms of this Agreement, will be entitled to the benefits of the
Indenture and will be valid and binding obligations of the Company
enforceable in accordance with their terms except as (a) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (b) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability;
(v) this Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company enforceable in accordance with its terms (except as rights to
indemnity and contribution hereunder may be limited by applicable
law);
(vi) the Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended, and has been duly authorized,
executed and delivered by the Company and is a valid and binding
agreement of the Company, enforceable in accordance with its terms
except as (a) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (b) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability;
(vii) the Registration Statement has become effective under the
Act, no stop order suspending its effectiveness has been issued and
no proceedings for that purpose are, to the knowledge of such
counsel, pending before or contemplated by the Commission;
(viii) the statements under the captions "Use of Proceeds,"
"Dividend Policy," "Business," "Description of Certain Indebtedness,"
"Certain Transactions," "Description of Securities" and
"Underwriting" in the Prospectus, as amended or supplemented, and
Items 14 and 15 of Part II of the Registration Statement insofar as
such statements constitute a summary of legal matters documents or
proceedings referred to therein, fairly present the information
called for with respect to such legal matters, documents and
proceedings;
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(ix) such counsel is of the opinion ascribed to it in the
Prospectus under the caption "Certain Federal Income Tax
Considerations;"
(x) neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws and, to the best of
such counsel's knowledge after due inquiry, neither the Company nor
any of its subsidiaries is in default in the performance of any
obligation, agreement or condition contained in any bond, debenture,
note or any other evidence of indebtedness or in any other agreement,
indenture or instrument material to the conduct of the business of
the Company and its subsidiaries, taken as a whole, to which the
Company or any of its subsidiaries is a party or by which it or any
of its subsidiaries or their respective property is bound;
(xi) the execution, delivery and performance of this Agreement,
the Indenture and the Securities and compliance by the Company with
all the provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not require any
consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body
(except as such may be required under the securities or Blue Sky laws
of the various states) and will not conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the
charter or by-laws of the Company or any of its subsidiaries or any
agreement, indenture or other instrument to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective properties is bound, or violate or
conflict with any laws, administrative regulations or rulings or
court decrees applicable to the Company or any of its subsidiaries or
their respective properties;
(xii) after due inquiry, such counsel does not know of any legal
or governmental proceeding pending or threatened to which the Company
or any of its subsidiaries is a party or to which any of their
respective property is subject which is required to be described in
the Registration Statement or the Prospectus and is not so described,
or of any contract or other document which is required to be
described in the Registration Statement or the Prospectus or is
required to be filed as an exhibit to the Registration Statement
which is not described or filed as required;
(xiii) to the best of such counsel's knowledge, after due
inquiry, neither the Company nor any of its subsidiaries has violated
any Environmental Laws, nor any federal or state law relating to
discrimination in the hiring, promotion or pay of employees nor any
17
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applicable federal or state wages and hours laws, nor any provisions
of the Employee Retirement Income Security Act or the rules and
regulations promulgated thereunder, which in each case might result
in any material adverse change in the business, prospects, financial
condition or results of operation of the Company and its
subsidiaries, taken as a whole;
(xiv) the Company and each of its subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits"), including, without limitation, under any
applicable Environmental Laws, as are necessary to own, lease and
operate its respective properties and to conduct its business in the
manner described in the Prospectus; to the best of such counsel's
knowledge, after due inquiry, the Company and each of its
subsidiaries has fulfilled and performed all of its material
obligations with respect to such permits and no event has occurred
which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such permit, subject in
each case to such qualification as may be set forth in the
Prospectus; and, except as described in the Prospectus, such permits
contain no restrictions that are materially burdensome to the Company
or any of its subsidiaries;
(xv) the Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
(xvi) to the best of such counsel's knowledge, after due
inquiry, no holder of any security of the Company has any right to
require registration of shares of Common Stock or any other security
of the Company;
(xvii) to the best of such counsel's knowledge, after due
inquiry, except as otherwise set forth in the Registration Statement
or such as are not material to the business, prospects, financial
condition or results of operation of the Company and its
subsidiaries, taken as a whole, the Company and each of its
subsidiaries has good and marketable title, free and clear of all
liens, claims, encumbrances and restrictions except liens for taxes
not yet due and payable, to all property and assets described in the
Registration Statement as being owned by it;
(xviii) to the best of such counsel's knowledge, after due
inquiry, all leases to which the Company or any of its subsidiaries
is a party are valid and binding and no default has occurred or is
continuing thereunder, which might result in any material adverse
change in the business, prospects, financial condition or results of
operation of the Company and
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its subsidiaries taken as a whole, and the Company and its
subsidiaries enjoy peaceful and undisturbed possession under all such
leases to which any of them is a party as lessee with such exceptions
as do not materially interfere with the use made by the Company or
such subsidiary;
(xix) (1) the Registration Statement (including any Registration
Statement filed under 462(b) of the Act, if any) and the Prospectus
and any supplement or amendment thereto (except for financial
statements as to which no opinion need be expressed) comply as to
form in all material respects with the Act, and (2) such counsel
believes that (except for financial statements, as aforesaid) the
Registration Statement and the prospectus included therein at the
time the Registration Statement became effective did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and that the Prospectus, as amended or
supplemented, if applicable (except for financial statements, as
aforesaid) does not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading;
In giving such opinion with respect to the matters covered by clause (xix)
such counsel may state that their opinion and belief are based upon their
participation in the preparation of the Registration Statement and Prospectus
and any amendments or supplements thereto and review and discussion of the
contents thereof, but are without independent check or verification except as
specified.
The opinion of Mayer, Brown & Platt described in paragraph (e) above shall
be rendered to you at the request of the Company and shall so state therein.
(f) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Latham & Watkins, counsel for the Underwriters, in form
and substance reasonably satisfactory to you.
(g) You shall have received a letter on and as of the Closing Date,
in form and substance satisfactory to you, from Deloitte & Touche LLP,
independent public accountants, with respect to the financial statements
and certain financial information contained in the Registration Statement
and the Prospectus and substantially in the form and substance of the
letter delivered to you by Deloitte & Touche LLP on the date of this
Agreement.
(h) The Company shall not have failed at or prior to the Closing Date
to perform or comply with any of the agreements herein contained and
required to be performed or complied with by the Company at or prior to
the Closing Date.
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9. Effective Date of Agreement and Termination. This Agreement shall
become effective upon the later of (i) execution of this Agreement and (ii)
when notification of the effectiveness of the Registration Statement has been
released by the Commission.
This Agreement may be terminated at any time prior to the Closing Date by
you by written notice to the Company if any of the following has occurred: (i)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, any material adverse change or development
involving a prospective material adverse change in the condition, financial or
otherwise, of the Company and its subsidiaries or the earnings, affairs, or
business prospects of the Company or any of its subsidiaries taken as a whole,
whether or not arising in the ordinary course of business, which would, in your
judgment, make it impracticable to market the Securities on the terms and in
the manner contemplated in the Prospectus, (ii) any outbreak or escalation of
hostilities or other national or international calamity or crisis or change in
economic conditions or in the financial markets of the United States or
elsewhere that, in your judgment, is material and adverse and would, in your
judgment, make it impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus, (iii) the suspension or material
limitation of trading in securities on the New York Stock Exchange, the
American Stock Exchange or the NASDAQ National Market System or limitation on
prices for securities on any such exchange or National Market System, (iv) the
enactment, publication, decree or other promulgation of any federal or state
statute, regulation, rule or order of any court or other governmental authority
which in your opinion materially and adversely affects, or will materially and
adversely affect, the business or operations of the Company or any Subsidiary,
(v) the declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in your
opinion has a material adverse effect on the financial markets in the United
States.
If on the Closing Date any one or more of the Underwriters shall fail or
refuse to purchase the Securities which it or they have agreed to purchase
hereunder on such date and the aggregate number of Securities which such
defaulting Underwriter or Underwriters, as the case may be, agreed but failed
or refused to purchase is not more than one-tenth of the total number of
Securities to be purchased on such date by all Underwriters, each
non-defaulting Underwriter shall be obligated severally, in the proportion
which the number of Securities set forth opposite its name in Schedule I bears
to the total number of Securities which all the non-defaulting Underwriters, as
the case may be, have agreed to purchase, or in such other proportion as you
may specify, to purchase the Securities which such defaulting Underwriter or
Underwriters, as the case may be, agreed but failed or refused to purchase on
such date; provided that in no event shall the number of Securities which any
Underwriter has agreed to purchase pursuant to
20
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Section 2 hereof be increased pursuant to this Section 9 by an amount in excess
of one-ninth of such number of Securities without the written consent of such
Underwriter. If on the Closing Date any Underwriter or Underwriters shall fail
or refuse to purchase Securities and the aggregate number of Securities with
respect to which such default occurs is more than one-tenth of the aggregate
number of Securities to be purchased on such date by all Underwriters and
arrangements satisfactory to you and the Company for purchase of such
Securities are not made within 48 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter and
the Company. In any such case which does not result in termination of this
Agreement, either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any default of any such Underwriter under this Agreement.
10. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company, to AmeriKing,
Inc., 2215 Enterprise Drive, Suite 1502, Westchester, Illinois 60154, and (b)
if to any Underwriter or to you, to you c/o Donaldson, Lufkin & Jenrette
Securities Corporation, 140 Broadway, New York, New York 10005, Attention:
Syndicate Department, or in any case to such other address as the person to be
notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, its officers and directors and
of the several Underwriters set forth in or made pursuant to this Agreement
shall remain operative and in full force and effect, and will survive delivery
of and payment for the Securities, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of any Underwriter or
by or on behalf of the Company, the officers or directors of the Company or any
controlling person of the Company, (ii) acceptance of the Securities and
payment for them hereunder and (iii) termination of this Agreement.
If this Agreement shall be terminated by the Underwriters because of any
failure or refusal on the part of the Company to comply with the terms or to
fulfill any of the conditions of this Agreement, the Company agrees to
reimburse the several Underwriters for all out-of-pocket expenses (including
the fees and disbursements of counsel) reasonably incurred by them.
Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company, the
Underwriters, any controlling persons referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement,
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall
21
<PAGE>
not include a purchaser of any of the Securities from any of the several
Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
22
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
AMERIKING, INC.
By
--------------------------------
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
JEFFERIES & COMPANY, INC.
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By
--------------------------------
23
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SCHEDULE I
Principal Amount of
Underwriters Securities to be Purchased
------------ --------------------------
Donaldson, Lufkin & Jenrette
Securities Corporation
Jefferies & Company, Inc.
---------------------
Total
24
L&W DRAFT OF 11/4/94
AMERIKING, INC.
________ UNITS, CONSISTING OF
$30,000,000
___% SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2008
AND
________ SHARES OF COMMON STOCK
UNDERWRITING AGREEMENT
__________, 1996
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
As representative of the
several underwriters
named in Schedule I hereto
140 Broadway
New York, New York 10005
Dear Sirs:
AmeriKing, Inc., a Delaware corporation (the "Company"), proposes to issue
and sell ________ Units (the "Units"), consisting of $30,000,000 of its ___%
Senior Exchangeable Preferred Stock due 2008 (the "Senior Preferred Stock") and
________ shares of Common Stock, par value $0.01 per share (the "Common
Stock"), of the Company to the several underwriters named in Schedule I hereto
(the "Underwriters"). The Senior Preferred Stock will be exchangeable as set
forth in the Certificate of Designation relating thereto (the "Certificate of
Designation") for the Company's ____% Subordinated Exchange Debentures due 2008
(the "Exchange Debentures") to be issued pursuant to the provisions of an
indenture (the "Indenture")
1
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between the Company and____________, as Trustee (the "Trustee"). The Units, the
Preferred Stock, the Common Stock and the Exchange Debentures are sometimes
collectively referred to herein as the "Securities."
1. Registration Statement and Prospectus. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively called the
"Act"), a registration statement on Form S-1 including a prospectus relating to
the Securities, which may be amended. The registration statement as amended at
the time when it becomes effective, including a registration statement (if any)
filed pursuant to Rule 462(b) under the Act increasing the size of the offering
registered under the Act and information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Act, is hereinafter referred to as the Registration Statement; and the
prospectus in the form first used to confirm sales of Securities is hereinafter
referred as the Prospectus.
2. Agreements to Sell and Purchase. On the basis of the representations
and warranties contained in this Agreement, and subject to its terms and
conditions, the Company agrees to issue and sell, and each Underwriter agrees,
severally and not jointly, to purchase from the Company the number of Units set
forth opposite the name of such Underwriter in Schedule I hereto, at $____ per
Unit (the "Purchase Price") plus accrued dividends thereon, if any, from
____________, 1996 to the date of payment and delivery.
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose (i) to make a public offering of their respective portions
of the Securities as soon after the effective date of the Registration
Statement as in your judgment is advisable and (ii) initially to offer the
Securities upon the terms set forth in the Prospectus.
4. Delivery and Payment. Delivery to the Underwriters of and payment for
the Units shall be made at 10:00 A.M., New York City time, on the third or
fourth business day unless otherwise permitted by the Commission pursuant to
Rule 15c6-1 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), following the date of the initial public offering (the "Closing Date"),
at the offices of Latham & Watkins, 885 Third Avenue, Suite 1000, New York, New
York. The Closing Date and the location of delivery of and the form of payment
for the Units may be varied by agreement between you and the Company.
Certificates for the Units shall be registered in such names and issued in
such denominations as you shall request in writing not later than two full
business days
2
<PAGE>
prior to the Closing Date. Such certificates shall be made available to you for
inspection not later than 9:30 A.M., New York City time, on the business day
immediately preceding the Closing Date. Certificates in definitive form
evidencing the Units shall be delivered to you on the Closing Date with any
transfer taxes thereon duly paid by the Company, for the respective accounts of
the several Underwriters, against payment of the Purchase Price therefor by
certified or official bank checks payable in next day funds to the order of the
Company.
3
<PAGE>
5. Agreements of the Company. The Company agrees with you:
(a) To use its best efforts to cause the Registration Statement to
become effective at the earliest possible time.
(b) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) when the Registration Statement has become
effective and when any post-effective amendment to it becomes effective,
(ii) of any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the
suspension of qualification of the Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purposes, and
(iv) of the happening of any event during the period referred to in
paragraph (e) below which makes any statement of a material fact made in
the Registration Statement or the Prospectus untrue or which requires the
making of any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal or lifting of such order at the
earliest possible time.
(c) To furnish to you, without charge, two signed copies of the
Registration Statement as first filed with the Commission and of each
amendment to it, including all exhibits, and to furnish to you and each
Underwriter designated by you such number of conformed copies of the
Registration Statement as so filed and of each amendment to it, without
exhibits, as you may reasonably request.
(d) Not to file any amendment or supplement to the Registration
Statement, whether before or after the time when it becomes effective, or
to make any amendment or supplement to the Prospectus of which you shall
not previously have been advised or to which you shall reasonably object;
and to prepare and file with the Commission, promptly upon your reasonable
request, any amendment to the Registration Statement or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Securities by you, and to use its best efforts to
cause the same to become promptly effective.
(e) Promptly after the Registration Statement becomes effective, and
from time to time thereafter for such period as in the opinion of counsel
for the Underwriters a prospectus is required by law to be delivered in
connection with
4
<PAGE>
sales by an Underwriter or a dealer, to furnish to each Underwriter and
dealer as many copies of the Prospectus (and of any amendment or
supplement to the Prospectus) as such Underwriter or dealer may reasonably
request.
(f) If during the period specified in paragraph (e) any event shall
occur as a result of which, in the opinion of counsel for the Underwriters
it becomes necessary to amend or supplement the Prospectus in order to
make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement the Prospectus to comply with any law,
forthwith to prepare and file with the Commission an appropriate amendment
or supplement to the Prospectus so that the statements in the Prospectus,
as so amended or supplemented, will not in the light of the circumstances
when it is so delivered, be misleading, or so that the Prospectus will
comply with law, and to furnish to each Underwriter and to such dealers as
you shall specify, such number of copies thereof as such Underwriter or
dealers may reasonably request.
(g) Prior to any public offering of the Securities, to cooperate with
you and counsel for the Underwriters in connection with the registration
or qualification of the Securities for offer and sale by the several
Underwriters and by dealers under the state securities or Blue Sky laws of
such jurisdictions as you may request, to continue such qualification in
effect so long as required for distribution of the Securities and to file
such consents to service of process or other documents as may be necessary
in order to effect such registration or qualification.
(h) To mail and make generally available to its security holders as
soon as reasonably practicable an earnings statement covering a period of
at least twelve months after the effective date of the Registration
Statement (but in no event commencing later than 90 days after such date)
which shall satisfy the provisions of Section 11(a) of the Act, and to
advise you in writing when such statement has been so made available.
(i) During the period of five years after the date of this Agreement,
(i) to mail as soon as reasonably practicable after the end of each fiscal
year to the record holders of its Securities a financial report of the
Company and its subsidiaries on a consolidated basis (and a similar
financial report of all unconsolidated subsidiaries, if any), all such
financial reports to include a consolidated balance sheet, a consolidated
statement of operations, a consolidated statement of cash flows and a
consolidated statement of shareholders' equity as of the end of and for
such fiscal year, together with comparable information as of the
5
<PAGE>
end of and for the preceding year, certified by independent certified
public accountants, and (ii) to mail and make generally available as soon
as practicable after the end of each quarterly period (except for the last
quarterly period of each fiscal year) to such holders, a consolidated
balance sheet, a consolidated statement of operations and a consolidated
statement of cash flows (and similar financial reports of all
unconsolidated subsidiaries, if any) as of the end of and for such period,
and for the period from the beginning of such year to the close of such
quarterly period, together with comparable information for the
corresponding periods of the preceding year.
(j) During the period referred to in paragraph (i), to furnish to you
as soon as available a copy of each report or other publicly available
information of the Company mailed to the security holders of the Company
or filed with the Commission and such other publicly available information
concerning the Company and its subsidiaries as you may reasonably request.
(k) To pay all costs, expenses, fees and taxes incident to (i) the
preparation, printing, filing and distribution under the Act of the
Registration Statement (including financial statements and exhibits), each
preliminary prospectus and all amendments and supplements to any of them
prior to or during the period specified in paragraph (e), (ii) the
printing and delivery of the Prospectus and all amendments or supplements
to it during the period specified in paragraph (e), (iii) the printing and
delivery of this Agreement, the Preliminary and Supplemental Blue Sky
Memoranda and all other agreements, memoranda, correspondence and other
documents printed and delivered in connection with the offering of the
Securities (including in each case any disbursements of counsel for the
Underwriters relating to such printing and delivery), (iv) the
registration or qualification of the Securities for offer and sale under
the securities or Blue Sky laws of the several states (including in each
case the fees and disbursements of counsel for the Underwriters relating
to such registration or qualification and memoranda relating thereto), (v)
filings and clearance with the National Association of Securities Dealers,
Inc. in connection with the offering, (vi) the listing of the Securities
on the National Association of Securities Dealers Automated Quotation
system ("NASDAQ") National Market System and (vii) furnishing such copies
of the Registration Statement, the Prospectus and all amendments and
supplements thereto as may be requested for use in connection with the
offering or sale of the Securities by the Underwriters or by dealers to
whom Securities may be sold.
6
<PAGE>
(l) To use its best efforts to maintain the inclusion of the
Securities in the NASDAQ National Market System (or on a national
securities exchange) for a period of five years after the effective date
of the Registration Statement.
(m) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell contract to sell or
otherwise dispose of any debt securities of the Company or warrants to
purchase debt securities of the Company substantially similar to the
Securities (other than (i) the Securities and (ii) commercial paper issued
in the ordinary course of business), without your prior written consent.
(n) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company
prior to the Closing Date and to satisfy all conditions precedent to the
delivery of the Securities.
6. Representations and Warranties of the Company. The Company represents
and warrants to each Underwriter that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or threatened by
the Commission.
(b) (i) Each part of the Registration Statement, when such part
became effective, did not contain and each such part, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii)
the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the
Act and (iii) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and warranties
set forth in this paragraph (b) do not apply to statements or omissions in
the Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule
7
<PAGE>
424 under the Act, and each Registration Statement filed pursuant to Rule
462(b) under the Act, if any, complied when so filed in all material
respects with the Act; and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) The Company and each of its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation and has the corporate power
and authority to carry on its business as it is currently being conducted
and to own, lease and operate its properties, and each is duly qualified
and is in good standing as a foreign corporation authorized to do business
in each jurisdiction in which the nature of its business or its ownership
or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(e) All of the outstanding shares of capital stock of, or other
ownership interests in, each of the Company's subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable, and
are owned by the Company, free and clear of any security interest, claim,
lien, encumbrance or adverse interest of any nature.
(f) The Units have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor as provided by this
Agreement, will conform to the description thereof in the Prospectus.
(g) The Senior Preferred Stock has been duly authorized and, when
issued and delivered to the Underwriters against payment therefor as
provided by this Agreement, will be validly issued, fully paid,
non-assessable and entitled to the rights, privileges and preferences set
forth in the Certificate of Designation, and the issuance of such Senior
Preferred Stock is not be subject to any preemptive or similar rights.
(h) The Common Stock has been duly authorized and, when issued and
delivered to the Underwriters against payment therefor as provided by this
Agreement, will be validly issued, fully paid and non-assessable, and the
issuance of such Shares is not subject to any preemptive or similar
rights.
8
<PAGE>
(i) The Exchange Debentures have been duly authorized and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered in exchange for the Senior Preferred Stock in
accordance with the provisions of the Certificate of Designation, the
Exchange Debentures will be entitled to the benefits of the Indenture, and
will be valid and binding obligations of the Company, enforceable in
accordance with their terms except as (i) the enforceability thereof may
be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(j) This Agreement has been duly authorized, executed and delivered
by the Company and is a valid and binding agreement of the Company
enforceable in accordance with its terms (except as rights to indemnity
and contribution hereunder may be limited by applicable law).
(k) The Certificate of Designation has been duly authorized by all
necessary corporate and stockholder action.
(l) The Indenture has been duly qualified under the Trust Indenture
Act of 1939, as amended, and has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company, enforceable in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability.
(m) The Securities conform as to legal matters to the description
thereof contained in the Prospectus.
(n) Neither the Company nor any of its subsidiaries is in violation
of its respective charter or by-laws or in default in the performance of
any obligation, agreement or condition contained in any bond, debenture,
note or any other evidence of indebtedness or in any other agreement,
indenture or instrument material to the conduct of the business of the
Company and its subsidiaries, taken as a whole, to which the Company or
any of its subsidiaries is a party or by which it or any of its
subsidiaries or their respective property is bound.
(o) The execution, delivery and performance of this Agreement, the
Certificate of Designation, the Indenture and the Securities and
compliance by the Company with all the provisions hereof and thereof and
the consummation of the
9
<PAGE>
transactions contemplated hereby and thereby will not require any consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body (except as such may be
required under the securities or Blue Sky laws of the various states) and
will not conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the Company
or any of its subsidiaries or any agreement, indenture or other instrument
to which it or any of its subsidiaries is a party or by which it or any of
its subsidiaries or their respective property is bound, or violate or
conflict with any laws, administrative regulations or rulings or court
decrees applicable to the Company, any of its subsidiaries or their
respective property.
(p) Except as otherwise set forth in the Prospectus, there are no
material legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any of their respective
property is the subject, and, to the best of the Company's knowledge, no
such proceedings are threatened or contemplated. No contract or document
of a character required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement
is not so described or filed as required.
(q) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), nor any federal or state law relating to discrimination in the
hiring, promotion or pay of employees nor any applicable federal or state
wages and hours laws, nor any provisions of the Employee Retirement Income
Security Act or the rules and regulations promulgated thereunder, which in
each case might result in any material adverse change in the business,
prospects, financial condition or results of operation of the Company and
its subsidiaries, taken as a whole.
(r) The Company and each of its subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits"), including, without limitation, under any
applicable Environmental Laws, as are necessary to own, lease and operate
its respective properties and to conduct its business; the Company and
each of its subsidiaries has fulfilled and performed all of its material
obligations with respect to such permits and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the
rights of the holder of any such permit; and, except as described in the
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Prospectus, such permits contain no restrictions that are materially
burdensome to the Company or any of its subsidiaries.
(s) In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its subsidiaries, in the
course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties). On the basis of such review, the Company has reasonably
concluded that such associated costs and liabilities would not, singly or
in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(t) Except as otherwise set forth in the Prospectus or such as are
not material to the business, prospects, financial condition or results of
operation of the Company and its subsidiaries, taken as a whole, the
Company and each of its subsidiaries has good and marketable title, free
and clear of all liens, claims, encumbrances and restrictions except liens
for taxes not yet due and payable, to all property and assets described in
the Registration Statement as being owned by it. All leases to which the
Company or any of its subsidiaries is a party are valid and binding and no
default has occurred or is continuing thereunder, which might result in
any material adverse change in the business, prospects, financial
condition or results of operation of the Company and its subsidiaries
taken as a whole, and the Company and its subsidiaries enjoy peaceful and
undisturbed possession under all such leases to which any of them is a
party as lessee with such exceptions as do not materially interfere with
the use made by the Company or such subsidiary.
(u) The Company and each of its subsidiaries maintains reasonably
adequate insurance.
(v) Deloitte & Touche LLP are independent public accountants with
respect to the Company as required by the Act.
(w) The financial statements, together with related schedules and
notes forming part of the Registration Statement and the Prospectus (and
any amendment or supplement thereto), present fairly the consolidated
financial position, results of operations and changes in financial
position of the Company and its subsidiaries on the basis stated in the
Registration Statement at the
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respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved, except as disclosed therein; and
the other financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) is, in all material respects, accurately presented and prepared
on a basis consistent with such financial statements and the books and
records of the Company.
(x) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(y) No holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the
Company.
(z) The Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida).
(aa) The Company has filed a registration statement pursuant to
Section 12(g) of the Exchange Act, to register the Securities.
(ab) There are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or liens
related to or entitling any person to purchase or otherwise to
acquire any shares of the capital stock of, or other ownership
interest in, the Company or any subsidiary thereof except as
otherwise disclosed in the Registration Statement.
(ac) Except as disclosed in the Prospectus, there are no
business relationships or related party transactions required to be
disclosed therein by Item 404 of Regulation S-K of the Commission.
(ad) There is (i) no significant unfair labor practice complaint
pending against the Company or any of its subsidiaries or, to the
best knowledge of the Company, threatened against any of them, before
the National Labor Relations Board or any state or local labor
relations board, and no significant grievance or more significant
arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against the Company or any of its
subsidiaries or, to the best knowledge of the Company, threatened
against any of them, and (ii) no significant strike, labor dispute,
slowdown or stoppage pending against the Company or any of its
subsidiaries or, to the best knowledge of the Company,
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threatened against it or any of its subsidiaries except for such
actions specified in clause (i) or (ii) above, which, singly or in
the aggregate, could not reasonably be expected to have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(ae) The Company and each of its subsidiaries maintains a system
of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions
are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
(af) All material tax returns required to be filed by the
Company and each of its subsidiaries in any jurisdiction have been
filed, other than those filings being contested in good faith, and
all material taxes, including withholding taxes, penalties and
interest, assessments, fees and other charges due pursuant to such
returns or pursuant to any assessment received by the Company or any
of its subsidiaries have been paid, other than those being contested
in good faith and for which adequate reserves have been provided.
7. Indemnification. (a) The Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Act or Section 20 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), from and against any and all
losses, claims, damages, liabilities and judgments caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information
relating to any Underwriters furnished in writing to the Company by or on
behalf of any Underwriter through you expressly for use therein; provided,
however, that the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, claims, damages and liabilities and judgments
purchased Securities, or any person controlling such
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Underwriter, if a copy of the Prospectus (as then amended or supplemented if
the Company shall have furnished any amendments or supplements thereto) was not
sent or given by or on behalf of such Underwriter to such person, if required
by law so to have been delivered, at or prior to the written confirmation of
the sale of the Securities to such person, and if the Prospectus (as so amended
and supplemented) would have cured the defect giving rise to such loss, claim,
damage, liability or judgment.
(b) In case any action shall be brought against any Underwriter or
any person controlling such Underwriter, based upon any preliminary
prospectus, the Registration Statement or the Prospectus or any amendment
or supplement thereto and with respect to which indemnity may be sought
against the Company, such Underwriter shall promptly notify the Company in
writing and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such indemnified party
and payment of all fees and expenses. Any Underwriter or any such
controlling person shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or
such controlling person unless (i) the employment of such counsel shall
have been specifically authorized in writing by the Company, (ii) the
Company shall have failed to assume the defense and employ counsel or
(iii) the named parties to any such action (including any impleaded
parties) include both such Underwriter or such controlling person and the
Company and such Underwriter or such controlling person shall have been
advised by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those available
to the Company (in which case the Company shall not have the right to
assume the defense of such action on behalf of such Underwriter or such
controlling person, it being understood, however, that the Company shall
not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any
local counsel) for all such Underwriters and controlling persons, which
firm shall be designated in writing by Donaldson, Lufkin & Jenrette
Securities Corporation and that all such fees and expenses shall be
reimbursed as they are incurred). The Company shall not be liable for any
settlement of any such action effected without its written consent but if
settled with the written consent of the Company, the Company agrees to
indemnify and hold harmless any Underwriter and any such controlling
person from and against any loss or liability by reason of such
settlement. Notwithstanding the immediately preceding sentence, if in any
case where the fees and expenses of counsel are at the expense of the
indemnifying party and an indemnified party shall have requested the
indemnifying party to reimburse the indemnified party for such fees and
expenses of counsel as incurred, such indemnifying party agrees that it
shall be liable for any settlement of any action effected without its
written consent if (i) such settlement is entered into more than ten
business days after the
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receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall have failed to reimburse the indemnified party in
accordance with such request for reimbursement prior to the date of such
settlement. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that are
the subject matter of such proceeding.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and any person controlling the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the
same extent as the foregoing indemnity from the Company to each
Underwriter but only with reference to information relating to such
Underwriter furnished in writing by or on behalf of such Underwriter
through you expressly for use in the Registration Statement, the
Prospectus or any preliminary prospectus. In case any action shall be
brought against the Company, any of its directors, any such officer or any
person controlling the Company based on the Registration Statement, the
Prospectus or any preliminary prospectus and in respect of which indemnity
may be sought against any Underwriter, the Underwriter shall have the
rights and duties given to the Company (except that if the Company shall
have assumed the defense thereof, such Underwriter shall not be required
to do so, but may employ separate counsel therein and participate in the
defense thereof but the fees and expenses of such counsel shall be at the
expense of such Underwriter), and the Company, its directors, any such
officers and any person controlling the Company shall have the rights and
duties given to the Underwriter, by Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and judgments (i) in
such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other
hand from the offering of the Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company
and the Underwriters in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or judgments, as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Underwriters shall be deemed to be in the
same proportion as the total net proceeds from the offering (before
deducting
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expenses) received by the Company, and the total underwriting discounts and
commissions received by the Underwriters, bear to the total price to the public
of the Securities, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault of the Company and the Underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Company or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 7(d) are several in proportion to the
respective number of Securities purchased by each of the Underwriters hereunder
and not joint.
8. Conditions of Underwriters' Obligations. The several obligations of the
Underwriters to purchase the Securities under this Agreement are subject to the
satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained
in this Agreement shall be true and correct on the Closing Date with the
same force and effect as if made on and as of the Closing Date.
(b) The Registration Statement shall have become effective not later
than 5:00 P.M. (and in the case of a Registration Statement filed under
Rule 462(b) of the Act, not later than 10:00 p.m.), New York City time, on
the date of this Agreement or at such later date and time as you may
approve in writing, and at
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the Closing Date no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending before or
contemplated by the Commission.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have been any downgrading, nor
shall any notice have been given of any intended or potential downgrading
or of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded any of the
Company's securities by any "nationally recognized statistical rating
organization", as such term is defined for purposes of Rule 436(g)(2)
under the Securities Act.
(d)(i) Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, there shall not have been any
material adverse change, or any development involving a prospective
material adverse change, in the condition, financial or otherwise, or in
the earnings, affairs or business prospects, whether or not arising in the
ordinary course of business, of the Company, (ii) since the date of the
latest balance sheet included in the Registration Statement and the
Prospectus there shall not have been any change, or any development
involving a prospective material adverse change, in the capital stock or
in the long-term debt of the Company from that set forth in the
Registration Statement and Prospectus, (iii) the Company and its
subsidiaries shall have no liability or obligation, direct or contingent,
which is material to the Company and its subsidiaries, taken as a whole,
other than those reflected in the Registration Statement and the
Prospectus and (iv) on the Closing Date you shall have received a
certificate dated the Closing Date, signed by _______________ and
_______________, in their capacities as the _______________ and
_______________ of the Company, confirming the matters set forth in
paragraphs (a), (b), (c) and (d) of this Section 8.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of Mayer, Brown & Platt counsel for the Company, to the effect that:
(i) the Company and each of its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has the
corporate power and authority required to carry on its business as it
is currently being conducted and to own, lease and operate its
properties;
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(ii) the Company and each of its subsidiaries is duly qualified
and is in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or
its ownership or leasing of property requires such qualification,
except where the failure to be so qualified would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole;
(iii) all of the outstanding shares of capital stock of, or
other ownership interests in, each of the Company's subsidiaries have
been duly and validly authorized and issued and are fully paid and
non-assessable, and are owned by the Company, free and clear of any
security interest, claim, lien, encumbrance or adverse interest of
any nature;
(iv) the Units have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor as provided by
this Agreement, will conform to the description thereof in the
Prospectus.
(v) the Senior Preferred Stock has been duly authorized and,
when issued and delivered to the Underwriters against payment
therefor as provided by this Agreement, will be validly issued, fully
paid, non-assessable and entitled to the rights, privileges and
preferences set forth in the Certificate of Designation, and the
issuance of such Senior Preferred Stock is not be subject to any
preemptive or similar rights.
(vi) the Common Stock has been duly authorized and, when issued
and delivered to the Underwriters against payment therefor as
provided by this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares is not subject to any
preemptive or similar rights.
(vii) the Exchange Debentures have been duly authorized and,
when executed and authenticated in accordance with the provisions of
the Indenture and delivered in exchange for the Senior Preferred
Stock in accordance with the provisions of the Certificate of
Designation, the Exchange Debentures will be entitled to the benefits
of the Indenture, and will be valid and binding obligations of the
Company, enforceable in accordance with their terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability.
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(viii) this Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company enforceable in accordance with its terms (except as rights to
indemnity and contribution hereunder may be limited by applicable
law).
(ix) the Certificate of Designation has been duly authorized by
all necessary corporate and stockholder action.
(x) the Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended, and has been duly authorized,
executed and delivered by the Company and is a valid and binding
agreement of the Company, enforceable in accordance with its terms
except as (a) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (b) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability;
(xi) the Registration Statement has become effective under the
Act, no stop order suspending its effectiveness has been issued and
no proceedings for that purpose are, to the knowledge of such
counsel, pending before or contemplated by the Commission;
(xii) the statements under the captions "Use of Proceeds,"
"Dividend Policy," "Business," "Description of Certain Indebtedness,"
"Certain Transactions," "Description of Securities" and
"Underwriting" in the Prospectus, as amended or supplemented, and
Items 14 and 15 of Part II of the Registration Statement insofar as
such statements constitute a summary of legal matters documents or
proceedings referred to therein, fairly present the information
called for with respect to such legal matters, documents and
proceedings;
(xiii) such counsel is of the opinion ascribed to it in the
Prospectus under the caption "Certain Federal Income Tax
Considerations;"
(xiv) neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws and, to the best of
such counsel's knowledge after due inquiry, neither the Company nor
any of its subsidiaries is in default in the performance of any
obligation, agreement or condition contained in any bond, debenture,
note or any other evidence of indebtedness or in any other agreement,
indenture or instrument
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material to the conduct of the business of the Company and its
subsidiaries, taken as a whole, to which the Company or any of its
subsidiaries is a party or by which it or any of its subsidiaries or their
respective property is bound;
(xv) the execution, delivery and performance of this Agreement,
the Indenture, the Certificate of Designation and the Securities and
compliance by the Company with all the provisions hereof and thereof
and the consummation of the transactions contemplated hereby and
thereby will not require any consent, approval, authorization or
other order of any court, regulatory body, administrative agency or
other governmental body (except as such may be required under the
securities or Blue Sky laws of the various states) and will not
conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the
Company or any of its subsidiaries or any agreement, indenture or
other instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or their
respective properties is bound, or violate or conflict with any laws,
administrative regulations or rulings or court decrees applicable to
the Company or any of its subsidiaries or their respective
properties;
(xvi) after due inquiry, such counsel does not know of any legal
or governmental proceeding pending or threatened to which the Company
or any of its subsidiaries is a party or to which any of their
respective property is subject which is required to be described in
the Registration Statement or the Prospectus and is not so described,
or of any contract or other document which is required to be
described in the Registration Statement or the Prospectus or is
required to be filed as an exhibit to the Registration Statement
which is not described or filed as required;
(xvii) to the best of such counsel's knowledge, after due
inquiry, neither the Company nor any of its subsidiaries has violated
any Environmental Laws, nor any federal or state law relating to
discrimination in the hiring, promotion or pay of employees nor any
applicable federal or state wages and hours laws, nor any provisions
of the Employee Retirement Income Security Act or the rules and
regulations promulgated thereunder, which in each case might result
in any material adverse change in the business, prospects, financial
condition or results of operation of the Company and its
subsidiaries, taken as a whole;
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(xviii) the Company and each of its subsidiaries has such
permits, licenses, franchises and authorizations of governmental or
regulatory authorities ("permits"), including, without limitation,
under any applicable Environmental Laws, as are necessary to own,
lease and operate its respective properties and to conduct its
business in the manner described in the Prospectus; to the best of
such counsel's knowledge, after due inquiry, the Company and each of
its subsidiaries has fulfilled and performed all of its material
obligations with respect to such permits and no event has occurred
which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such permit, subject in
each case to such qualification as may be set forth in the
Prospectus; and, except as described in the Prospectus, such permits
contain no restrictions that are materially burdensome to the Company
or any of its subsidiaries;
(xix) the Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
(xx) to the best of such counsel's knowledge, after due inquiry,
no holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the
Company;
(xxi) to the best of such counsel's knowledge, after due
inquiry, except as otherwise set forth in the Registration Statement
or such as are not material to the business, prospects, financial
condition or results of operation of the Company and its
subsidiaries, taken as a whole, the Company and each of its
subsidiaries has good and marketable title, free and clear of all
liens, claims, encumbrances and restrictions except liens for taxes
not yet due and payable, to all property and assets described in the
Registration Statement as being owned by it;
(xxii) to the best of such counsel's knowledge, after due
inquiry, all leases to which the Company or any of its subsidiaries
is a party are valid and binding and no default has occurred or is
continuing thereunder, which might result in any material adverse
change in the business, prospects, financial condition or results of
operation of the Company and its subsidiaries taken as a whole, and
the Company and its subsidiaries enjoy peaceful and undisturbed
possession under all such leases to which any of them is a party as
lessee with such exceptions as do not materially interfere with the
use made by the Company or such subsidiary;
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(xxiii) (1) the Registration Statement (including any
Registration Statement filed under 462(b) of the Act, if any) and the
Prospectus and any supplement or amendment thereto (except for
financial statements as to which no opinion need be expressed) comply
as to form in all material respects with the Act, and (2) such
counsel believes that (except for financial statements, as aforesaid)
the Registration Statement and the prospectus included therein at the
time the Registration Statement became effective did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and that the Prospectus, as amended or
supplemented, if applicable (except for financial statements, as
aforesaid) does not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading;
In giving such opinion with respect to the matters covered by clause
(xxiii) such counsel may state that their opinion and belief are based upon
their participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and discussion
of the contents thereof, but are without independent check or verification
except as specified.
The opinion of Mayer, Brown & Platt described in paragraph (e) above shall
be rendered to you at the request of the Company and shall so state therein.
(f) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Latham & Watkins, counsel for the Underwriters, in form
and substance reasonably satisfactory to you.
(g) You shall have received a letter on and as of the Closing Date,
in form and substance satisfactory to you, from Deloitte & Touche LLP,
independent public accountants, with respect to the financial statements
and certain financial information contained in the Registration Statement
and the Prospectus and substantially in the form and substance of the
letter delivered to you by Deloitte & Touche LLP on the date of this
Agreement.
(h) The Company shall not have failed at or prior to the Closing Date
to perform or comply with any of the agreements herein contained and
required to be performed or complied with by the Company at or prior to
the Closing Date.
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9. Effective Date of Agreement and Termination. This Agreement shall
become effective upon the later of (i) execution of this Agreement and (ii)
when notification of the effectiveness of the Registration Statement has been
released by the Commission.
This Agreement may be terminated at any time prior to the Closing Date by
you by written notice to the Company if any of the following has occurred: (i)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, any material adverse change or development
involving a prospective material adverse change in the condition, financial or
otherwise, of the Company and its subsidiaries or the earnings, affairs, or
business prospects of the Company or any of its subsidiaries taken as a whole,
whether or not arising in the ordinary course of business, which would, in your
judgment, make it impracticable to market the Securities on the terms and in
the manner contemplated in the Prospectus, (ii) any outbreak or escalation of
hostilities or other national or international calamity or crisis or change in
economic conditions or in the financial markets of the United States or
elsewhere that, in your judgment, is material and adverse and would, in your
judgment, make it impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus, (iii) the suspension or material
limitation of trading in securities on the New York Stock Exchange, the
American Stock Exchange or the NASDAQ National Market System or limitation on
prices for securities on any such exchange or National Market System, (iv) the
enactment, publication, decree or other promulgation of any federal or state
statute, regulation, rule or order of any court or other governmental authority
which in your opinion materially and adversely affects, or will materially and
adversely affect, the business or operations of the Company or any Subsidiary,
(v) the declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in your
opinion has a material adverse effect on the financial markets in the United
States.
If on the Closing Date any one or more of the Underwriters shall fail or
refuse to purchase the Units which it or they have agreed to purchase hereunder
on such date and the aggregate number of Units which such defaulting
Underwriter or Underwriters, as the case may be, agreed but failed or refused
to purchase is not more than one-tenth of the total number of Units to be
purchased on such date by all Underwriters, each non-defaulting Underwriter
shall be obligated severally, in the proportion which the number of Units set
forth opposite its name in Schedule I bears to the total number of Units which
all the non-defaulting Underwriters, as the case may be, have agreed to
purchase, or in such other proportion as you may specify, to purchase the Units
which such defaulting Underwriter or Underwriters, as the case may be, agreed
but failed or refused to purchase on such date; provided that in no event shall
the number of
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Units which any Underwriter has agreed to purchase pursuant to Section 2 hereof
be increased pursuant to this Section 9 by an amount in excess of one-ninth of
such number of Units without the written consent of such Underwriter. If on the
Closing Date any Underwriter or Underwriters shall fail or refuse to purchase
Units and the aggregate number of Units with respect to which such default
occurs is more than one-tenth of the aggregate number of Units to be purchased
on such date by all Underwriters and arrangements satisfactory to you and the
Company for purchase of such Units are not made within 48 hours after such
default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter and the Company. In any such case which does not
result in termination of this Agreement, either you or the Company shall have
the right to postpone the Closing Date, but in no event for longer than seven
days, in order that the required changes, if any, in the Registration Statement
and the Prospectus or any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting Underwriter
from liability in respect of any default of any such Underwriter under this
Agreement.
10. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company, to AmeriKing,
Inc., 2215 Enterprise Drive, Suite 1502, Westchester, Illinois 60154, and (b)
if to any Underwriter or to you, to you c/o Donaldson, Lufkin & Jenrette
Securities Corporation, 140 Broadway, New York, New York 10005, Attention:
Syndicate Department, or in any case to such other address as the person to be
notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, its officers and directors and
of the several Underwriters set forth in or made pursuant to this Agreement
shall remain operative and in full force and effect, and will survive delivery
of and payment for the Units, regardless of (i) any investigation, or statement
as to the results thereof, made by or on behalf of any Underwriter or by or on
behalf of the Company, the officers or directors of the Company or any
controlling person of the Company, (ii) acceptance of the Units and payment for
them hereunder and (iii) termination of this Agreement.
If this Agreement shall be terminated by the Underwriters because of any
failure or refusal on the part of the Company to comply with the terms or to
fulfill any of the conditions of this Agreement, the Company agrees to
reimburse the several Underwriters for all out-of-pocket expenses (including
the fees and disbursements of counsel) reasonably incurred by them.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Underwriters, any
controlling persons referred to herein and their respective successors and
assigns, all as
24
<PAGE>
and to the extent provided in this Agreement, and no other person shall acquire
or have any right under or by virtue of this Agreement. The term "successors
and assigns" shall not include a purchaser of any of the Securities from any of
the several Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
25
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
AMERIKING, INC.
By
-------------------------------------------
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
Acting severally on behalf of
itself and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By
-------------------------------------------
26
<PAGE>
SCHEDULE I
----------
Number of Units
Underwriters to be Purchased
------------ ---------------
Donaldson, Lufkin & Jenrette
Securities Corporation
---------------------
Total
27
<PAGE>
MBP DRAFT 11/8/96
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
AMERIKING, INC.
The undersigned, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, as amended (the
"GCL"), DOES HEREBY CERTIFY as follows:
1. The Certificate of Incorporation of AMERIKING, Inc. (the
"Corporation") was filed in the Office of the Secretary of State of the State
of Delaware on August 17, 1994. The original name under which the Corporation
was incorporated was "NRE Holdings, Inc."
2. In the manner prescribed by Sections 242 and 245 of the GCL,
resolutions were duly adopted by the Board of Directors and the stockholders of
the Corporation, respectively, duly adopting this Amended and Restated
Certificate of Incorporation.
3. Pursuant to the provisions of Section 103(d) of the GCL, this
Amended and Restated Certificate of Incorporation is not to become effective
until [11:00 AM New York time on November __, 1996] (the "Effective Date").
4. On October __, 1996, the stockholders of the Corporation approved a
Recapitalization Agreement, which included a 1,000-to-1 stock split of the
Corporation's Common Stock, (the "Stock Split").
5. The text of the Certificate of Incorporation, as amended and
restated herein, shall, at the Effective Date read as follows:
* * *
FIRST: The name of the Corporation is "AmeriKing, Inc."
SECOND: The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, in the city of Wilmington, County of
New Castle. The name of its registered agent at such address is The Corporation
Trust Company.
<PAGE>
THIRD: The nature or purpose of the business to be conducted or
promoted by the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the GCL.
FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue after giving effect to the Stock
Split is four million four hundred thousand (4,400,000) shares, consisting of:
(i) four million (4,000,000) shares of common stock, par
value of $.01 per share (the "Common Stock");
(ii) three hundred thousand (300,000) shares of non-voting
common stock, par value of $.01 per share (the "Non-Voting Common Stock"); and
(iii) one hundred thousand (100,000) shares of preferred
stock, par value of $.01 per share, (the "Preferred Stock") consisting of 4,425
shares of Class A1 Preferred Stock, 1,200 shares of Class A2 Preferred Stock,
1,875 shares of Class B Preferred Stock (together with Class A1 Preferred Stock
and Class A2 Preferred Stock, the "Original Preferred Stock") and 92,500 shares
of undesignated preferred stock (the "Undesignated Preferred Stock").
4.1 Common Stock. A statement of the designations, powers,
preferences, rights, qualifications, limitations and restriction in respect to
the shares of Common Stock is as follows:
(a) Dividends. The Board of Directors of the Corporation may
cause dividends to be paid to the holders of shares of Common Stock
out of funds legally available for the payment of dividends by
declaring an amount per share as a dividend. When and as dividends are
declared, whether payable in cash, in property or in shares of stock
or other securities of the Corporation, the holders of Common Stock
shall be entitled to share ratably according to the number of shares
of Common Stock held by them, in such dividends. The board of
directors may set apart funds legally available for the payment of
dividends, a reserve or reserves for any proper purpose, and may from
time to time, in its absolute judgment an discretion, increase,
abolish, diminish and vary any reserve or reserves so set apart.
(b) Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of
the Corporation, the holders of Common Stock shall be entitled to
share ratably, according to the number of shares of Common Stock held
by them, in all remaining assets of the Corporation available for
distribution to its shareholders.
-2-
<PAGE>
(c) Voting Rights. Except as otherwise provided in these
Articles or by applicable law, the holders of Common Stock shall be
entitled to vote on each matter on which the stockholders of the
Corporation shall be entitled to vote, and each holder of Common Stock
shall be entitled to one vote for each share of such stock held by
him.
(d) Fractional Shares. Except as otherwise provided in these
Articles or by applicable law, the Corporation shall have the right to
issue fractional shares of Common Stock.
4.2 Nonvoting Common Stock. Except with respect to the following
rights, all designations, powers, preferences, rights, qualifications,
limitations and restriction in respect of the shares of Non-Voting Common Stock
are identical to those of the shares of the Common Stock:
(a) Dividends. Whenever the Board of Directors of the
Corporation declares a dividend on the Common Stock, the Board of
Directors of the Corporation shall simultaneously declare a dividend
on the Non-Voting Common Stock in an amount per share equal to the
dividend declared per share of Common Stock, except that any dividends
payable on the Common Stock in additional shares of capital stock of
the Corporation shall be payable to holders of Non-Voting Common Stock
in non-voting capital stock of the Corporation which is otherwise
identical to capital stock to be issued to the holders of Common
Stock. When and as dividends are declared, whether payable in cash, in
property or in shares of stock or other securities of the Corporation,
the holders of Non-Voting Common Stock shall be entitled to share
ratably according to the number of shares of Non-Voting Common Stock
held by them, in such dividends.
(b) Voting Rights. Except as otherwise provided in this
Amended and Restated Certificate of Incorporation or by applicable
law, the holders of Non-Voting Common Stock shall not be entitled to
vote on any matters.
(c) Conversion Rights.
(i) At any time and from time to time, each record
holder of NonVoting Common Stock will be entitled to convert
any and all of the shares of such holder's Non-Voting Common
Stock into the same number of shares of Common Stock at such
holder's election; provided, that each holder of NonVoting
Common Stock shall only be entitled to convert any share or
shares of Non-Voting Common Stock to the extent that after
giving effect to such conversion such holder or its
affiliates shall not directly or indirectly own, control or
have power to vote a greater quantity of securities of any
kind issued by the Corporation than such holder and its
affiliates are permitted to
-3-
<PAGE>
own, control or have power to vote under any law or under any
regulation, rule or other requirement of any governmental
authority at any time applicable to such holder and its
affiliates.
(ii) Each conversion of shares of Non-Voting Common
Stock into shares of Common Stock will be effected by the
surrender of the certificates or certificates representing
the shares to be converted at the principal office of the
Corporation (or such other office or agency of the
Corporation as the Corporation may designate by notice in
writing to the holder or holders of the Non-Voting Common
Stock) at any time during normal business hours, together
with a written notice by the holder of such Non-Voting Common
Stock stating that such holder desires to convert the shares,
or a stated number of the shares, of Non-Voting Common Stock
represented by such certificate or certificates into Common
Stock and that upon such conversion such holder and its
affiliates will not directly or indirectly own, control or
have the power to vote a greater quantity of securities of
any kind issued by the Corporation than such holders and its
affiliates are permitted to own, control or have the power to
vote under any applicable law, regulation, rule or other
governmental requirement (and such statement will obligate
the Corporation to issue such Common Stock). Such conversion
will be deemed to have been effected as of the close of
business on the date on which such certificate or
certificates have been surrendered and such notice has been
received, and at such time the rights of the holder will
cease and the person or persons in whose name or names the
certificate or certificates for shares of Common Stock are to
be issued upon such conversion will be deemed to have become
the holder or holder of record of the shares of Common Stock
represented thereby.
(iii) Promptly after such surrender and the receipt
of such written notice, the Corporation will issue and
deliver in accordance with the surrendering holder's
instructions (i) the certificate or certificates for the
Common Stock issuable upon such conversion and (ii) a
certificate representing any Non-Voting Common Stock which
was represented by the certificate or certificates delivered
to the Corporation in connection with such conversion but
which was not converted.
(iv) The Corporation will at all times reserve and
keep available out of its authorized but unissued shares of
Common Stock or its treasury shares, solely for the purpose
of issue upon the conversion of the Non-Voting Common Stock
as provided in this paragraph (c), such number of shares of
Common Stock as shall then be issuable upon the conversion of
all then outstanding shares of Non-Voting Common Stock
(assuming that all such shares of Non-Voting Common Stock are
held by persons entitled to convert such shares into Common
Stock).
-4-
<PAGE>
(v) The issuance of certificates for Common Stock
upon the conversion of Non-Voting Common Stock will be made
without charge to the holders of such shares for any issuance
tax in respect thereof or other cost incurred by the
Corporation in connection with such conversion and the
related issuance of Common Stock. The Corporation will not
close its books against the transfer of Non-Voting Common
Stock or of Common Stock issued or issuable upon the
conversion of Non-Voting Common Stock in any manner which
would interfere with the timely conversion of Non-Voting
Common Stock.
(d) Fractional Shares. Except as otherwise provided in these
Articles or by applicable law, the Corporation shall have the right to
issue fractional shares of Non- Voting Common Stock.
4.3 Original Preferred Stock. The shares of Class A Preferred Stock
and Class B Preferred Stock shall be subject to the following provisions:
(a) Dividends.
(i) Class A Preferred Stock. Class A1 Preferred
Stock and Class A2 Preferred Stock shall rank junior to any
Preferred Stock designated as senior in dividend rights by
the Board of Directors and shall rank pari passu with each
other with equal rights to dividends and other payments with
dividend payments to be made as follows.
(1) Class A1 Preferred Stock. Subject to the
foregoing and paragraph (g) below, the holders of
the Class A1 Preferred Stock shall be entitled to
receive, and the Board of Directors shall declare
and pay, annual dividends of 6% of the Liquidation
Value (as defined below) of Class A1 Preferred
Stock, payable in quarterly dividends equal to 1.5%
of such Liquidation Value on each of September 30,
December 31, March 31 and June 30 of each year
("Dividend Payment Date"), commencing on March 31,
1996, provided, however, that no dividend payment
shall be made on the Class A1 Preferred Stock unless
all accrued dividends on senior preferred stock have
been declared and paid. Such dividends shall be
payable, on each Dividend Payment Date, in
additional shares of Class A1 Preferred Stock ("PIK
Dividends"), or in cash and such dividends shall be
cumulative and shall accrue whether or not declared,
earned or payable from and after the date of issue
of the Class A1 Preferred Stock; provided, that if
the Board of Directors fails for any reason to
declare a dividend for the Class A1 Preferred Stock,
such dividends shall accrue as PIK Dividends. If a
dividend payment is a PIK Dividend, the shares of
Class A1 Preferred Stock distributed as a PIK
Dividend shall be deemed to be issued and
outstanding from and
-5-
<PAGE>
after such Dividend Payment Date, and the amount of
shares issued as a PIK Dividend shall have an
aggregate Liquidation Value, at the Dividend Payment
Date equal to the value of the dividend accrued and
payable. The initial "Liquidation Value" of each
share of Class A Preferred Stock and Class B
Preferred Stock will be $1,000 per share, and
thereafter, there will be added to the Liquidation
Value of each share of Class A Preferred Stock and
Class B Preferred Stock, as of any Dividend Payment
Date, the amount of any dividends payable on such
share on that Dividend Payment Date but not paid on
that Dividend Payment Date, whether or not such
dividends are declared, earned or payable.
(2) Class A2 Preferred Stock. Subject to the
foregoing and paragraph (g) below, the holders of
Class A2 Preferred Stock shall be entitled to
receive, and the Board of Directors shall declare
and pay, annual dividends of 6% of the Liquidation
Value of Class A2 Preferred Stock, payable in
quarterly dividends equal to 1.5% of such
Liquidation Value on September 30, December 31,
March 31 and June 30 of each year, commencing on
March 31, 1996, provided, however, that no dividend
payment shall be made on the Class A2 Preferred
Stock unless all accrued dividends on senior
preferred stock have been declared and paid.
Dividends on Class A2 Preferred Stock shall be
cumulative and payable, whether or not declared,
earned or payable, from and after the date of issue
of the Class A2 Preferred Stock. Dividends, if
declared by the Board of Directors, on the Class A2
Preferred Stock shall be paid only in cash.
(ii) Class B Preferred Stock. Subject to the
foregoing and paragraph (f) below, the holders of Class B
Preferred Stock shall be entitled to receive, and the Board
of Directors shall declare and pay, annual dividends of 6% of
the Liquidation Value of Class B Preferred Stock, payable in
quarterly dividends equal to 1.5% of such Liquidation Value
on September 30, December 31, March 31 and June 30 of each
year, commencing on March 31, 1996; provided, however, that
no dividend payments shall be made on the Class B Preferred
Stock unless all accrued dividends on senior preferred stock
and the Class A Preferred Stock have been declared and paid.
Dividends on the Class B Preferred Stock shall be cumulative
and payable, whether or not declared, earned or payable, from
and after the date of issue of the Class B Preferred Stock.
Dividends, if declared by the Board of Directors, on Class B
Preferred Stock shall be paid only in cash.
(b) Liquidation - Class A Preferred Stock. Upon any
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, and after the
-6-
<PAGE>
payment of any liquidation preference to Preferred Stock designated as
senior in liquidation rights by the Board of Directors, the holders of
all shares of Class A Preferred Stock shall be entitled, before any
distribution or payment is made upon any shares of any other class of
stock of the Corporation, to be paid an amount equal to the sum of the
Liquidation Value per share (subject to adjustment after certain
partial redemptions as provided in paragraph (g)) plus any accrued and
unpaid dividends thereon (such sum being herein called the "Class A
Preferred Stock Liquidation Payment"), and the holders of Class A
Preferred Stock shall not be entitled to any further distribution or
payment. If upon such liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, the assets of the
Corporation to be distributed among the holders of the capital stock
of the Corporation shall be insufficient to permit payment to the
holders of Class A Preferred Stock of the amount distributable as
aforesaid, then the entire assets of the Corporation to be distributed
to the holders of the capital stock of the Corporation shall be
distributed ratably among the holders of the Class A Preferred Stock
in proportion to the Class A Preferred Stock Liquidation Payment due
under this paragraph (b) to each such holder. Upon any such
liquidation, dissolution or winding-up of the Corporation, but only
after each holder of the Class A Preferred Stock shall have been paid
in full the Class A Preferred Stock Liquidation Payment to which such
holder is entitled, the remaining assets of the Corporation shall be
distributed to the holders of the Class B Preferred Stock and Common
Stock. Written notice of such liquidation, dissolution or winding-up,
stating a payment date, the amount of the Class A Preferred Stock
Liquidation Payment and the place where the amounts distributed shall
be payable, shall be given by mail, postage prepaid, not less than ten
days prior to the payment date stated therein, to the holders of
record of the Class A Preferred Stock, such notice to be addressed to
each stockholder at his or its post office address as shown by the
records of the Corporation. For liquidation purposes Class A1
Preferred Stock and Class A2 Preferred Stock shall rank junior to
Preferred Stock designated as senior by the Board of Directors and
shall rank pari passu with each other, and shall receive payments due
to liquidation distributions ratably and in proportion to the shares
of each tranche outstanding. Neither the consolidation nor merger of
the Corporation into or with any other corporation or corporations,
nor the sale or transfer by the Corporation of all or any part of its
assets, nor the reduction of the capital stock of the Corporation,
shall be deemed to be a liquidation, dissolution or winding-up of the
Corporation within the meaning of any of the provisions of this
paragraph (b).
(c) Liquidation - Class B Preferred Stock. Upon any
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, and after payment of any liquidation
preference to Preferred Stock designated as senior in liquidation
rights by the Board of Directors and the Class A Preferred Stock
Liquidation Payment as provided in paragraph (b), but before any
distribution or payment is made upon any shares of any other class of
stock of the Corporation, the holders of all shares of Class B
Preferred Stock shall be entitled to be paid an amount
-7-
<PAGE>
equal to the sum of the Liquidation Value per share (subject to
adjustment after certain partial redemptions as provided in paragraph
(g)) plus any accrued and unpaid dividends thereon (such sum being
herein called the "Class B Preferred Stock Liquidation Payment"), and
the holders of Class B Preferred Stock shall not be entitled to any
further distribution or payment. If upon such liquidation, dissolution
or winding-up of the Corporation, whether voluntary or involuntary,
the assets of the Corporation to be distributed among the holders of
the capital stock of the Corporation shall be insufficient to permit
payment to the holders of Class B Preferred Stock of the amount
distributable as aforesaid, then the entire assets of the Corporation
to be distributed to the holders of the capital stock of the
Corporation shall be distributed ratably among the holders of the
Class B Preferred Stock in proportion to the Class B Preferred Stock
Liquidation Payment due under this paragraph (c) to each such holder.
Upon any such liquidation, dissolution or winding-up of the
Corporation, but only after each holder of the Class B Preferred Stock
shall have been paid in full the Class B Preferred Stock Liquidation
Payment to which such holder is entitled, the remaining assets of the
Corporation shall be distributed to the holders of the Common Stock.
Written notice of such liquidation, dissolution or winding-up, stating
a payment date, the amount of the Class B Preferred Stock Liquidation
Payment and the place where the amounts distributed shall be payable,
shall be given by mail, postage prepaid, not less than ten days prior
to the payment date stated therein, to the holder of record of the
Class B Preferred Stock, such notice to be addressed to each
stockholder at his or its post office address as shown by the records
of the Corporation. Neither the consolidation nor merger of the
Corporation into or with any other corporation or corporations, nor
the sale or transfer by the Corporation of all or any part of its
assets, nor the reduction of the capital stock of the Corporation,
shall be deemed to be a liquidation, dissolution or winding-up of the
Corporation within the meaning of any of the provisions of this
paragraph (c).
(d) Redemption.
(i) Redemption Price. Subject to paragraph (g) and
any redemption preference to Preferred Stock designated as
senior in redemption rights by the Board of Directors, the
Class A Preferred Stock and the Class B Preferred Stock shall
be redeemable as provided in this paragraph (d) by paying for
each share in cash on the redemption date the sum of the
Liquidation Value thereof plus any accrued and unpaid
dividends thereon through the redemption payment date, such
sum being herein called the "Redemption Price". Redemption
payments shall be accrued but not paid if the payment thereof
would result in a default under any obligation of the
Corporation or any subsidiary of the Corporation for borrowed
money. For redemption purposes Class A1 Preferred Stock and
Class A2 Preferred Stock shall rank pari passu with each
other and shall upon the redemption of any shares of Class A
-8-
<PAGE>
Preferred be redeemed ratably and in proportion to the number
of outstanding shares of each tranche.
(ii) Redeemed or Otherwise Acquired Shares to be
Retired. Any shares of Preferred Stock redeemed pursuant to
this paragraph (d) or otherwise acquired by the Corporation
in any manner whatsoever shall be permanently retired
immediately on the acquisition thereof and shall not under
any circumstances be reissued. The Corporation shall from
time-to-time take such appropriate action as may be necessary
to reduce the authorized number of shares of Preferred Stock
accordingly.
(iii) Shares to be Redeemed. In case of a redemption
of only a part of the outstanding shares of the Class A
Preferred Stock or Class B Preferred Stock, there shall be so
redeemed from each registered holder as nearly as
practicable, that proportion of all of the shares to be
redeemed which the number of shares held of record by such
holder bears to the total number of shares of Class A
Preferred Stock or Class B Preferred Stock, respectively, at
the time outstanding.
(iv) Order of Redemption. In no event shall any
shares of Class A Preferred Stock or Class B Preferred Stock
be redeemed by the Corporation unless all shares of Preferred
Stock designated as senior in redemption rights by the Board
of Directors have been redeemed in full. In no event shall
any shares of Class B Preferred Stock be redeemed by the
Corporation unless all shares of Class A Preferred Stock have
been redeemed.
(v) Mandatory Redemption. Subject to paragraphs 1,
3, and 4 above, on August 31, 2009 the Corporation shall
purchase and redeem, at the Redemption Price, all of the
outstanding shares of Class A Preferred Stock and Class B
Preferred Stock.
(vi) Optional Redemptions. Subject to paragraphs 1,
3 and 4 above, the Corporation may purchase and redeem shares
of Class A Preferred Stock and Class B Preferred Stock prior
to the date for Mandatory Redemption set forth in paragraph 5
above on any date provided that (i) all accrued and unpaid
dividends shall be declared and issued with respect to the
shares of Class A Preferred Stock and Class B Preferred Stock
to be redeemed for each full month since the immediately
prior payment date up to the date of redemption and (ii) any
consent required for such redemption shall have been
obtained.
(e) Notice of Redemption. Notice of each redemption of
Preferred Stock pursuant to paragraph (d), specifying the date and
place of redemption and the number of shares which are to be redeemed,
shall be mailed to each holder of record
-9-
<PAGE>
of shares to be redeemed at such holder's address as shown by the
records of the Corporation not more than ninety nor less than thirty
days prior to the date on which such redemption is to be made.
(f) Dividends After Redemption Date. Notice of redemption
having been so mailed or a Mandatory Redemption having occurred, and
provision for payment of the Redemption Price for such shares on the
specified Redemption Date having been made by the Corporation, then,
unless default be made in the payment of the Redemption Price for such
shares when and as due (i) the shares of Preferred Stock designated
for redemption shall not be entitled to any dividends accruing after
the Redemption Date specified, (ii) on such Redemption Date all rights
of the respective holders of such shares, as stockholders of the
Corporation by reason of the ownership of such shares, shall cease,
except the right to receive the Redemption Price for such shares
without interest upon presentation, and (iii) such shares shall not
after such Redemption Date be deemed to be outstanding. In case less
than all the shares represented by any such certificate are redeemed,
a new certificate shall be issued without cost to the holder thereof
representing the unredeemed shares.
(g) All Past Annual Dividends Must Be Declared Prior to
Redemption. Except for the redemption of Preferred Stock designated as
senior in redemption rights by the Board of Directors or as set forth
in this paragraph (g), the Corporation shall not purchase or redeem
shares of any Preferred Stock at the time outstanding unless all
dividends on all Class A Preferred Stock and Class B Preferred Stock
for all past periods shall have been declared and issued or securities
sufficient for the payment thereof set apart. If applicable laws
relating to the sources of funds for the payment of accrued and unpaid
dividends on any shares of Class A Preferred Stock or Class B
Preferred Stock would prohibit the payment in full on a Redemption
Date of the dividends for any shares of Class A Preferred Stock or
Class B Preferred Stock required to be redeemed by paragraph (d), (i)
notwithstanding any provision herein to the contrary, the aggregate
Redemption Price payable in respect of all shares of Preferred Stock
to be redeemed shall be deemed reduced by the amount of accrued and
unpaid dividends that the Corporation is prohibited by law from
paying, (ii) shares of Preferred Stock to be redeemed on the
applicable Redemption Date shall otherwise be redeemed in accordance
with the requirements of this paragraph (g), and (iii) the amount of
such unpayable accrued and unpaid dividends shall be added in equal
amounts per share to the accrued and unpaid dividends on the shares of
Class A Preferred Stock and Class B Preferred Stock remaining
outstanding in the hands of the holder thereof. If applicable laws
would prohibit the payment in full on the Redemption Date of the
Redemption Price for the shares of Preferred Stock required to be
redeemed pursuant to paragraph (d), (a) no such shares shall be
redeemed, (b) the Corporation shall nevertheless, to the extent
legally permissible, pay to the holders of such shares on the final
Redemption Date the highest permissible amount per share up to an
amount equal to the applicable Liquidation Payment less $0.01,
-10-
<PAGE>
(c) the Redemption Price and applicable Liquidation Payment of each
such share shall thereupon be reduced by the amount per share so paid
pursuant to the immediately preceding clause (b), (d) the Corporation
shall purchase and redeem all such shares on the soonest next date on
which dividends are required to be paid pursuant to paragraph (a) and
on which the Corporation is no longer prohibited by law from paying in
full the Redemption Price for such shares, and (e) the obligation of
the Corporation to pay dividends under paragraph (a) shall continue
until all outstanding shares of Class A Preferred Stock and Class B
Preferred Stock are redeemed in accordance with clause (d), except
that dividends thereafter payable with respect to outstanding shares
of Class A Preferred Stock or Class B Preferred Stock shall be reduced
by the same percentage reduction as the percentage reduction in the
Redemption Price and Class A Liquidation Payment that takes place
pursuant to this paragraph (g). In no event shall the Corporation
purchase or redeem the last share of Class A Preferred Stock or Class
B Preferred Stock held by any holder unless the Corporation shall have
paid to the last holder of Class A Preferred Stock and Class B
Preferred Stock, all accrued and unpaid dividends on all shares of
Class A Preferred Stock and Class B Preferred Stock held by such
holder at any time.
(h) Voting Rights. The Class A Preferred Stock and Class B
Preferred Stock shall not have voting rights except as expressly
required by law or on any amendment to the Corporation's Certificate
of Incorporation to alter or change the respective powers,
designations, preferences or special rights of the shares of such
Preferred Stock.
(i) Fractional Shares. Except as otherwise provided in these
Articles or by applicable law, the Corporation shall have the right to
issue fractional shares of Preferred Stock.
4.4. Undesignated Preferred Stock. The Board of Directors is
authorized, subject to limitation prescribed by law and the provisions of this
ARTICLE FOURTH, to provide for the issuance of the shares of Preferred Stock in
series, and by filing an article of amendment pursuant to Section 151 of the
GCL, to establish from time to time the number of shares to be included in each
such class or series within a class, and to fix the designation, powers,
preferences and rights of the shares of each such class or series within a
class and the qualifications, limitations or restrictions thereof.
The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
(a) The number of shares constituting the series and the
distinctive designation of the series;
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<PAGE>
(b) The dividend rate (or the method of calculation of
dividends) on the shares of the series, whether dividends will be
cumulative, and if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of the
series;
(c) Whether the series shall have voting rights, in addition
to the voting rights provided by law, and if so, the terms of such
voting rights;
(d) Whether the series shall have conversion privileges, and,
if so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events as the
Board of Directors shall determine;
(e) Whether or not the shares of that series shall be
redeemable or exchangeable, and, if so, the terms and conditions of
such redemption or exchange, as the case may be, including the date or
dates upon or after which they shall be redeemable or exchangeable, as
the case may be, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at
different redemption dates;
(f) Whether the series shall have a sinking fund for the
redemption or purchase of shares of that series, and if so, the terms
and amount of such sinking fund;
(g) The rights of the shares of the series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and the relative rights or priority, if any, of payment of
shares of the series;
(h) The par value for any shares of the series; and
(i) Any other relative rights, preferences and limitations of
that series.
Except for any difference so provided by this Certificate of
Incorporation and the Board of Directors, the shares of Preferred Stock will
rank on parity with respect to the payment of dividends and to the distribution
of assets upon liquidation.
Shares of any series of Preferred Stock which have been redeemed
(whether through the operation of a sinking fund or otherwise) or which, if
convertible or exchangeable, have been converted into or exchanged for shares
of stock of any other class or classes, shall have the status of authorized and
unissued shares of Preferred Stock and may be reissued as shares of the same or
any other series of Preferred Stock.
FIFTH: At all meetings of stockholders, each stockholder shall be
entitled to vote, in person or by proxy, the shares of voting stock owned by
such stockholders of record on the
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record date for the meeting. When a quorum is present or represented at any
meeting, the vote of the holders of a majority in interest of the stockholders
present in person or by proxy at such meeting and entitled to vote thereon
shall decide any question, matter or proposal brought before such meeting
unless the question is one upon which, by express provision of law, this
Certificate of Incorporation or the By-laws applicable thereto, a different
vote is required, in which case such express provision shall govern and control
the decision of such question.
SIXTH:
(a) Number of Directors. The number of directors of the
Corporation shall be fixed from time to time by the vote of a majority
of the entire Board of Directors, but such number shall in no case be
less than one (1) nor more than nine (9). Any such determination made
by the Board of Directors shall continue in effect unless and until
changed by the Board of Directors, but no such changes shall affect
the term of any directors then in office.
(b) Term of Office; Quorum; Vacancies. A director shall hold
office until the annual meeting for the year in which his or her term
expires and until his or her successor shall be elected and shall
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Subject to the By-laws, a
majority of the entire Board of Directors shall constitute a quorum
for the transaction of business. Any vacancies and newly created
directorships resulting from an increase in the number of directors
shall be filled by a majority of the Board of Directors then in office
even though less than a quorum and shall hold office until his
successor is elected and qualified or until his earlier death,
resignation, retirement, disqualification or removal from office.
(c) Removal. Any director may be removed upon the affirmative
vote of the holders of a majority of the votes which could be cast by
the holders of all outstanding shares of capital stock entitled to
vote for the election of directors, voting together as a class, given
at a duly called annual or special meeting of stockholders.
SEVENTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
(a) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(b) The directors shall have the power to make, alter, amend,
change, add to or repeal the By-laws of the Corporation.
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(c) In addition to the powers and authority hereinbefore or
by statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Certificate of Incorporation, and
any By-laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate any
prior act of the directors which would have been valid if such By-Laws
had not been adopted.
EIGHTH:
(a) Stockholder Meetings; Keeping of Books and Records.
Meetings of stockholders may be held within or outside the State of
Delaware as the By-laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the
State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the By-laws of the
Corporation.
(b) Special Stockholders Meetings. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise prescribed
by law, may be called by the President or the Chairman of the Board,
if one is elected, and shall be called by the Secretary at the
direction of a majority of the Board of Directors, or at the request
in writing of stockholders owning a majority in amount of the entire
capital stock of the Company issued and outstanding and entitled to
vote.
(c) No Written Ballot. Elections of directors need not be by
written ballot unless the By-laws of the Corporation shall so provide.
NINTH:
(a) Limits on Director Liability. A director of the
Corporation shall not be personally liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty
as a director to the fullest extent now or hereafter permitted by GCL.
(b) Indemnification. Each person (and the heirs, executors or
administrators of such person) who was or is a party or is threatened
to be made a party to, or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such
person is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other
enterprise, shall be indemnified and held harmless by the Corporation
to the fullest extent now or hereafter permitted by GCL. The right to
indemnification and the right to the advancement to expenses by the
Corporation
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conferred in this ARTICLE NINTH shall also include the right to be
paid by the Corporation the expenses incurred in connection with any
such proceeding in advance of its final disposition to the fullest
extent now or hereafter authorized by GCL. The rights to
indemnification and to advancement of expenses conferred in this
ARTICLE NINTH shall be contract rights.
(c) Additional Indemnification. The Corporation may, by
action of its Board of Directors, provide indemnification to such of
the directors, officers, employees and agents of the Corporation to
such extent and to such effect as the Board of Directors shall
determine to be appropriate and authorized by GCL.
(d) Insurance. The Corporation shall have power to purchase
and maintain insurance on behalf of any person who 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, partnership, joint venture,
trust or other enterprise against any expense, liability or loss
incurred by such person in any such capacity or arising out of his
status as such, whether or not the Corporation would have the power to
indemnify him against such liability under GCL.
(e) Other Rights. The rights and authority conferred in this
ARTICLE NINTH shall not be exclusive of any other right which any
person may otherwise have or hereafter acquire.
(f) Effect of Amendments. Neither the amendment, change,
alteration nor repeal of this ARTICLE NINTH, nor the adoption of any
provision of this Certificate of Incorporation or the by-laws of the
Corporation, nor, to the fullest extent permitted by GCL, any
modification of law, shall eliminate or reduce the effect of this
ARTICLE NINTH or the rights or any protection afforded under this
ARTICLE NINTH in respect of any acts or omissions occurring prior to
such amendment, repeal, adoption or modification.
TENTH: Subject to the Company's Stockholders Agreement, dated
September 1, 1994, among the Company and its stockholders, as amended and
modified in accordance with the provisions thereof ("Stockholders Agreement")
the Corporation reserves the right to repeal, alter, change or amend any
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by statute and all rights conferred upon stockholders
herein are granted subject to this reservation. No repeal, alteration or
amendment of this Certificate of Incorporation shall be made unless the same is
first approved by the Board of Directors of the Corporation pursuant to a
resolution adopted by the directors then in office in accordance with the
By-laws and applicable law and thereafter approved by the stockholders.
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ELEVENTH: The Corporation has elected to not be governed by Section
203 of the GCL.
TWELFTH: This Amended and Restated Certificate of Incorporation of the
Corporation shall constitute a restatement of, and shall supersede the Amended
and Restated Certificate of Incorporation of the Corporation, dated February 7,
1996, as amended.
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by its Chief executive
Officer and attested to by its Secretary.
AMERIKING, INC.
By:
----------------------------------
Name: Lawrence E. Jaro
Title: Chief Executive Officer
ATTEST:
By:
-------------------------------------
Name: Joel Aaseby
Title: Secretary
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EXHIBIT 4.38
L&W DRAFT OF 10/30/96
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AMERIKING, INC.
----------------------------------------
___% SENIOR NOTES DUE 2006
----------------------------------------
-------------------
INDENTURE
DATED AS OF __________, 1996
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Trustee
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions............................................................................... 1
Section 1.02. Other Definitions......................................................................... 13
Section 1.03. Incorporation by Reference of Trust Indenture Act......................................... 14
Section 1.04. Rules of Construction..................................................................... 14
Section 1.05. Incorporation of Burger King Agreement.................................................... 14
ARTICLE 2
THE SENIOR NOTES
Section 2.01. Form and Dating........................................................................... 14
Section 2.02. Execution and Authentication.............................................................. 15
Section 2.03. Registrar and Paying Agent................................................................ 15
Section 2.04. Paying Agent to Hold Money in Trust....................................................... 16
Section 2.05. Holder Lists.............................................................................. 16
Section 2.06. Transfer and Exchange..................................................................... 16
Section 2.07. Replacement Senior Notes.................................................................. 19
Section 2.08. Outstanding Senior Notes.................................................................. 19
Section 2.09. Treasury Senior Notes..................................................................... 20
Section 2.10. Temporary Senior Notes.................................................................... 20
Section 2.11. Cancellation.............................................................................. 20
Section 2.12. Defaulted Interest........................................................................ 20
Section 2.13. Record Date............................................................................... 21
Section 2.14. CUSIP Number.............................................................................. 21
ARTICLE 3
OPTIONAL REDEMPTION AND MANDATORY OFFERS TO PURCHASE
Section 3.01. Notices to Trustee........................................................................ 21
Section 3.02. Selection of Senior Notes to be Redeemed or Purchased..................................... 21
Section 3.03. Notice of Redemption...................................................................... 22
Section 3.04. Effect of Notice of Redemption............................................................ 23
Section 3.05. Deposit of Redemption Price............................................................... 23
Section 3.06. Senior Notes Redeemed in Part............................................................. 23
Section 3.07. Optional Redemption Provisions............................................................ 24
Section 3.08. Mandatory Purchase Provisions............................................................. 24
ARTICLE 4
COVENANTS
Section 4.01. Payment of Senior Notes................................................................... 25
Section 4.02. Commission Reports........................................................................ 26
Section 4.03. Compliance Certificate.................................................................... 26
Section 4.04. Stay, Extension and Usury Laws............................................................ 27
Section 4.05. Limitation on Restricted Payments......................................................... 27
Section 4.06. Corporate Existence....................................................................... 29
Section 4.07. Limitation on Incurrence of Indebtedness.................................................. 30
Section 4.08. Limitation on Transactions With Affiliates................................................ 30
(i)
<PAGE>
Section 4.09. Limitation on Liens....................................................................... 31
Section 4.10. Compliance With Laws, Taxes............................................................... 31
Section 4.11. Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries............................................ 31
Section 4.12. Maintenance of Office or Agencies......................................................... 32
Section 4.13. Change of Control......................................................................... 33
Section 4.14. Limitation on Asset Sales................................................................. 33
Section 4.15. Limitation on Guarantees of Company
Indebtedness by Restricted Subsidiaries................................................... 34
Section 4.16. Designation of Restricted and Non-Restricted Subsidiaries................................. 35
ARTICLE 5
SUCCESSORS
Section 5.01. Merger or Consolidation................................................................... 36
Section 5.02. Successor Corporation Substituted......................................................... 36
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default......................................................................... 36
Section 6.02. Acceleration.............................................................................. 38
Section 6.03. Other Remedies............................................................................ 38
Section 6.04. Waiver of Past Defaults................................................................... 39
Section 6.05. Control by Majority....................................................................... 39
Section 6.06. Limitation on Suits....................................................................... 39
Section 6.07. Rights of Holders to Receive Payment...................................................... 39
Section 6.08. Collection Suit by Trustee................................................................ 40
Section 6.09. Trustee May File Proofs of Claim.......................................................... 40
Section 6.10. Priorities................................................................................ 40
Section 6.11. Undertaking for Costs..................................................................... 41
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee......................................................................... 41
Section 7.02. Rights of Trustee......................................................................... 42
Section 7.03. Individual Rights of Trustee.............................................................. 42
Section 7.04. Trustee's Disclaimer...................................................................... 42
Section 7.05. Notice to Holders of Defaults and Events of Default....................................... 43
Section 7.06. Reports by Trustee to Holders............................................................. 43
Section 7.07. Compensation and Indemnity................................................................ 43
Section 7.08. Replacement of Trustee.................................................................... 44
Section 7.09. Successor Trustee by Merger, Etc.......................................................... 45
Section 7.10. Eligibility; Disqualification............................................................. 45
Section 7.11. Preferential Collection of Claims Against the Company..................................... 45
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.01. Discharge of Liability on Senior Notes; Defeasance........................................ 45
Section 8.02. Conditions to Defeasance.................................................................. 46
Section 8.03. Application of Trust Money................................................................ 47
Section 8.04. Repayment to the Company.................................................................. 47
(ii)
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Section 8.05. Indemnity for Government Obligations...................................................... 47
Section 8.06. Reinstatement............................................................................. 47
ARTICLE 9
AMENDMENTS
Section 9.01. Amendments and Supplements Permitted Without Consent of Holders........................... 48
Section 9.02. Amendments and Supplements Requiring Consent of Holders................................... 48
Section 9.03. Compliance with TIA....................................................................... 49
Section 9.04. Revocation and Effect of Consents......................................................... 49
Section 9.05. Notation on or Exchange of Senior Notes................................................... 50
Section 9.06. Trustee Protected......................................................................... 50
Section 9.07. Payment for Consents...................................................................... 50
ARTICLE 10
MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls.............................................................. 50
Section 10.02. Notices................................................................................... 50
Section 10.03. Communication by Holders with Other Holders............................................... 51
Section 10.04. Certificate and Opinion as to Conditions Precedent........................................ 52
Section 10.05. Statements Required in Certificate or Opinion............................................. 52
Section 10.06. Rules by Trustee and Agents............................................................... 52
Section 10.07. Legal Holidays............................................................................ 52
Section 10.08. No Recourse Against Others................................................................ 52
Section 10.09. Counterparts.............................................................................. 53
Section 10.10. Variable Provisions....................................................................... 53
Section 10.11. Governing Law............................................................................. 53
Section 10.12. No Adverse Interpretation of Other Agreements............................................. 53
Section 10.13. Successors................................................................................ 53
Section 10.14. Severability.............................................................................. 53
Section 10.15. Table of Contents, Headings, Etc.......................................................... 53
EXHIBITS
Exhibit A Form of Senior Note ......................................................................A-1
Exhibit D Burger King Agreement.....................................................................B-1
(iii)
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This Indenture, dated as of ____________, 1996, is between AmeriKing,
Inc., a Delaware corporation (the "Company"), and ____________, as trustee
(the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the holders of the Company's __% Senior
Notes due 2006 (the "Senior Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Affiliate" means any of the following: (i) any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company, (ii) any spouse, immediate family member or other
relative who has the same principal residence as any Person described in
clause (i) above, (iii) any trust in which any such Persons described in
clause (i) or (ii) above has a beneficial interest, and (iv) any corporation
or other organization of which any such Persons described above collectively
own 50% or more of the equity of such entity.
"Agent" means any Registrar, Paying Agent or co-registrar or any
successor thereto.
"Asset Sale" means the sale, lease, conveyance or other disposition
by the Company or a Restricted Subsidiary of assets or property whether owned
on the date of original issuance of the Senior Notes or thereafter acquired,
in a single transaction or in a series of related transactions; provided that
Asset Sales will not include such sales, leases, conveyances or dispositions
in connection with (i) the sale or disposition of any Restricted Investment,
(ii) any Equity Offering by (a) the Company or (b) any Restricted Subsidiary
if the proceeds therefrom are used to make mandatory prepayments of
Indebtedness under the Credit Agreement or Indebtedness of the Restricted
Subsidiaries or redeem Senior Notes as described in Section 3.07 hereof, (iii)
the surrender or waiver of contract rights or the settlement, release or
surrender of contract, tort or other claims of any kind, (iv) the sale of
inventory in the ordinary course of business, (v) a sale-leaseback of assets
within one year following the acquisition of such assets, (vi) the grant of any
license of patents, trademarks, registration therefor and other similar
intellectual property, (vii) a transfer of assets by the Company or a Restricted
Subsidiary to the Company or a Restricted Subsidiary, (viii) the designation of
a Restricted Subsidiary as a Non-Restricted Subsidiary pursuant to Section 4.16
hereof, (ix) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company as permitted under Section 5.01
hereof, (x) the sale or disposition of obsolete equipment or other obsolete
assets, or (xi) Restricted Payments permitted by Section 4.05 hereof, (xii) the
BKC Designated Transfer, or (xiii) the exchange of assets for other non-cash
assets that (a) are useful in the business of the Company and its Restricted
Subsidiaries and (b) have a fair market value at least equal to the fair market
value of the assets being exchanged (as determined by the Board of Directors in
good faith).
"BBI Note" means the promissory note in the aggregate principal amount
of $600,000 issued by the Company to BancBoston and all related Obligations as
in effect on the date of the original issuance of the Senior Notes.
"BKC" means Burger King Corporation and its successors and assigns.
"BKC Agreements" means the franchise, trademark, royalty, lease,
sublease and other agreements, obligations and liabilities of the Company and
its Subsidiaries with or to BKC.
"BKC Designated Transfer" means the sale by the Company of up to 10
Burger King restaurants to a franchisee to be designated by BKC.
"Bankruptcy Law" means Title II, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Company's board of directors or any
authorized committee of such board of directors.
"Burger King Agreement" means the Agreement, dated the date of this
Indenture, between the Trustee and Burger King Corporation in the form of
Exhibit B.
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" means any and all shares, interests, participations
or other equivalents (however designated) of corporate stock, including any
preferred stock.
"Cash Flow" means, for any given period and Person, the sum of,
without duplication, Consolidated Net Income, plus (a) the portion of Net
Income attributable to the minority interests in its
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Restricted Subsidiaries, to the extent not included in calculating Consolidated
Net Income, plus (b) any provision for taxes based on income or profits to the
extent such income or profits were included in computing Consolidated Net
Income, plus (c) Consolidated Interest Expense, to the extent deducted in
computing Consolidated Net Income, plus (d) the amortization of all intangible
assets, to the extent such amortization was deducted in computing Consolidated
Net Income (including, but not limited to, inventory write-ups, goodwill, debt
and financing costs, and Incentive Arrangements), plus (e) any non-capitalized
transaction costs incurred in connection with financings, acquisitions or
divestures (including, but not limited to, financing and refinancing fees, to
the extent deducted in computing Consolidated Net Income, including those in
connection with the Offerings, to the extent deducted in computing Consolidated
Net Income), plus (f) all depreciation and all other non-cash charges
(including, without limitation, those charges relating to purchase accounting
adjustments and LIFO adjustments), to the extent deducted in computing
Consolidated Net Income, plus (g) any interest income, to the extent such
income was not included in computing Consolidated Net Income, plus (h) all
dividend payments on preferred stock (whether or not paid in cash) to the
extent deducted in computing Consolidated Net Income, plus (i) any
extraordinary or non-recurring charge or expense arising out of the
implementation of SFAS 106 or SFAS 109 to the extent deducted in computing
Consolidated Net Income, plus (j) to the extent not covered in clause (e) above,
fees paid or payable in respect of the TJC Agreement to the extent deducted in
computing Consolidated Net Income, plus (k) the net loss of any Person, other
than those of a Restricted Subsidiary, to the extent deducted in computing
Consolidated Net Income, plus (l) net losses in respect of any discontinued
operations, as determined in accordance with GAAP, to the extent deducted in
computing Consolidated Net Income; provided, however, that if any such
calculation includes any period during which an acquisition or sale of a Person
or the incurrence or repayment of Indebtedness occurred, then such calculation
for such period shall be made on a Pro Forma Basis.
"Cash Flow Coverage Ratio" means, for any given period and Person,
the ratio of: (i) Cash Flow, divided by (ii) the sum of Consolidated Interest
Expense and all dividend payments on any series of preferred stock of such
person (except dividends paid or payable in additional shares of Capital Stock
(other than Disqualified Stock) and except for accrued and unpaid dividends with
respect to preferred stock outstanding on the date of original issuance of the
Senior Notes), in each case, without duplication; provided, however, that if any
such calculation includes any period during which an acquisition or sale of a
person or the incurrence or repayment of Indebtedness occurred, then such
calculation for such period shall be made on a Pro Forma Basis.
"Change of Control" means the occurrence of each of the following:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), excluding the Existing Stockholders, is or becomes
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a Person shall be deemed to have "beneficial ownership" of
all securities that such Person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Stock of the Company; and
(ii) the Company consolidates with, or merges with or into, another Person or
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates
with, or merges with or into, the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is converted
into or exchanged for cash, securities or other property, other than any such
transaction where (A) the outstanding Voting Stock of the Company is converted
into or exchanged for (1) Voting Stock (other than Redeemable Capital Stock)
of the surviving or transferee corporation or (2) cash, securities and other
property in an amount which could be paid by the Company as a Restricted
Payment under this Indenture and (B) immediately after such transaction no
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), excluding the Existing Stockholders, is the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
Person shall be deemed to have "beneficial ownership" of all securities that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
more than 50% of the total Voting Stock of
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the surviving or transferee corporation; and (iii) during any consecutive
two-year period, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
stockholders of the Company was approved by a vote of a majority of the
directors then still in office who are entitled to vote to elect such new
director and were either directors at the beginning of such period or Persons
whose election as directors or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office.
"Commission" means the Securities and Exchange Commission.
"Company" means AmeriKing, Inc. until a successor replaces it in
accordance with Article 5 hereof and thereafter means the successor, and shall
include any and all other obligors on the Senior Notes.
"Consolidated Interest Expense" means, for any given period and
Person, the aggregate of the interest expense in respect of all Indebtedness
of such Person and its Restricted Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP (including amortization
of original issue discount on any such Indebtedness, all non-cash interest
payments, the interest portion of any deferred payment obligation and the
interest component of capital lease obligations, but excluding amortization of
deferred financing fees if such amortization would otherwise be included in
interest expense); provided, however, that for the purpose of the Cash Flow
Coverage Ratio, Consolidated Interest Expense shall be calculated on a Pro Forma
Basis; provided further that any premiums, fees and expenses (including the
amortization thereof) payable in connection with the Offerings and the
application of the net proceeds therefrom or any other refinancing of
Indebtedness will be excluded.
"Consolidated Net Income" means, for any given period and Person, the
aggregate of the Net Income of such Person and its Restricted Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that: (i) the Net Income of any Person acquired in a pooling
of interests transaction for any period prior to the date of such acquisition
shall be excluded, and (ii) Consolidated Net Income of any Person will not
include, without duplication, any deduction for: (A) any increased
amortization or depreciation resulting from the write-up of assets pursuant to
Accounting Principles Board Opinion Nos. 16 and 17, as amended or supplemented
from time to time, (B) the amortization of all intangible assets (including
amortization attributable to inventory write-ups, goodwill, debt and financing
costs, and Incentive Arrangements), (C) any non-capitalized transaction costs
incurred in connection with financings, acquisitions or divestitures (including,
but not limited to, financing and refinancing fees), (D) any extraordinary or
nonrecurring charges relating to any premium or penalty paid, write-off or
deferred financing costs or other financial recapitalization charges in
connection with redeeming or retiring any Indebtedness prior to its stated
maturity, and (E) any Restructuring Charges; provided, however, that for
purposes of determining the Cash Flow Coverage Ratio, Consolidated Net Income
shall be calculated on a Pro Forma Basis.
"Consolidated Net Worth" with respect to any Person means, as of any
date, the consolidated equity of the common stockholders of such Person
(excluding the cumulated foreign currency translation adjustment), all
determined on a consolidated basis in accordance with GAAP, but without any
reduction in respect of the payment of dividends on any series of such
Person's preferred stock if such dividends are paid in additional shares of
Capital Stock (other than Disqualified Stock); provided, however, that
Consolidated Net Worth shall also include, without duplication: (a) the
amortization of all write-ups of
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inventory, (b) the amortization of all intangible assets (including
amortization of goodwill, debt and financing costs, and Incentive
Arrangements), (c) any non-capitalized transaction costs incurred in
connection with financings, acquisitions or divestitures (including, but not
limited to, financing and refinancing fees), (d) any increased amortization or
depreciation resulting from the write-up of assets pursuant to Accounting
Principles Board Opinion Nos. 16 and 17, as amended and supplemented from time
to time, (e) any extraordinary or nonrecurring charges or expenses relating to
any premium or penalty paid, write-off or deferred financing costs or other
financial recapitalization charges incurred in connection with redeeming or
retiring any Indebtedness prior to its stated maturity, (f) any Restructuring
Charges, and (g) any extraordinary or non-recurring charge arising out of the
implementation of SFAS 106 or SFAS 109; provided, however, that Consolidated
Net Worth shall be calculated on a Pro Forma Basis.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 10.02 of this Indenture or such other address
as to which the Trustee gives notice to the Company.
"Credit Agreement" means the credit agreement, dated February 7, 1996,
among the Company, certain of its subsidiaries and the lenders party thereto in
their capacities as lenders thereunder and The First National Bank of Boston, as
agent, together with all loan documents and instruments thereunder (including,
without limitation, any guarantee agreements and security documents), in each
case as such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including, without limitation, increasing the amount of available
borrowings thereunder, and all Obligations with respect thereto, in each case,
to the extent permitted by Section 4.07 hereof, or adding Subsidiaries of the
Company as additional borrowers or guarantors thereunder) all or any portion of
the Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Definitive Senior Notes" means Senior Notes that are in the form of
Exhibit A attached hereto (but without including the text referred to in
footnotes 1 and 2 thereto).
"Depositary" means, with respect to the Senior Notes issuable or
issued in whole or in part in global form, the Person specified in Section
2.03 hereof as the Depositary with respect to the Senior Notes, until a
successor shall have been appointed and become such pursuant to the applicable
provision of this Indenture and, thereafter, "Depositary" shall mean or
include such successor.
"Disqualified Stock" means any Capital Stock that by its terms (or by
the terms of any security into which it is convertible--or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part on, or
prior to, the maturity date of the Senior Notes.
"Equity Interests" means Capital Stock or partnership interests or
warrants, options or other rights to acquire Capital Stock or partnership
interests (but excluding (i) any debt security that is convertible into, or
exchangeable for, Capital Stock or partnership interests, and (ii) any other
Indebtedness or
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Obligation) provided, however, that Equity Interests will not include any
Incentive Arrangements or obligations or payments thereunder.
"Equity Offering" means a public or private offering by the Company
for cash of Capital Stock or other Equity Interests and all warrants, options or
other rights to acquire Capital Stock, other than (i) an offering of
Disqualified Stock or (ii) Incentive Arrangements or obligations or payments
thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Debentures" means the Company's ___% Subordinated Exchange
Debentures Due 2008.
"Executive Employment Agreements" means the Employment Agreements,
effective as of September 1, 1994, between the Company, on the one hand, and
Lawrence E. Jaro, William C. Osborn, Gary W. Hubert, Joel D. Aaseby and Scott E.
Vasatka, on the other hand, as in effect at the date of issuance of the Senior
Notes.
"Existing Stockholders" means (a) The Jordan Company and
Jordan/Zalaznick Capital Corporation and their respective affiliates,
principals, partners and employees, family members of any of the foregoing and
trusts for the benefit of any of the foregoing, including, without limitation,
MCIT PLC, Leucadia National Corporation and Jordan Industries, Inc., and their
respective Subsidiaries and (b) the officers and directors of the Company on the
date of issuance of the Senior Notes and their respective affiliates and family
members and trusts for the benefit of any of the foregoing.
"GAAP" means generally accepted accounting principles, consistently
applied, as of the date of original issuance of the Senior Notes. All
financial and accounting determinations and calculations under this Indenture
will be made in accordance with GAAP.
"Global Senior Note" means a Senior Note that contains the paragraph
referred to in footnote 1 and the additional schedule referred to in footnote
2 to the form of the Senior Note attached hereto as Exhibit A.
"Hedging Obligations" means, with respect to any Person, the
Obligations of such Persons under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, (ii) foreign exchange
contracts, currency swap agreements or similar agreements, and (iii) other
agreements or arrangements designed to protect such Person against
fluctuations, or otherwise to establish financial hedges in respect of,
exchange rates, currency rates or interest rates.
"Holder" means a Person in whose name a Senior Note is registered.
"Incentive Arrangements" means any earn-out agreements, stock
appreciation rights, "phantom" stock plans, employment agreements,
non-competition agreements, subscription and stockholders agreements and other
incentive and bonus plans and similar arrangements made in connection with
acquisitions of Persons or businesses by the Company or the Restricted
Subsidiaries or the retention of executives, officers or employees by the
Company or the Restricted Subsidiaries.
"Indebtedness" means, with respect to any Person, any indebtedness,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing the deferred and
unpaid balance of the purchase price of any property (including pursuant to
capital leases), except any such balance that constitutes an accrued expense
or a trade payable, and any Hedging Obligations, if and to the extent such
indebtedness (other than a Hedging Obligation) would appear as a liability
upon a balance sheet of such Person prepared on a consolidated basis in
accordance with GAAP, and also includes, to the extent not otherwise included,
the guarantee of items that would be included within this definition;
provided, however, that "Indebtedness" will not include (i) any Incentive
Arrangements or obligations or payments thereunder, or (ii) any BKC Agreement,
except for any indebtedness in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or representing the deferred and unpaid
balance of the purchase price of any property (including pursuant to capital
leases).
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy or similar case or proceeding, or any reorganization, receivership,
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, or (ii) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company.
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"Investment" means any capital contribution to, or other debt or
equity investment in, any Person.
"Investment Grade" means a rating of BBB- or higher by S&P and Baa3
or higher by Moody's or the equivalent of such ratings by S&P or Moody's and
the equivalent in respect of Rating Categories of any Rating Agencies
substituted for S&P or Moody's.
"issue" means create, issue, assume, guarantee, incur or otherwise
become directly or indirectly liable for any Indebtedness or Capital Stock, as
applicable; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Restricted Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be deemed
to be issued by such Restricted Subsidiary at the time it becomes a Restricted
Subsidiary. For this definition, the terms "issuing," "issuer," "issuance" and
"issued" have meanings correlative to the foregoing.
"Jaro Leases" means the leases between the Company's Subsidiaries and
Lawrence E. Jaro relating to two Burger King restaurants as in effect at the
date of original issuance of the Senior Notes.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized
by law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell and any filing of
or agreement to give any financing statement under the Uniform Commercial Code
(or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP, excluding, however, any
gain or loss, together with any related provision for taxes, realized in
connection with any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions).
"Net Proceeds" means, with respect to any Asset Sale, the aggregate
amount of cash proceeds (including any cash received by way of deferred
payment pursuant to a note receivable issued in connection with such Asset
Sale, other than the portion of such deferred payment constituting interest,
and including any amounts received as disbursements or withdrawals from any
escrow or similar account established in connection with any such Asset Sale,
but, in either such case, only as and when so received) received by the
Company or any of its Restricted Subsidiaries in respect of such Asset Sale,
net of: (i) the cash expenses of such Asset Sale (including, without
limitation, the payment of principal of, and premium, if any, and interest on,
Indebtedness required to be paid as a result of such Asset Sale (other than
the Senior Notes) and legal, accounting, management and advisory and
investment banking
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fees and sales commissions), (ii) taxes paid or payable as a result thereof,
(iii) any portion of cash proceeds that the Company determines in good faith
should be reserved for post-closing adjustments, it being understood and
agreed that on the day that all such post-closing adjustments have been
determined, the amount (if any) by which the reserved amount in respect of
such Asset Sale exceeds the actual post-closing adjustments payable by the
Company or any of its Restricted Subsidiaries shall constitute Net Proceeds on
such date, (iv) any relocation expenses and pension, severance and shutdown
costs incurred as a result thereof, and (v) any deduction or appropriate
amounts to be provided by the Company or any of its Restricted Subsidiaries as
a reserve in accordance with GAAP against any liabilities associated with the
asset disposed of in such transaction and retained by the Company or such
Restricted Subsidiary after such sale or other disposition thereof, including,
without limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with such transaction.
"Non-Restricted Subsidiary" means any Subsidiary of the Company other
than a Restricted Subsidiary.
"Obligations" means, with respect to any Indebtedness, all principal,
interest, premiums, penalties, fees, indemnities, expenses (including legal
fees and expenses), reimbursement obligations and other liabilities payable to
the holder of such Indebtedness under the documentation governing such
Indebtedness, and any other claims of such holder arising in respect of such
Indebtedness.
"Offering" means the offer and sale of the Senior Notes as
contemplated by the Prospectus.
"Officer" means, with respect to any Person, the Chief Executive
Officer, the President, the Chief Operating Officer, the Chief Financial
Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary
or any Vice President of such Person.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee that meets the requirements of Section
10.05 hereof. Such counsel may be an employee of or counsel to the Company,
any Subsidiary of the Company or the Trustee.
"Other Permitted Indebtedness" means: (i) Indebtedness of the Company
and its Restricted Subsidiaries existing as of the date of original issuance
of the Senior Notes and all related Obligations as in effect on such date; (ii)
Indebtedness of the Company and its Restricted Subsidiaries in respect of
bankers acceptances and letters of credit (including, without limitation,
letters of credit in respect of workers' compensation claims) issued in the
ordinary course of business, or other Indebtedness in respect of respect to
reimbursement-type obligations regarding workers' compensation claims; (iii)
Refinancing Indebtedness, provided that: (A) the principal amount of such
Refinancing Indebtedness shall not exceed the outstanding principal amount of
Indebtedness (including unused commitments) extended, refinanced, renewed,
replaced, substituted or refunded plus any amounts incurred to pay premiums,
fees and expenses in connection therewith, (B) the Refinancing Indebtedness
shall have a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Indebtedness being extended,
refinanced, renewed, replaced, substituted or refunded; provided, however, that
this limitation in this clause (B) does not apply to Refinancing Indebtedness of
Senior Indebtedness, and (C) in the case of Refinancing Indebtedness of
Subordinated Indebtedness, such Refinancing Indebtedness shall be subordinated
to the Senior Notes at least to the same extent as the Subordinated Indebtedness
being extended, refinanced, renewed, replaced, substituted or refunded; (iv)
intercompany Indebtedness of and among the Company and its Restricted
Subsidiaries (excluding guarantees by Restricted Subsidiaries of Indebtedness of
the Company not issued
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in compliance with Section 4.15 hereof); (v) Indebtedness of the Company and
its Restricted Subsidiaries incurred in connection with making permitted
Restricted Payments under clauses (iii), (iv) (but only to the extent that such
Indebtedness is provided by the Company or a Restricted Subsidiary) or (x) of
Section 4.05(b) hereof; (vi) Indebtedness of any Non-Restricted Subsidiary
created after the date of original issuance of the Senior Notes, provided that
such Indebtedness is nonrecourse to the Company and its Restricted Subsidiaries
and the Company and its Restricted Subsidiaries have no Obligations with respect
to such Indebtedness; (vii) Indebtedness of the Company and its Restricted
Subsidiaries under Hedging Obligations; (viii) Indebtedness of the Company and
its Restricted Subsidiaries arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts, which will not be, and will not be
deemed to be, inadvertent) drawn against insufficient funds in the ordinary
course of business; (ix) Indebtedness of any Person at the time it is acquired
as a Restricted Subsidiary, provided that such Indebtedness was not issued by
such Person in connection with or in anticipation of such acquisition; (x)
guarantees by Restricted Subsidiaries of Indebtedness of any Restricted
Subsidiary if such Indebtedness so guaranteed is permitted under this
Indenture; (xi) guarantees by a Restricted Subsidiary of Indebtedness of the
Company if the Indebtedness so guaranteed is permitted under this Indenture
and the Senior Notes are guaranteed by such Restricted Subsidiary to the
extent required by Section 4.15 hereof; (xii) guarantees by the Company of
Indebtedness of any Restricted Subsidiary if the Indebtedness so guaranteed is
permitted under this Indenture; (xiii) Indebtedness of the Company and its
Restricted Subsidiaries in connection with performance, surety, statutory,
appeal or similar bonds in the ordinary course of business; (xiv) Indebtedness
of the Company and its Restricted Subsidiaries in connection with agreements
providing for indemnification, purchase price adjustments and similar
obligations in connection with the sale or disposition of any of their business,
properties or assets; and (xv) If the company issues Exchange Debentures in
exchange for the Senior Preferred Stock, the issuance of additional Exchange
Debentures in lieu of cash interest with respect to all interest payments
payable on or prior to , 2001, in accordance with the Exchange
Debenture Indenture.
"Permitted Liens" means:
(a) with respect to the Company and its Restricted Subsidiaries, (i)
Liens for taxes, assessments, governmental charges or claims which are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and if a reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made therefor;
(ii) statutory Liens of landlords and carriers', warehousemen's, mechanics',
suppliers', materialmen's, repairmen's or other like Liens arising in the
ordinary course of business and with respect to amounts not yet delinquent or
being contested in good faith by appropriate proceedings, if a reserve or
other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made therefor; (iii) Liens incurred on deposits made in
the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (iv) Liens incurred
on deposits made to secure the performance of tenders, bids, leases, statutory
obligations, surety and appeal bonds, government contracts, performance and
return of money bonds and other obligations of a like nature incurred in the
ordinary course of business (exclusive of obligations for the payment of
borrowed money); (v) easements, rights-of-way, zoning or other restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the business of the
Company or any of its Restricted Subsidiaries incurred in the ordinary course
of business; (vi) Liens (including extensions, renewals and replacements
thereof) upon property acquired (the "Acquired Property") after the date of
original issuance of the Senior Notes, provided that: (A) any such Lien is
created solely for the purpose of securing Indebtedness representing, or
issued to finance, refinance or refund, the cost (including the cost of
construction) of the Acquired Property, (B) the principal amount of the
Indebtedness secured by such Lien does not exceed 100% of the cost of the
Acquired Property, (C) such Lien does not extend to or cover any property
other than the Acquired Property and any improvements on such Acquired
Property, and (D) the issuance of the Indebtedness to purchase the Acquired
Property is permitted by Section 4.07 hereof; (vii) Liens in favor of customs
and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods; (viii) judgment
and
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attachment Liens not giving rise to an Event of Default; (ix) leases or
subleases granted to others not interfering in any material respect with the
business of the Company or any of its Restricted Subsidiaries; (x) Liens
securing Indebtedness under Hedging Obligations; (xi) Liens encumbering
deposits made to secure obligations arising from statutory, regulatory,
contractual or warranty requirements; (xii) Liens arising out of consignment
or similar arrangements for the sale of goods entered into by the Company or
its Restricted Subsidiaries in the ordinary course of business; (xiii) any
interest or title of a lessor in property subject to any capital lease
obligation or operating lease; (xiv) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xv) Liens existing on
the date of original issuance of the Senior Notes and any extensions,
refinancings, renewals, replacements, substitutions or refundings thereof;
(xvi) any Lien granted to the Trustee and any substantially equivalent Lien
granted to any trustee or similar institution under any indenture for Senior
Indebtedness permitted by the terms of this Indenture; (xvii) Liens in respect
of (A) and BKC Intercreditor Agreement or (B) other BKC Agreements that do not
constitute Indebtedness; and (xviii) additional Liens at any one time
outstanding in respect of properties or assets where aggregate fair market value
does not exceed $5,000,000 (the fair market value to be determined on the date
such Lien is granted on such properties or assets);
(b) with respect to the Restricted Subsidiaries, (i) Liens securing
Restricted Subsidiaries' reimbursement Obligations with respect to letters of
credit that encumber documents and other property relating to such letters of
credit and the products and proceeds thereof; (ii) Liens securing Indebtedness
issued by Restricted Subsidiaries if such Indebtedness is (A) under the Credit
Agreement, or (B) permitted by Section 4.07(a) hereof, clauses (i), (ii) or
(iii) clauses (i), (iii) (to the extent the Indebtedness subject to such
Refinancing Indebtedness was subject to Liens), (vi), (vii), (ix) or (x) of the
definition of Other Permitted Indebtedness; (iii) Liens securing intercompany
Indebtedness issued by any Restricted Subsidiary to the Company or another
Restricted Subsidiary; and (iv) Liens securing guarantees by Restricted
Subsidiaries of Indebtedness issued by the Company if such guarantees permitted
by clause (xi) (but only in respect of the property, rights and assets of the
Restricted Subsidiaries issuing such guarantees) of the definition of Other
Permitted Indebtedness;
(c) with respect to the Company, (i) Liens securing Indebtedness
issued by the Company if such Indebtedness is (A) under the Credit Agreement,
or (B) if such Indebtedness is permitted by Section 4.07 hereof (including,
but not limited to, Indebtedness issued by the Company under the Credit
Agreement pursuant to clause (i) and/or clause (iii) of Section 4.07(b)
hereof); (ii) Liens securing Indebtedness of the Company if such Indebtedness
is permitted by clauses (i), (iii) (to the extent the Indebtedness subject to
such Refinancing Indebtedness was subject to Liens) or (vii) of the definition
of Other Permitted Indebtedness; (iii) Liens securing guarantees by the
Company of Indebtedness issued by Restricted Subsidiaries if such Indebtedness
is permitted by Section 4.07 hereof (including, but not limited to,
Indebtedness issued by Restricted Subsidiaries under the Credit Agreement
pursuant to clause (i) and/or clause (iii) of Section 4.07(b) hereof) and if
such guarantees are permitted by clause (xii) (but only in respect of
3Indebtedness issued by the Restricted Subsidiaries under the Credit Agreement
pursuant to Section 4.07 hereof) of the definition of Other Permitted
Indebtedness; and (iv) Liens securing the Company's reimbursement obligations
with respect to letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds thereof;
provided, however, that, notwithstanding any of the foregoing, the Permitted
Liens referred to in clause (c) of this definition shall not include any Lien
on Capital Stock of Restricted Subsidiaries held directly by the Company (as
distinguished from Liens on Capital Stock of Restricted Subsidiaries held by
other Restricted Subsidiaries) other than Liens securing (A) Indebtedness of
the Company issued under the Credit Agreement pursuant to Section 4.07 hereof
and any permitted Refinancing Indebtedness of such Indebtedness, (B) Liens in
respect of (1) the BKC Intercreditor Agreement and (2) other BKC Agreements that
do not constitute Indebtedness and (C) guarantees by the Company of Indebtedness
issued by Restricted Subsidiaries under the Credit Agreement pursuant to Section
4.07 hereof and any permitted Refinancing Indebtedness of such Indebtedness.
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"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Post-Petition Interest" means, with respect to any Senior
Indebtedness, all interest accrued or accruing on such Senior Indebtedness
after the commencement of any Insolvency or Liquidation proceeding in
accordance with and at the contract rate (including, without limitation, any
rate applicable upon default) specified in the agreement or instrument
creating, evidencing or governing such Senior Indebtedness, whether or not,
pursuant to applicable law or otherwise, the claim for such interest is
allowed as a claim in such Insolvency or Liquidation Proceeding.
"Pro Forma Basis" means, for purposes of determining Consolidated Net
Income in connection with the Cash Flow Coverage Ratio (including in
connection with Section 4.05, Section 4.16 and Section 5.01 hereof, the
incurrence of Indebtedness pursuant to Section 4.07(a) hereof and Consolidated
Net Worth for purposes of Section 5.01 hereof), giving pro forma effect to (x)
any acquisition or sale of a Person, business or asset, related incurrence,
repayment or refinancing of Indebtedness or other related transactions,
including any Restructuring Charges which would otherwise be accounted for as
an adjustment pursuant to Regulation S-X under the Securities Act or on a pro
forma basis under GAAP, or (y) any incurrence, repayment or refinancing of any
Indebtedness and the application of the proceeds therefrom, in each case, as
if such acquisition or sale and related transactions, restructurings,
consolidations, cost savings, reductions, incurrence, repayment or refinancing
were realized on the first day of the relevant period permitted by Regulation
S-X under the Securities Act or on a pro forma basis under GAAP. Furthermore, in
calculating the Cash Flow Coverage Ratio, (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the determination date
and which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the determination date; (2) if interest on any
Indebtedness actually incurred on the determination date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate,
a eurocurrency interbank offered rate, or other rates, then the interest rate
in effect on the determination date will be deemed to have been in effect
during the relevant period; and (3) notwithstanding clause (1) above, interest
on Indebtedness determined on a fluctuating basis, to the extent such interest
is covered by agreements relating to interest rate swaps or similar interest
rate protection Hedging Obligations, shall be deemed to accrue at the rate per
annum resulting after giving effect to the operation of such agreements.
"Prospectus" means the Prospectus, dated ____________, 1996, relating
to the Company's offering and placement of the Senior Notes to the public.
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"Redeemable Preferred Stock" means preferred stock that by its terms
or otherwise is required to be redeemed or is redeemable at the option of the
holder thereof on, or prior to, the maturity date of the Senior Notes.
"Refinancing Indebtedness" means (i) Indebtedness of the Company and
its Restricted Subsidiaries issued or given in exchange for, or the proceeds
of which are used to, extend, refinance, renew, replace, substitute or refund
any Indebtedness permitted under this Indenture or any Indebtedness issued to
so extend, refinance, renew, replace, substitute or refund such Indebtedness,
(ii) any refinancings of Indebtedness issued under the Credit Agreement, and
(iii) any additional Indebtedness issued to pay premiums and fees in
connection with clauses (i) and (ii).
"Restricted Investment" means any Investment in any person; provided
that Restricted Investments will not include: (i) Investments in marketable
securities and other negotiable instruments permitted by this Indenture; (ii)
any Incentive Arrangement; (iii) Investments in the Company; or (iv) Investments
in any Restricted Subsidiary (provided that any Investment in a Restricted
Subsidiary was made for fair market value (as determined by the Board of
Directors in good faith)). The amount of any Restricted Investment shall be the
amount of cash and the fair market value at the time of transfer of all other
property (as determined by the Board of Directors in good faith) initially
invested or paid for such Restricted Investment, plus all additions thereto,
without any adjustments for increases or decreases in value of or write-ups,
write-downs or write-offs with respect to, such Restricted Investment.
"Restricted Subsidiary" means: (i) any Subsidiary of the Company
existing on the date of original issuance of the Senior Notes, and (ii) any
other Subsidiary of the Company formed, acquired or existing after the date of
original issuance of the Senior Notes that is designated as a "Restricted
Subsidiary" by the Company pursuant to a resolution approved by a majority of
the Board of Directors, provided, however, that the term Restricted Subsidiary
shall not include any Subsidiary of the Company that has been redesignated by
the Company pursuant to a resolution approved by a majority of the Board of
Directors as a Non-Restricted Subsidiary in accordance with Section 4.16
hereof unless such Subsidiary shall have subsequently been redesignated a
Restricted Subsidiary in accordance with clause (ii) of this definition.
"Restructuring Charges" means any charges or expenses in respect of
restructuring or consolidating any business, operations or facilities, any
compensation or headcount reduction, or any other cost savings, of any Persons
or businesses either alone or together with the Company or any Restricted
Subsidiary, as permitted by GAAP or Regulation S-X under the Securities Act.
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"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means: (i) all Obligations (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law) on any Indebtedness of
the Company, whether outstanding on the date of issuance of the Senior Notes
or thereafter created, incurred or assumed, of the following types: (A) all
Indebtedness of the Company (including without limitation the Senior Notes)
for money borrowed, and (B) all Indebtedness evidenced by notes, debentures,
bonds or other similar instruments for the payment of which the Company is
responsible or liable; (ii) all capitalized lease obligations of the Company;
(iii) all Obligations of the Company: (A) for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction,
(B) all constituting Hedging Obligations, or (C) issued as the deferred
purchase price of property and all conditional sale Obligations of the Company
and all Obligations of the Company under any title retention agreement; (iv)
all guarantees of the Company with respect to Obligations of other Persons of
the type referred to in clauses (ii) and (iii) and with respect to the payment
of dividends of other Persons; and (v) all Obligations of the Company
consisting of modifications, renewals, extensions, replacements and refundings
of any Obligations described in clauses (i), (ii), (iii) or (iv) unless, in
the instrument creating or evidencing the same or pursuant to which the same
is outstanding, it is expressly provided that such Obligations are
subordinated or junior in right of payment to the Senior Notes; provided,
however, that Senior Indebtedness shall not be deemed to include: (1) any
Obligation of the Company to any Subsidiary, (2) any liability for federal,
state, local or other taxes owed or owing by the Company, (3) any accounts
payable or other liability to trade creditors arising in the ordinary course
of business (including guarantees thereof or instruments evidencing such
liabilities), (4) any Indebtedness, guarantee or Obligation of the Company
that is contractually subordinated or junior in any respect to any other
Indebtedness, guarantee or Obligation of the Company, or (5) any Indebtedness
to the extent the same is incurred in violation of this Indenture. Senior
Indebtedness shall include all Obligations in respect of the Senior Notes and
this Indenture.
To the extent any payment on the Senior Notes, whether by or on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise, is declared to be fraudulent or preferential, set aside
or required to be paid to a trustee, receiver or other similar party under any
bankruptcy, insolvency, receivership or similar law, then if such payment is
recovered by, or paid over to, such trustee, receiver or other similar party,
the Senior Notes or part thereof originally intended to be satisfied by such
payment shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
"Senior Note Custodian" means the Trustee, as custodian with respect
to the Senior Notes in global form, or any successor entity thereto.
"Senior Preferred Stock" means the Company's % Senior Exchangeable
Preferred Stock due 2008.
"SFAS 106" means Statement of Financial Accounting Standards No. 106.
"SFAS 109" means Statement of Financial Accounting Standards No. 109.
"Significant Subsidiary" means any Restricted Subsidiary of the
Company that would be a "significant subsidiary" as defined in clause (2) of
the definition of such term in Rule 1-02 of Regulation S-X under the
Securities Act and the Exchange Act.
"Subordinated Indebtedness" means all Obligations of the type
referred to in clauses (i) through (v) of the definition of Senior
Indebtedness, if the instrument creating or evidencing the same, or pursuant
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to which the same is outstanding, designates such Obligations as subordinated
or junior in right of payment to Senior Indebtedness.
"Subsidiary" of any Person means any entity of which the Equity
Interests entitled to cast at least a majority of the votes that may be cast
by all Equity Interests having ordinary voting power for the election of
directors or other governing body of such entity are owned by such Person
(regardless of whether such Equity Interests are owned directly by such Person
or through one or more Subsidiaries).
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of original issuance of
the Senior Notes.
"TJC Agreement" means the Management Consulting Agreement, dated
February 7, 1996, between the Company and TJC Management Corporation, as in
effect on the date of original issuance of the Senior Notes.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Trust Officer" means, when used with respect to the Trustee, any
officer within the corporate trust administration department of the Trustee
(or any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above designated officers, and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referenced
because of his knowledge of, and familiarity with, the particular subject.
"U.S. Government Obligations" means direct obligations of the United
States of America for the payment of which the full faith and credit of the
United States of America is pledged, provided that no U.S. Government
Obligation shall be callable at the issuer's option.
"Voting Stock" means any class or classes of Capital Stock pursuant
to which the holders thereof have the general voting power under ordinary
circumstances to elect the board of directors.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the
then outstanding principal amount of such Indebtedness into (ii) the sum of
the product(s) obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other requirement payment of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction"................................. 4.08
"Asset Sale Disposition Date"........................... 4.14
"Asset Sale Trigger Date"............................... 4.14
"Change of Control Trigger Date"........................ 4.13
"covenant defeasance option"............................ 8.01
"Disposition"........................................... 5.01
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"DTC"................................................... 2.03
"Event of Default"...................................... 6.01
"Excess Proceeds"....................................... 4.14
"legal defeasance option"............................... 8.01
"Notice of Default"..................................... 6.01
"Offer"................................................. 3.08
"Other Company Indebtedness"............................ 4.15
"Other Indebtedness Guarantee".......................... 4.15
"Paying Agent".......................................... 2.03
"Purchase Date"......................................... 3.08
"Registrar"............................................. 2.03
"Restricted Payments"................................... 4.05
"Successor Corporation"................................. 5.01
"Trustee Expenses"...................................... 6.08
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in, and made a part of, this Indenture.
Any terms incorporated by reference in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
under the TIA have the meanings so assigned to them therein.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein;
(2) an accounting term not otherwise defined herein has the
meaning assigned to it under GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
SECTION 1.05. INCORPORATION OF BURGER KING AGREEMENT.
Concurrently with the execution of this Indenture, the Trustee shall
execute and deliver to Burger King Corporation the Burger King Agreement. The
Senior Notes shall be subject to the terms of the Burger King Agreement, which
are incorporated by reference herein.
ARTICLE 2
THE SENIOR NOTES
SECTION 2.01. FORM AND DATING.
The Senior Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A, which is part of this
Indenture. The Senior Notes may have notations, legends or endorsements
required by law, stock exchange rule or usage. Each Senior Note shall be dated
the date of its authentication. The Senior Notes shall be in denominations of
$1,000 and integral multiples thereof.
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The terms and provisions contained in the Senior Notes shall
constitute, and are hereby expressly made, a part of this Indenture and, to
the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and
to be bound thereby.
Each Global Senior Note shall represent such of the outstanding
Senior Notes as shall be specified therein and each shall provide that it
shall represent the aggregate amount of outstanding Senior Notes from time to
time endorsed thereon and that the aggregate amount of outstanding Senior
Notes represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Senior Note to reflect the amount of any increase or decrease in the amount of
outstanding Senior Notes represented thereby shall be made by the Trustee or
the Senior Note Custodian, at the direction of the Trustee, in accordance with
instructions given by the Holder thereof as required by Section 2.06 hereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
One Officer shall sign the Senior Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Senior Note no longer holds
that office at the time a Senior Note is authenticated, the Senior Note shall
nevertheless be valid.
A Senior Note shall not be valid until authenticated by the manual
signature of an authorized signatory of the Trustee, and the Trustee's
signature shall be conclusive evidence that the Senior Note has been
authenticated under this Indenture. The form of Trustee's certificate of
authentication to be borne by the Senior Notes shall be substantially as set
forth in Exhibit A.
The Trustee shall, upon a written order of the Company signed by two
Officers directing the Trustee to authenticate the Senior Notes and certifying
that all conditions precedent to the issuance of the Senior Notes contained
herein have been complied with, authenticate Senior Notes for original
issuance up to an aggregate principal amount stated in paragraph 4 of the
Senior Notes (the aggregate principal amount of outstanding Senior Notes may
not exceed that amount at any time, except as provided in Section 2.07
hereof).
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Senior Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Senior Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent. An authenticating agent has
the same rights as an Agent to deal with the Company or an Affiliate of the
Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency (the "Registrar")
where Senior Notes may be presented for registration of transfer or for
exchange and an office or agency (the "Paying Agent") where Senior Notes may
be presented for payment. The Registrar shall keep a register of the Senior
Notes and of their transfer and exchange. The Company may appoint one or more
co-registrars and one or more additional paying agents. The term "Registrar"
includes any co-registrar, and the term "Paying Agent" includes any additional
paying agent. The Company may change any Paying Agent or Registrar without
prior notice to any Holder. The Company shall notify in writing the Trustee
and the Trustee shall notify the Holders in writing of the name and address of
any Agent not a party to this Indenture. If the Company fails to appoint or
maintain another entity as Registrar or Paying Agent, the Trustee shall act
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as such. The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, and such agreement shall incorporate the
TIA's provisions and implement the provisions of this Indenture that relate to
such Agent.
The Company initially appoints The Depository Trust Company ("DTC")
to act as Depositary with respect to the Global Senior Notes.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the Senior
Notes and as Senior Note Custodian with respect to the Global Senior Notes.
The Company or any of its Subsidiaries may act as Paying Agent, Registrar or
co-registrar. If the Company fails to appoint or maintain a Registrar and
Paying Agent, the Trustee shall act as such, and shall be entitled to
appropriate compensation in accordance with Section 7.07 hereof.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the Holders'
benefit or the Trustee all money the Paying Agent holds for redemption or
purchase of the Senior Notes or for the payment of principal of, or premium,
if any, or interest on, the Senior Notes, and will promptly notify the Trustee
of any Default by the Company in providing the Paying Agent with sufficient
funds to (i) purchase Senior Notes tendered pursuant to an Offer arising under
Section 4.13 hereof, (ii) redeem Senior Notes called for redemption, or (iii)
make any payment of principal, premium or interest due on the Senior Notes.
While any such Default continues, the Trustee may require the Paying Agent to
pay all money it holds to the Trustee and to account for any funds disbursed.
The Company at any time may require the Paying Agent to pay all money it holds
to the Trustee and to account for any funds disbursed. Upon payment over to
the Trustee, the Paying Agent (if other than the Company or any of its
Subsidiaries) shall have no further liability for the money it delivered to
the Trustee. If the Company or any of its Subsidiaries acts as Paying Agent,
it shall segregate and hold in a separate trust fund for the Holders' benefit
or the Trustee all money it holds as Paying Agent.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require that sets forth the names and addresses of, and
the aggregate principal amount of Senior Notes held by, each Holder, and the
Company shall otherwise comply with Section 312(a) of the TIA.
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Definitive Senior Notes. When Definitive
Senior Notes are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Definitive Senior Notes; or
(y) to exchange such Definitive Senior Notes for an equal
principal amount of Definitive Senior Notes of other
authorized denominations,
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the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Senior Notes presented or surrendered for register of transfer or
exchange shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing.
(b) Transfer of a Definitive Senior Note for a Beneficial Interest in
a Global Senior Note. A Definitive Senior Note may not be exchanged for a
beneficial interest in a Global Senior Note except upon satisfaction of the
requirements set forth herein. Upon receipt by the Trustee of a Definitive
Senior Note, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Trustee, together with written
instructions from the Holder thereof directing the Trustee to make, or to
direct the Senior Note Custodian to make, an endorsement on the Global Senior
Note to reflect an increase in the aggregate principal amount of the Senior
Notes represented by the Global Senior Note, the Trustee shall cancel such
Definitive Senior Note in accordance with Section 2.11 hereof and cause, or
direct the Senior Note Custodian to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the Senior
Note Custodian, the aggregate principal amount of Senior Notes represented by
the Global Senior Note to be increased accordingly. If no Global Senior Notes
are then outstanding, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, the Trustee shall
authenticate a new Global Senior Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Senior Notes. The transfer and
exchange of Global Senior Notes or beneficial interests therein shall be
effected through the Depositary, in accordance with this Indenture and the
procedures of the Depositary therefor, which shall include restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act.
(d) Transfer of a Beneficial Interest in a Global Senior Note for a
Definitive Senior Note.
(i) Any Person having a beneficial interest in a Global
Senior Note may upon request exchange such
beneficial interest for a Definitive Senior Note.
Upon receipt by the Trustee of written instructions
or such other form of instructions as is customary
for the Depositary, from the Depositary or its
nominee on behalf of any Person having a beneficial
interest in a Global Senior Note, the Trustee or
the Senior Note Custodian, at the direction of the
Trustee, shall, in accordance with the standing
instructions and procedures existing between the
Depositary and the Senior Note Custodian, cause the
aggregate principal amount of Global Senior Notes
to be reduced accordingly and, following such
reduction, the Company shall execute and, upon
receipt of an authentication order in accordance
with Section 2.02 hereof, the Trustee shall
authenticate and deliver to the transferee a
Definitive Senior Note in the appropriate principal
amount.
(ii) Definitive Senior Notes issued in exchange for a
beneficial interest in a Global Senior Note
pursuant to this Section 2.06(d) shall be
registered in such names and in such authorized
denominations as the Depositary, pursuant to
instructions from its direct or indirect
participants or otherwise, shall instruct the
Trustee. The Trustee shall deliver in accordance
with the standard procedures of the Depositary such
Definitive Senior Notes to the Persons in whose
names such Senior Notes are so registered.
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(e) Restrictions on Transfer and Exchange of Global Senior Notes.
Notwithstanding any other provision of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.06), a Global Senior
Note may not be transferred as a whole except by the Depositary to a nominee
of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or by the Depositary or any such nominee to
a successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Senior Notes in Absence of
Depositary. If at any time:
(i) the Depositary for the Senior Notes notifies the
Company that the Depositary is unwilling or unable
to continue as Depositary for the Global Senior
Notes and a successor Depositary for the Global
Senior Notes is not appointed by the Company within
90 days after delivery of such notice; or
(ii) The Company, at its sole discretion, notifies the
Trustee in writing that it elects to cause the
issuance of Definitive Senior Notes under this
Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Senior Notes in an aggregate principal amount equal to the
principal amount of the Global Senior Notes in exchange for such Global Senior
Notes and registered in such names as the Depositary shall instruct the
Trustee or the Company in writing.
(g) Cancellation and/or Adjustment of Global Senior Notes. At such
time as all beneficial interests in Global Senior Notes have been exchanged
for Definitive Senior Notes, redeemed, repurchased or cancelled, all Global
Senior Notes shall be returned to or retained and cancelled by the Trustee in
accordance with Section 2.11 hereof. At any time prior to such cancellation,
if any beneficial interest in a Global Senior Note is exchanged for Definitive
Senior Notes, redeemed, repurchased or cancelled, the principal amount of
Senior Notes represented by such Global Senior Note shall be reduced
accordingly and an endorsement shall be made on such Global Senior Note, by
the Trustee or the Senior Notes Custodian, at the direction of the Trustee, to
reflect such reduction.
(h) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall
authenticate Definitive Senior Notes and Global
Senior Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the
Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental
charge payable in connection therewith (other than
any such transfer taxes or similar governmental
charge payable upon exchange or transfer pursuant
to Sections 3.07, 4.13, 4.14 and 9.05 hereof).
(iii) Neither the Company nor the Registrar shall be
required to register the transfer of or exchange
any Senior Note selected for redemption in whole or
in part, except the unredeemed portion of any
Senior Note being redeemed in part.
(iv) All Definitive Senior Notes and Global Senior Notes
issued upon any registration of transfer or
exchange of Definitive Senior Notes or Global
Senior Notes in
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accordance with this Indenture (including any
increase in the aggregate principal amount of the
Senior Notes represented by the Global Senior Note
pursuant to subsection (b) above) shall be the
valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under
this Indenture, as the Definitive Senior Notes or
Global Senior Notes surrendered upon such
registration of transfer or exchange.
(v) The Company shall not be required to issue Senior
Notes and the Registrar shall not be required to
register the transfer of or to exchange Senior
Notes during a period beginning at the opening of
business 15 days before the day of any selection of
Senior Notes for redemption under Section 3.02
hereof and ending at the close of business on the
day of selection, or to register the transfer of or
to exchange a Senior Note between a record date and
the next succeeding interest payment date.
(vi) Prior to due presentment for the registration of a
transfer of any Senior Note, the Trustee, any Agent
and the Company may deem and treat the Person in
whose name any Senior Note is registered as the
absolute owner of such Senior Note for the purpose
of receiving payment of principal of, premium, if
any, and accrued and unpaid interest on such Senior
Notes, and neither the Trustee, any Agent nor the
Company shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Definitive Senior
Notes and Global Senior Notes in accordance with
the provisions of Section 2.02 hereof.
SECTION 2.07. REPLACEMENT SENIOR NOTES.
If any mutilated Senior Note is surrendered to the Trustee, or the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Senior Note, the Company shall issue and the
Trustee, upon the Company's written order signed by two Officers, shall
authenticate a replacement Senior Note if the Trustee's requirements are met.
If the Trustee or the Company requires it, the Holder must supply an indemnity
bond that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Agent or any authenticating agent from
any loss that any of them may suffer if a Senior Note is replaced. The Company
and the Trustee may charge for their expenses in replacing a Senior Note.
Every replacement Senior Note is an additional Obligation of the Company.
SECTION 2.08. OUTSTANDING SENIOR NOTES.
The Senior Notes outstanding at any time are all the Senior Notes the
Trustee has authenticated except for those it has cancelled, those delivered
to it for cancellation, those representing reductions in the interest in a
Global Senior Note effected by the Trustee in accordance with the provisions
hereof, and those described in this Section as not outstanding.
If a Senior Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that a bona fide purchaser holds the replaced Senior Note.
If the entire principal of, and premium, if any, and accrued interest
on, any Senior Note is considered paid under Section 4.01 hereof, it ceases to
be outstanding and interest on it ceases to accrue.
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Subject to Section 2.09 hereof, a Senior Note does not cease to be
outstanding because the Company or an Affiliate holds the Senior Note.
SECTION 2.09. TREASURY SENIOR NOTES.
In determining whether the Holders of the required principal amount
of Senior Notes have concurred in any direction, waiver or consent, Senior
Notes owned by the Company or an Affiliate shall be considered as though not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Senior Notes that a Trust Officer of the Trustee knows are so owned shall be
so disregarded. Notwithstanding the foregoing, Senior Notes that the Company
or an Affiliate offers to purchase or acquires pursuant to an Offer, exchange
offer, tender offer or otherwise shall not be deemed to be owned by the
Company or an Affiliate until legal title to such Senior Notes passes to the
Company or such Affiliate, as the case may be.
SECTION 2.10. TEMPORARY SENIOR NOTES.
Until Definitive Senior Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Senior Notes. Temporary
Senior Notes shall be substantially in the form of Definitive Senior Notes but
may have variations that the Company considers appropriate for temporary
Senior Notes. Without unreasonable delay, the Company shall prepare and the
Trustee, upon receipt of the Company's written order signed by two Officers
which shall specify the amount of temporary Senior Notes to be authenticated
and the date on which the temporary Senior Notes are to be authenticated,
shall authenticate Definitive Senior Notes and deliver them in exchange for
temporary Senior Notes. Until such exchange, Holders of temporary Senior Notes
shall be entitled to the same rights, benefits and privileges as Definitive
Senior Notes.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Senior Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Senior Notes surrendered to them for registration of transfer, exchange,
replacement, payment (including all Senior Notes called for redemption and all
Senior Notes accepted for payment pursuant to an Offer) or cancellation, and
the Trustee shall cancel all such Senior Notes and shall destroy all cancelled
Senior Notes (subject to the Exchange Act's record retention requirements) and
deliver a certificate of their destruction to the Company unless by written
order, signed by two Officers of the Company, the Company shall direct that
cancelled Senior Notes be returned to it. The Company may not issue new Senior
Notes to replace any Senior Notes that have been cancelled by the Trustee or
that have been delivered to the Trustee for cancellation. If the Company or an
Affiliate acquires any Senior Notes (other than by redemption or pursuant to
an Offer), such acquisition shall not operate as a redemption or satisfaction
of the Indebtedness represented by such Senior Notes unless and until such
Senior Notes are delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Senior Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to Holders on a subsequent
special record date, in each case at the rate provided in the Senior Notes and
in Section 4.01 of this Indenture. The Company shall fix or cause to be fixed
each such special record date and payment date. As early as practicable prior
to the special record date, the Company (or the
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Trustee, in the name of and at the expense of the Company) shall mail a notice
that states the special record date, the related payment date and the amount
of interest to be paid.
SECTION 2.13. RECORD DATE.
The record date for purposes of determining the identity of Holders
of Senior Notes entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided
for in section 316(c) of the TIA.
SECTION 2.14. CUSIP NUMBER.
A "CUSIP" number shall be printed on the Senior Notes, and the
Trustee shall use the CUSIP number in notices of redemption, purchase or
exchange as a convenience to Holders, provided that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Senior Notes and that reliance may be
placed only on the other identification numbers printed on the Senior Notes.
The Company shall promptly notify the Trustee of any change in the CUSIP
number.
ARTICLE 3
OPTIONAL REDEMPTION AND MANDATORY OFFERS TO PURCHASE
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Senior Notes pursuant to Section 3.07
hereof, it shall furnish to the Trustee, at least 10 but not more than 15 days
before notice of redemption is to be mailed by the Company to Holders, an
Officers' Certificate stating that the Company has elected to redeem Senior
Notes pursuant to Section 3.07(a) or 3.07(b) hereof, as the case may be, the
date notice of redemption is to be mailed to Holders, the redemption date, the
aggregate principal amount of Senior Notes to be redeemed, the redemption
price for such Senior Notes and the amount of accrued and unpaid interest on
such Senior Notes as of the redemption date. If the Trustee is not the
Registrar, the Company shall, concurrently with delivery of its notice to the
Trustee of a redemption, cause the Registrar to deliver to the Trustee a
certificate (upon which the Trustee may rely) setting forth the name of, and
the aggregate principal amount of Senior Notes held by, each Holder.
If the Company is required to offer to purchase Senior Notes pursuant
to Section 4.13 or 4.14 hereof, it shall furnish to the Trustee, at least two
Business Days before notice of the Offer is to be mailed to Holders, an
Officers' Certificate setting forth that the Offer is being made pursuant to
Section 4.13 or 4.14 hereof, as the case may be, the Purchase Date, the
maximum principal amount of Senior Notes the Company is offering to purchase
pursuant to the Offer, the purchase price for such Senior Notes, and the
amount of accrued and unpaid interest on such Senior Notes as of the Purchase
Date.
The Company will also provide the Trustee with any additional
information that the Trustee reasonably requests in connection with any
redemption or Offer.
SECTION 3.02. SELECTION OF SENIOR NOTES TO BE REDEEMED OR PURCHASED.
If less than all outstanding Senior Notes are to be redeemed or if
less than all Senior Notes tendered pursuant to an Offer are to be accepted
for payment, the Trustee shall select the outstanding Senior Notes to be
redeemed or accepted for payment pro rata, by lot or by a method that complies
with
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the requirements of any stock exchange on which the Senior Notes are listed
and that the Trustee considers fair and appropriate. If the Company elects to
mail notice of a redemption to Holders, the Trustee shall at least 5 business
days prior to the date notice of redemption is to be mailed, (i) select the
Senior Notes to be redeemed from Senior Notes outstanding not previously
called for redemption and (ii) notify the Company of the names of each Holder
of Senior Notes selected for redemption, the principal amount of Senior Notes
held by each such Holder and the principal amount of such Holder's Senior
Notes that are to be redeemed. If less than all Senior Notes tendered pursuant
to an Offer on the Purchase Date are to be accepted for payment, the Trustee
shall select on or promptly after the Purchase Date the Senior Notes to be
accepted for payment. The Trustee shall select for redemption or purchase
Senior Notes or portions of Senior Notes in principal amounts of $1,000 or
integral multiples of $1,000; except that if all of the Senior Notes of a
Holder are selected for redemption or purchase, the aggregate principal amount
of the Senior Notes held by such Holder, even if not a multiple of $1,000,
shall be redeemed or purchased. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Senior Notes called for redemption
or tendered pursuant to an Offer also apply to portions of Senior Notes called
for redemption or tendered pursuant to an Offer. The Trustee shall notify the
Company promptly of the Senior Notes or portions of Senior Notes to be called
for redemption or selected for purchase.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail a notice of redemption to each Holder of Senior Notes
or portions thereof that are to be redeemed at such Holder's registered address.
The notice shall identify the Senior Notes or portions thereof to be
redeemed and shall state:
(1) the redemption date;
(2) the redemption price for the Senior Notes and
separately stating the amount of unpaid and accrued
interest on such Senior Notes as of the date of
redemption;
(3) if any Senior Note is being redeemed in part, the
portion of the principal amount of such Senior
Notes to be redeemed and that, after the redemption
date, upon surrender of such Senior Note, a new
Senior Note or Senior Notes in principal amount
equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Senior Notes called for redemption must be
surrendered to the Paying Agent to collect the
redemption price for, and any accrued and unpaid
interest on, such Senior Notes;
(6) that, unless the Company defaults in making such
redemption payment, interest on Senior Notes called
for redemption ceases to accrue on and after the
redemption date;
(7) the paragraph of the Senior Notes pursuant to which
the Senior Notes called for redemption are being
redeemed; and
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(8) the CUSIP number; provided that no representation
is made as to the correctness or accuracy of the
CUSIP number listed in such notice and printed on
the Senior Notes.
At the Company's request, the Trustee shall (at the Company's
expense) give the notice of redemption in the Company's name at least 30 but
not more than 60 days before a redemption; provided, however, that the Company
shall deliver to the Trustee, at least 45 days prior to the redemption date
and at least 10 days prior to the date that notice of the redemption is to be
mailed to Holders, an Officers' Certificate that (i) requests the Trustee to
give notice of the redemption to Holders, (ii) sets forth the information to
be provided to Holders in the notice of redemption, as set forth in the
preceding paragraph, (iii) states that the Company has elected to redeem
Senior Notes pursuant to Section 3.07(a) or 3.07(b) hereof, as the case may
be, and (iv) sets forth the aggregate principal amount of Senior Notes to be
redeemed and the amount of accrued and unpaid interest thereon as of the
redemption date. If the Trustee is not the Registrar, the Company shall,
concurrently with any such request, cause the Registrar to deliver to the
Trustee a certificate (upon which the Trustee may rely) setting forth the name
of, the address of, and the aggregate principal amount of Senior Notes held
by, each Holder.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Senior Notes called for
redemption become due and payable on the redemption date at the price set
forth in the Senior Note. Upon surrender to the Trustee or Paying Agent, such
Senior Notes called for redemption shall be paid at the redemption price
(which shall include accrued interest thereon to the redemption date) but
installments of interest, the maturity of which is on or prior to the
redemption date, shall be payable to Holders of record at the close of
business on the relevant record dates. On and after any redemption or purchase
date, interest shall cease to accrue on the Senior Notes or portions thereof
called for redemption or accepted for payment.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or prior to any redemption date, the Company shall deposit with
the Trustee or with the Paying Agent money sufficient to pay the redemption
price of, and accrued interest on, all Senior Notes to be redeemed on that
date. The Trustee or the Paying Agent shall return to the Company any money
that the Company deposited with the Trustee or the Paying Agent in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Senior Notes to be redeemed.
If the Company complies with the preceding paragraph, interest on the
Senior Notes to be redeemed will cease to accrue on such Senior Notes on the
applicable redemption date, whether or not such Senior Notes are presented for
payment. If a Senior Note is redeemed on or after an interest record date but
on or prior to the related interest payment date, then any accrued and unpaid
interest shall be paid to the Person in whose name such Senior Note was
registered at the close of business on such record date. If any Senior Note
called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest will be paid on the unpaid principal, premium, if any, and interest
from the redemption date until such principal, premium and interest is paid,
at the rate of interest provided in the Senior Notes and Section 4.01 hereof.
SECTION 3.06. SENIOR NOTES REDEEMED IN PART.
Upon surrender of a Senior Note that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the Holder at the Company's
expense a new Senior Note equal in principal amount to the unredeemed portion
of the Senior Note surrendered.
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SECTION 3.07. OPTIONAL REDEMPTION PROVISIONS.
(a) Except as provided in Section 3.07(b) hereof, the Senior Notes
may not be redeemed at the option of the Company prior to ____________, 2001.
During the twelve (12) month period beginning on ____________ of the years
indicated below, the Senior Notes will be redeemable at the option of the
Company, in whole or in part, on at least 30 but not more than 60 days' notice
to each Holder of Senior Notes to be redeemed, at the redemption prices
(expressed as percentages of the principal amount) set forth below, plus any
accrued and unpaid interest to the redemption date:
Year Percentage
---- ----------
2001................................................... %
2002................................................... %
2003................................................... %
2004 and thereafter.................................... 100.000%
(b) Notwithstanding the foregoing, prior to ____________, 1999, the
Company may (but shall not have the obligation to) redeem up to 35% of the
original aggregate principal amount of the Senior Notes at a redemption price
of ___% of the principal amount thereof, plus accrued and unpaid interest to
the redemption date, with the net proceeds of one or more Equity Offerings;
provided that at least 65% of the aggregate principal amount of Senior Notes
originally issued remain outstanding immediately after the occurrence of any
such redemption; and provided, further, that any such redemption shall occur
within 60 days of the date of the closing of any such Equity Offering.
SECTION 3.08. MANDATORY PURCHASE PROVISIONS.
(a) Within 30 days after any Change of Control Trigger Date or Asset
Sale Trigger Date, the Company shall mail a notice to each holder at such
holder's registered address stating: (i) that an offer ("Offer") is being made
pursuant to Section 4.13 or Section 4.14 hereof, as the case may be, the
length of time the Offer shall remain open and the maximum aggregate principal
amount of Senior Notes that will be accepted for payment pursuant to such
Offer; (ii) the purchase price for the Senior Notes (as set forth in Section
4.13 or Section 4.14 hereof, as the case may be), the amount of accrued and
unpaid interest on such Senior Notes as of the purchase date, and the purchase
date (which shall be no earlier than 30 days and no later than 40 days from
the date such notice is mailed (the "Purchase Date")); (iii) that any Senior
Note not accepted for payment will continue to accrue interest; (iv) that,
unless the Company fails to deposit with the Paying Agent on the Purchase Date
an amount sufficient to purchase all Senior Notes accepted for payment,
interest shall cease to accrue on such Senior Notes after the Purchase Date;
(v) that Holders electing to tender any Senior Note or portion thereof will be
required to surrender their Senior Note, with a form entitled "Option of
Holder to Elect Purchase" completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the Business Day
preceding the Purchase Date, provided that Holders electing to tender only a
portion of any Senior Note must tender a principal amount of $1,000 or
integral multiples thereof; (vi) that Holders will be entitled to withdraw
their election to tender Senior Notes, if the Paying Agent receives, not later
than the close of business on the third Business Day preceding the Purchase
Date, a telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Senior Notes delivered for
purchase, and a statement that such Holder is withdrawing his election to have
such Senior Note purchased; and (vii) that Holders whose Senior Notes are
accepted for payment in part will be issued new Senior Notes equal in
principal amount to the unpurchased portion of Senior Notes surrendered;
provided that only Senior Notes in a principal amount of $1,000 or integral
multiples thereof will be accepted for payment in part.
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(b) On the Purchase Date for any Offer, the Company shall, to the
extent required by this Indenture and such Offer, (i) in the case of an Offer
resulting from a Change of Control, accept for payment all Senior Notes or
portions thereof tendered pursuant to such Offer and, in the case of an Offer
resulting from an Asset Sale Trigger Date, accept for payment the maximum
principal amount of Senior Notes or portions thereof tendered pursuant to such
Offer that can be purchased out of the Excess Proceeds, (ii) deposit with the
Paying Agent the aggregate purchase price of all Senior Notes or portions
thereof accepted for payment and any accrued and unpaid interest on such Senior
Notes as of the Purchase Date, and (iii) deliver or cause to be delivered to the
Trustee all Senior Notes tendered pursuant to the Offer.
(c) With respect to any Offer, if less than all of the Senior Notes
tendered pursuant to an Offer are to be purchased by the Company, the Trustee
shall select on the Purchase Date the Senior Notes or portions thereof to be
accepted for payment pursuant to Section 3.02 hereof.
(d) Promptly after consummation of an Offer, (i) the Paying Agent
shall mail (or cause to be transferred by book entry) to each Holder of Senior
Notes or portions thereof accepted for payment an amount equal to the purchase
price for, plus any accrued and unpaid interest on, such Senior Notes, (ii)
with respect to any tendered Senior Note not accepted for payment in whole or
in part, the Trustee shall return such Senior Note to the Holder thereof, and
(iii) with respect to any Senior Note accepted for payment in part, the
Trustee shall authenticate and mail to each such Holder a new Senior Note
equal in principal amount to the unpurchased portion of the tendered Senior
Note.
(e) The Company will publicly announce the results of the Offer on or
as soon as practicable after the Purchase Date.
(f) The Company shall comply with any tender offer rules under the
Exchange Act which may then be applicable, including Rule 14e-1, in connection
with an Offer required to be made by the Company to repurchase the Senior
Notes as a result of a Change of Control Trigger Date or an Asset Sale Trigger
Date. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Indenture by virtue thereof.
(g) With respect to any Offer, if the Company deposits prior to 10
a.m. New York City time with the Paying Agent on the Purchase Date an amount
in available funds sufficient to purchase all Senior Notes accepted for
payment, interest shall cease to accrue on such Senior Notes after the
Purchase Date; provided, however, that if the Company fails to deposit such
amount on the Purchase Date, interest shall continue to accrue on such Senior
Notes until such deposit is made.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF SENIOR NOTES.
The Company shall pay the principal of, and premium, if any, and
accrued and unpaid interest on, the Senior Notes on the dates and in the
manner provided in the Senior Notes. Holders of Senior Notes must surrender
their Senior Notes to the Paying Agent to collect principal payments.
Principal of, premium, if any, and accrued and unpaid interest shall be
considered paid on the date due if the Paying Agent (other than the Company or
any of its Subsidiaries), the Global Senior Note Holder or each Holder that
has specified an account, holds, as of 10:00 a.m. New York City time, money
the Company deposited in immediately available funds designated for and
sufficient to pay in cash all principal,
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premium, if any, and accrued and unpaid interest then due; provided that, to
the extent that the Holders have not specified accounts, such amounts shall be
considered paid on the date due if the Company mails a check for such amounts
on such date. The Paying Agent shall return to the Company, no later than five
days following the date of payment, any money (including accrued interest)
that exceeds the amount of principal, premium, if any, and accrued and unpaid
interest, paid on the Senior Notes.
To the extent lawful, the Company shall pay interest (including
Post-Petition Interest) on (i) overdue principal and premium at the rate equal
to 2% per annum in excess of the then applicable interest rate on the Senior
Notes, compounded semiannually and (ii) overdue installments of interest
(without regard to any applicable grace period) at the same rate as set forth
in clause (i), compounded semiannually.
SECTION 4.02. COMMISSION REPORTS.
(a) The Company shall file with the Trustee, within 15 days after it
files them with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) that
the Company is required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act. Notwithstanding the foregoing, if the Company is not
subject to the requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall file with the Commission and with the Trustee, within 15 days
after it files with the Commission, financial statements, including any notes
thereto (and with respect to annual reports, an auditor's report by a firm of
established national reputation), and a "Management's Discussion and Analysis of
Financial Condition and Results of Operations," both comparable to that which
the Company would have been required to include in such annual reports,
information, documents or other reports if the Company were subject to the
requirements of Section 13 or 15(d) of the Exchange Act. Subsequent to the
qualification of this Indenture under the TIA, the Company also shall comply
with the provisions of section 314(a) of the TIA.
(b) If the Company is required to furnish annual or quarterly reports
to its stockholders pursuant to the Exchange Act, the Company shall cause any
annual report furnished to its stockholders generally and any quarterly or
other financial reports it furnishes to its stockholders generally to be filed
with the Trustee and the Company shall mail to the Holders at their addresses
appearing in the register of Senior Notes maintained by the Registrar. If the
Company is not required to furnish annual or quarterly reports to its
stockholders pursuant to the Exchange Act, the Company shall cause its
financial statements referred to in Section 4.02(a) hereof, including any
notes thereto (and with respect to annual reports, an auditors' report by a
firm of established national reputation), and a "Management's Discussion and
Analysis of Financial Condition and Results of Operations," to be so mailed to
the Holders within 120 days after the end of each of the Company's fiscal
years and within 60 days after the end of each of the first three fiscal
quarters of each year. The Company shall cause to be disclosed in a statement
accompanying any annual report or comparable information as of the date of the
most recent financial statements in each such report or comparable information
the amount available for payments pursuant to Section 4.05 hereof. As of the
date hereof, the Company's fiscal year ends on [January 1].
SECTION 4.03. COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year of the Company, an Officers' Certificate stating that
a review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that,
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to the best of his or her knowledge, the Company has kept, observed, performed
and fulfilled each and every covenant contained in this Indenture and is not
in default in the performance or observance of any of the terms, provisions
and conditions hereof (or, if a Default or Event of Default shall have
occurred, describing all such Defaults or Events of Default of which he or she
may have knowledge and what action the Company has taken or proposes to take
with respect thereto) and that, to the best of his or her knowledge no event
has occurred and remains in existence by reason of which payments on account
of the principal of, premium, if any, and accrued and unpaid interest on, the
Senior Notes are prohibited or if such event has occurred, a description of
the event and what action the Company is taking or proposes to take with
respect thereto.
So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the financial statements
delivered pursuant to Section 4.02 hereof shall be accompanied by a written
statement of the Company's independent public accountants (who shall be a firm
of established national reputation reasonably satisfactory to the Trustee)
that in making the examination necessary for certification of such financial
statements nothing has come to their attention that would lead them to believe
that the Company has violated any provisions of Section 4.01, 4.05, 4.06,
4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15 or 4.16 or of Article 5
hereof or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall
not be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
The Company shall, so long as any of the Senior Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes
to take with respect thereto.
SECTION 4.04. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that might affect the
covenants or the performance of this Indenture; and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
has been enacted.
SECTION 4.05. LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, (i) declare or pay any dividend or make
any distribution on account of the Company's or such Restricted Subsidiary's
Capital Stock or other Equity Interests (other than dividends or distributions
payable in Capital Stock or other Equity Interests (other than Disqualified
Stock) of the Company and dividends or distributions payable by a Restricted
Subsidiary to another Restricted Subsidiary or to the Company); (ii) purchase,
redeem or otherwise acquire or retire for value any Capital Stock or other
Equity Interests of the Company or any of its Restricted Subsidiaries (other
than any such Equity Interest purchased from the Company or any Restricted
Subsidiary for fair market value (as determined by the Board of Directors in
good faith)); (iii) voluntarily prepay any Subordinated Indebtedness of the
Company, whether any such Subordinated Indebtedness is outstanding on, or issued
after, the date of original issuance of the Senior Notes except as specifically
permitted by the covenants of this Indenture; (iv) make any Restricted
Investment (all such dividends, distributions, purchases, redemptions or other
acquisitions, retirements, prepayments and Restricted Investments,
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together with any Investments deemed to be Restricted Payments as set forth in
Section 4.16 hereof, being collectively referred to as "Restricted Payments"),
if, at the time of such Restricted Payment:
(A) a Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence thereof; or
(B) immediately after such Restricted Payment and after giving
effect thereto on a Pro Forma Basis, the Company shall not
be able to issue $1.00 of additional Indebtedness pursuant
to Section 4.07(a) of this Indenture; or
(C) such Restricted Payment, together with the aggregate of all
other Restricted Payments made after the date of original
issuance of the Senior Notes, without duplication, exceeds
the sum of (1) 50% of the aggregate Consolidated Net Income
(including, for this purpose, gains from Asset Sales and, to
the extent not included in Consolidated Net Income, any gain
from a sale or disposition of a Restricted Investment) of the
Company (or, in case such aggregate is a loss, 100% of such
loss) for the period (taken as one accounting period) from the
beginning of the first quarter commencing immediately after
the date of original issuance of the Senior Notes and ended as
of the Company's most recently ended fiscal quarter at the
time of such Restricted Payment, plus (2) 100% of the
aggregate net cash proceeds and the fair market value of any
property or securities (as determined by the Board of
Directors in good faith) received by the Company since the
date of original issuance of the Senior Notes or other Equity
Interests subsequent to the date of original issuance of the
Senior Notes (other than (x) Capital Stock or other Equity
Interests issued or sold to a Restricted Subsidiary and (y)
the issuance or sale of Disqualified Stock), plus (3)
$5,000,000, plus (4) the amount by which the principal
amount of and any accrued interest on either (x) Senior
Indebtedness of the Company or (y) any Indebtedness of any
Restricted Subsidiary, is reduced on the Company's
consolidated balance sheet upon the conversion or exchange
(other than by a Restricted Subsidiary) subsequent to the
date of original issuance of the Senior Notes of any
Indebtedness of the Company or any Restricted Subsidiary
(not held by the Company or any Restricted Subsidiary) for
Capital Stock or other Equity Interests (other than
Disqualified Stock) of the Company (less the amount of any
cash, or the fair market value of any other property or
securities (as determined by the Board of Directors in good
faith), distributed by the Company or any Restricted
Subsidiary (to Persons other than the Company or any other
Restricted Subsidiary) upon such conversion or exchange), plus
(5) if any Non- Restricted Subsidiary is redesignated as a
Restricted Subsidiary, the value of the Restricted
Payment that would result if such Subsidiary were redesignated
as a Non-Restricted Subsidiary at such time as determined in
accordance with the second sentence of Section 4.16 hereof;
provided, however, that for purposes of this clause (5), the
value of any redesignated Non-Restricted Subsidiary shall be
reduced by the amount that any such redesignation replenishes
or increases the amount of Restricted Investments permitted to
be made pursuant to Section 4.05(b)(ii) hereof.
(b) Notwithstanding Section 4.05(a) hereof, the following shall not
be prohibited as Restricted Payments: (i) the payment of any dividend within
60 days after the date of declaration thereof, if at said date of declaration
such payment would comply with all the provisions hereof (including, but not
limited to, this Section 4.05); (ii) making Restricted Investments at any
time, and from time to time, in an aggregate outstanding amount of $10,000,000
after the date of original issuance of the Senior Notes (it being understood
that if any Restricted Investment after the date of original issuance of the
Senior Notes pursuant to this clause (ii) is sold, transferred or otherwise
conveyed to any Person other than the Company or a Restricted Subsidiary, the
portion of the net cash proceeds or fair market value of
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securities or properties paid or transferred to the Company and its Restricted
Subsidiaries in connection with such sale, transfer or conveyance that relates
or corresponds to the repayment or return of the original cost of such a
Restricted Investment will replenish or increase the amount of Restricted
Investments permitted to be made pursuant to this Section 4.05(b)(ii), so that
up to $10,000,000 of Restricted Investments may be outstanding under this
Section 4.05(b)(ii) at any given time) provided that, without limiting this
clause (ii) is made for fair market value (as determined by the Board of
Directors in good faith); (iii) the repurchase, redemption, retirement or
acquisition of the Company's stock from the executives, management, employees or
consultants of the Company or its Subsidiaries pursuant to the terms of any
subscription, stockholder or other agreement or plan, up to an aggregate amount
not to exceed $5,000,000; (iv) any loans, advances, distributions or payments
from the Company to its Restricted Subsidiaries, or any loans, advances,
distributions or payments by a Restricted Subsidiary to the Company or to
another Restricted Subsidiary, in each case pursuant to intercompany
Indebtedness, intercompany management agreements and other intercompany
agreements and obligations; (v) the purchase, redemption, retirement or other
acquisition of (A) any Senior Indebtedness of the Company or any Indebtedness of
Restricted Subsidiaries required by its terms to be purchased, redeemed, retired
or acquired with the net proceeds from asset sales (as defined in the instrument
evidencing such Senior Indebtedness or Indebtedness) or upon a change of control
(as defined in the instrument evidencing such Senior Indebtedness or
Indebtedness) and (B) the Senior Notes pursuant to Sections 4.13 and 4.14
hereof; (vi) the payment of (A) consulting, financial and investment banking
fees under the TJC Agreement, provided, that no Default or Event of Default
shall have occurred and be continuing or shall occur as a consequence thereof,
and the Company's Obligations to pay such fees under the TJC Agreement shall be
subordinated expressly to the Company's Obligations in respect of the Senior
Notes, and (B) indemnities, expenses and other amounts under the TJC Agreement;
(vii) the redemption, repurchase, retirement or the acquisition of any Capital
Stock or other Equity Interests of the Company or other Restricted Subsidiary in
exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to a Subsidiary of the Company) of other Capital Stock or other
Equity Interests of the Company (other than any Disqualified Stock) or the
redemption, repurchase, retirement or other acquisition of any Capital Stock or
other Equity Interests of any Restricted Subsidiary in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to the Company or
a Subsidiary of the Company) of other Capital Stock or other Equity Interests of
such Restricted Subsidiary; provided that, in each case, any net cash proceeds
that are utilized for any such redemption, repurchase, retirement or other
acquisition, and any Net Income resulting therefrom, shall be excluded from
Section 4.05(a)(C)(1) and (C)(2) hereof; (viii) the defeasance, redemption or
repurchase of pari passu or Subordinated Indebtedness with the net cash proceeds
from an issuance of permitted Refinancing Indebtedness or the substantially
concurrent sale (other than to a Subsidiary of the Company) of Capital Stock or
other Equity Interests of the Company or of a Restricted Subsidiary (other than
Disqualified Stock); provided that any net cash proceeds that are utilized for
any such defeasance, redemption or repurchase, and any Net Income resulting
therefrom, shall be excluded from Section 4.05(a)(C)(1) and (C)(2) hereof; (ix)
Restricted Investments made or received in connection with the sale, transfer or
disposition of any business, properties or assets of the Company or any
Restricted Subsidiary, provided, that if such sale, transfer or disposition
constitutes an Asset Sale, the Company complies with Section 4.14 hereof; and
(x) any Restricted Investment constituting securities or instruments of a
Person issued in exchange for trade or other claims against such Person in
connection with a financial reorganization or restructuring of such Person; (xi)
payments in connection with the application of the net proceeds of the Offerings
as described under "Use of Proceeds" in the Prospectus; (xii) in the event that
the Company elects to issue the Exchange Debentures in exchange for the Senior
Preferred Stock, any cash payments made in lieu of the issuance of Exchange
Debentures having a face amount of less than $1,000 and any cash payments
representing accrued and unpaid dividends on the Preferred Stock at the time of
the exchange; (xiii) redemption or repurchase of the Senior Preferred Stock or
the Exchange Debentures in connection with an Offer following a Change of
Control; (xiv) payments of fees, expenses and indemnities to the directors of
the Company and its restricted Subsidiaries; and (xv) the issuance of the
Exchange Debentures in exchange for the Company's Senior Preferred Stock in
accordance with its terms, provided that the Company is then permitted to incur
the Indebtedness represented by the Exchange Debentures.
SECTION 4.06. CORPORATE EXISTENCE.
Subject to Section 4.14 and Article 5 hereof, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or other
existence of each of its Restricted Subsidiaries in accordance with the
respective organizational documents of each of its Restricted Subsidiaries and
the rights (charter and statutory), licenses and franchises of the Company and
each of its Restricted Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate,
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partnership or other existence of any Restricted Subsidiary, if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and its Restricted Subsidiaries
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders.
SECTION 4.07. LIMITATION ON INCURRENCE OF INDEBTEDNESS.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, issue any Indebtedness (other than the Indebtedness represented
by the Senior Notes) unless the Company's Cash Flow Coverage Ratio for its
four full fiscal quarters next preceding the date such additional Indebtedness
is issued would have been at least 2.0 to 1 determined on a Pro Forma Basis
(including, for this purpose, any other Indebtedness incurred since the end of
the applicable four-quarter period) as if such additional Indebtedness and any
other Indebtedness issued since the end of such four-quarter period had been
issued at the beginning of such four-quarter period.
(b) Section 4.07(a) hereof shall not apply to the issuance of (i)
Indebtedness of the Company and/or its Restricted Subsidiaries as measured on
such date of issuance in an aggregate principal amount outstanding on any such
date of issuance not exceeding $75,000,000 aggregate principal amount pursuant
to the Credit Agreement (provided that the aggregate principal amount of
Indebtedness outstanding under this clause (i) together with the aggregate
principal amount of Indebtedness outstanding under clause (iii) below shall not
exceed $80,000,000 in aggregate principal amount at any one time outstanding);
(ii) Indebtedness of the Company and its Restricted Subsidiaries in connection
with capital leases, sale and leaseback transactions, purchase money
obligations, capital expenditures or similar financing transactions relating to:
(A) their properties, assets and rights as of the date of original issuance of
the Senior Notes up to $5,000,000 in aggregate principal amount or (B) their
properties, assets and rights acquired after the date of original issuance of
the Senior Notes, provided that the aggregate principal amount of such
Indebtedness under this Section 4.07(b)(ii)(B) does not exceed 100% of the cost
of such properties, assets and rights; (iii) additional Indebtedness of the
Company and its Restricted Subsidiaries in an aggregate principal amount up to
$25,000,000 (all or any portion of which may be issued as additional
Indebtedness under the Credit Agreement), provided that the aggregate principal
amount of Indebtedness outstanding under this clause (iii) together with the
aggregate principal amount of Indebtedness outstanding under clause (i) above
shall not exceed $80,000,000 in aggregate principal amount at any one time
outstanding; and (iv) Other Permitted Indebtedness.
(c) Notwithstanding Sections 4.07(a) and (b) hereof, no Restricted
Subsidiary shall under any circumstances issue a guarantee of any Indebtedness
of the Company except for guarantees issued by Restricted Subsidiaries
pursuant to Section 4.15 hereof, provided, however, that the foregoing will
not limit or restrict guarantees issued by Restricted Subsidiaries in respect
of Indebtedness of other Restricted Subsidiaries.
SECTION 4.08. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) Except as otherwise set forth herein, neither the Company nor any
of its Restricted Subsidiaries shall make any loan, advance, guarantee or
capital contribution to, or for the benefit of, or sell, lease, transfer or
dispose of any properties or assets to, or for the benefit of, or purchase or
lease any property or assets from, or enter into or amend any contract,
agreement or understanding with, or for the benefit of, an Affiliate (each
such transaction or series of related transactions that are part of a common
plan are referred to as an "Affiliate Transaction"), except in good faith and
on terms that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable
transaction on an arm's length basis from an unrelated Person.
(b) The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any Affiliate Transaction involving aggregate
payments or other transfers by the Company and its Restricted Subsidiaries in
excess of $2,500,000 (including cash and non-cash payments and benefits valued
at their fair market value by the Board of Directors of the Company in good
faith) unless the Company delivers
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to the Trustee: (i) a resolution of the Board of Directors of the Company
stating that the Board of Directors (including a majority of the disinterested
directors, if any) has, in good faith, determined that such Affiliate
Transaction complies with the provisions of this Indenture; and (ii)(A) with
respect to any Affiliate Transaction involving the incurrence of Indebtedness,
a written opinion of a nationally recognized investment banking or accounting
firm experienced in the review of similar types of transactions, (B) with
respect to any Affiliate Transaction involving the transfer of real property,
fixed assets or equipment, either directly or by a transfer of 50% or more of
the Capital Stock of a Restricted Subsidiary which holds any such real
property, fixed assets or equipment, a written appraisal from a nationally
recognized appraiser experienced in the review of similar types of
transactions or (C) with respect to any Affiliate Transaction not otherwise
described in (A) or (B) above, a written certification from a nationally
recognized professional or firm experienced in evaluating similar types of
transactions, in each case, stating that the terms of such transaction are
fair to the Company or such Restricted Subsidiary, as the case may be, from a
financial point of view.
(c) Notwithstanding Sections 4.08(a) and (b) hereof, this Section
4.08 shall not apply to: (i) transactions between the Company and any
Restricted Subsidiary or between Restricted Subsidiaries; (ii) payments under
the TJC Agreement; (iii) any other payments or transactions permitted pursuant
to Section 4.05 hereof; (iv) (A) payments and transactions under the Executive
Employment Agreements and (B) reasonable compensation paid to officers,
employees or consultants of the Company or any Subsidiary as determined in good
faith by the Company's Board of Directors or executives; (v) payments and
transactions under the Jaro Leases; (vi) payments and transactions involving
First National Bank of Boston and its subsidiaries and affiliates in connection
with the BBI Note, the Credit Agreement and any other Indebtedness permitted by
the Section 4.07 hereof; or (vii) payments and transactions in connection with
the Offerings and the application of the net proceeds therefrom as described
under "Use of Proceeds" in the Prospectus.
SECTION 4.09. LIMITATION ON LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien (other than Permitted Liens) upon any asset now owned or
hereafter acquired by them, or any income or profits therefrom, or assign or
convey any right to receive income therefrom; provided, however, that in
addition to creating Permitted Liens on its properties or assets, the Company
and any of its Restricted Subsidiaries may create any Lien upon any of their
properties or assets (including, but not limited to, any Capital Stock of its
Subsidiaries) if the Senior Notes are equally and ratably secured.
SECTION 4.10. COMPLIANCE WITH LAWS, TAXES.
The Company shall, and shall cause each of its Restricted
Subsidiaries to, comply with all statutes, laws, ordinances, or government
rules and regulations to which it is subject, the non-compliance with which
would materially adversely affect the business, prospects, earnings,
properties, assets or condition, financial or otherwise, of the Company and
its Restricted Subsidiaries taken as a whole.
The Company shall, and shall cause each of its Restricted
Subsidiaries to, pay prior to delinquency all taxes, assessments and
governmental levies, except those contested in good faith by appropriate
proceedings.
SECTION 4.11. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective, any encumbrance or restriction on the ability of
any Restricted Subsidiary to: (i) pay dividends or make any other
distributions on its Capital Stock or any other interest or participation in,
or measured by, its profits, owned by the Company or any Restricted
Subsidiary, or pay any Indebtedness owed to, the Company
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or any Restricted Subsidiary; (ii) make loans or advances to the Company; or
(iii) transfer any of its properties or assets to the Company, except for such
encumbrances or restrictions existing under or by reason of: (A) applicable
law; (B) Indebtedness permitted (1) under Section 4.07(a) hereof, (2) under
Sections 4.07(b)(i) and (iii) hereof and clauses (i), (v), (vi), (vii), (ix),
(x) and (xi) of the definition of Other Permitted Indebtedness, or (3) by
agreements and transactions permitted under Section 4.05 hereof; (C) customary
provisions restricting subletting or assignment of any lease or license of the
Company or any Restricted Subsidiary; (D) (1) the terms of the BKC Intercreditor
Agreement and any other BKC Agreement, and (2) customary provisions of any
franchise, distribution or similar agreement; (E) any instrument governing
Indebtedness or any other encumbrance or restriction of a Person acquired by
the Company or any Restricted Subsidiary at the time of such acquisition,
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property or
assets of the Person, so acquired; (F) Indebtedness or other agreements
existing on the date of original issuance of the Senior Notes; (G) any
Refinancing Indebtedness permitted under Section 4.07(b) hereof and clauses
(i), (v), (vi), (vii), (ix), (x) and (xi) of the definition of Other
Permitted Indebtedness; provided that the encumbrances and restrictions
created in connection with such Refinancing Indebtedness are no more
restrictive in any material respect with regard to the interests of the
Holders of Senior Notes than the encumbrances and restrictions in the
refinanced Indebtedness; (H) any restrictions, with respect to a Restricted
Subsidiary, imposed pursuant to an agreement that has been entered into for
the sale or disposition of the stock, business, assets or properties of such
Restricted Subsidiary; (I) the terms of any Indebtedness of the Company
incurred in connection with Section 4.07 hereof, provided that the terms of
such Indebtedness constitute no greater encumbrance or restriction on the
ability of any Restricted Subsidiary to pay dividends or make distributions,
make loans or advances or transfer properties or assets than is otherwise
permitted by this Section 4.11; or (J) the terms of purchase money
obligations, but only to the extent such purchase money obligations restrict
or prohibit the transfer of the property so acquired.
(b) Nothing contained in this Section 4.11 shall prevent the Company
from entering into any agreement or instrument providing for the incurrence of
Permitted Liens or restricting the sale or other disposition of property or
assets of the Company or any of its Restricted Subsidiaries that are subject
to Permitted Liens.
SECTION 4.12. MAINTENANCE OF OFFICE OR AGENCIES.
The Company shall maintain in the Borough of Manhattan, the City of
New York an office or an agency (which may be an office of any Agent) where
Senior Notes may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Company in respect of the Senior
Notes and this Indenture may be served. The Company shall give prompt written
notice to the Trustee of any change in the location of such office or agency.
If at any time the Company shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office.
The Company may also from time to time designate one or more other
offices or agencies where the Senior Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any matter
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or
agency.
The Company hereby designates the Corporate Trust Office of the
Trustee located at __________ ______ as one such office or agency of the
Company in accordance with Section 2.03 hereof.
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SECTION 4.13. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control (such date being the
"Change of Control Trigger Date"), each Holder of Senior Notes shall have the
right to require the Company to purchase all or any part (equal to $1,000 or an
integral multiple thereof) of such Holder's Senior Notes pursuant to an Offer at
a purchase price in cash equal to 101% of the aggregate principal amount
thereof, plus any accrued and unpaid interest to the date of purchase. Although
the failure of the Company to purchase all Senior Notes tendered in such an
Offer shall be a Default, if the Company is unable to purchase all Senior Notes
tendered in such an Offer, the Company shall nevertheless purchase the maximum
principal amount of Senior Notes that it is able to purchase at that time.
Prior to the mailing of the notice referred to in Section 3.08(a)
hereof, but in any event within 30 days following any Change of Control
Trigger Date, the Company covenants to (i) repay in full and terminate all
commitments under Indebtedness under the Credit Agreement and all other Senior
Indebtedness the terms of which require repayment upon a Change of Control or
offer to repay in full and terminate all commitments under all Indebtedness
under the Credit Agreement and all other such Senior Indebtedness and to repay
the Indebtedness owed to each lender which has accepted such offer or (ii)
obtain the requisite consents under the Credit Agreement and all such other
Senior Indebtedness to permit the repurchase of the Senior Notes as provided
herein. The Company shall first comply with the covenant in the immediately
preceding sentence before it shall be required to repurchase Senior Notes as
provided herein. The Company's failure to comply with this covenant shall
constitute an Event of Default described in clause (iii) and not in clause
(ii) under Section 6.01(a) hereof.
(b) In the event of a Change of Control, the Company shall not offer to
purchase or redeem any Subordinated Indebtedness required or entitled by its
terms to be redeemed or purchased until the Offer for the Senior Notes has been
consummated and all Senior Notes tendered pursuant to such Offer have been
accepted for payment.
SECTION 4.14. LIMITATION ON ASSET SALES.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, consummate an Asset Sale (including the
sale of any of the Capital Stock of any Restricted Subsidiary) providing for
Net Proceeds in excess of $2,500,000 unless at least 75% of the Net Proceeds
from such Asset Sale are applied (in any manner otherwise permitted hereunder)
to one or more of the following purposes in such combination as the Company
shall elect: (i) an investment in another asset or business in the same line
of business as, or a line of business similar to that of, the line of business
of the Company and its Restricted Subsidiaries at the time of the Asset Sale;
provided that such investment occurs on or prior to the 365th day following
the date of such Asset Sale (the "Asset Sale Disposition Date"), (ii) to
reimburse the Company or its Subsidiaries for expenditures made, and costs
incurred, to repair, rebuild, replace or restore property subject to loss,
damage or taking to the extent that the Net Proceeds consist of insurance
proceeds received on account of such loss, damage or taking, (iii) the
purchase, redemption or other prepayment or repayment of outstanding Senior
Indebtedness of the Company or Indebtedness of the Company's Restricted
Subsidiaries on or prior to the 365th day following the Asset Sale Disposition
Date or (iv) an Offer expiring on or prior to the Purchase Date.
(b) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, consummate an Asset Sale unless at
least 75% of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of cash, cash equivalents or marketable
securities; provided that, solely for purposes of calculating such 75% of the
consideration, the amount of (i) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet or in
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the notes thereto, excluding contingent liabilities and trade payables), of
the Company or any Restricted Subsidiary (other than liabilities that are by
their terms subordinated to the Senior Notes) that are assumed by the
transferee of any such assets and (ii) any notes or other obligations received
by the Company or any such Restricted Subsidiary from such transferee that are
promptly, but in no event more than 30 days after receipt, converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash and cash equivalents for purposes of
this provision. Any Net Proceeds from any Asset Sale that are not applied or
invested as provided in Section 4.14(a) hereof shall constitute "Excess
Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $5,000,000
(such date being an "Asset Sale Trigger Date"), the Company shall make an
Offer to all Holders of Senior Notes to purchase the maximum principal amount
of the Senior Notes then outstanding that may be purchased out of Excess
Proceeds, at an offer price in cash in an amount equal to 100% of principal
amount thereof plus any accrued and unpaid interest to the Purchase Date in
accordance with the procedures set forth in this Indenture.
(d) To the extent that any Excess Proceeds remain after completion of
an Offer, the Company may use such remaining amount for general corporate
purposes.
(e) If the aggregate principal amount of Senior Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall
select the Senior Notes to be purchased on a pro rata basis.
(f) Upon completion of an Offer, the amount of Excess Proceeds shall
be reset at zero.
(g) Notwithstanding the foregoing, to the extent that any or all of
the Net Proceeds of an Asset Sale is prohibited or delayed by applicable local
law from being repatriated to the United States, the portion of such Net
Proceeds so affected will not be required to be applied pursuant to this
Section 4.14, but may be retained for so long, but only for so long, as the
applicable local law prohibits repatriation to the United States. The Company
will promptly take all reasonable actions required by the applicable local law
to permit such repatriation, and once such repatriation of any affected Net
Proceeds is not prohibited under applicable local law, such repatriation will
be immediately effected and such repatriated Net Proceeds will be applied in
the manner set forth above as if such Asset Sale have occurred on the date of
repatriation.
SECTION 4.15. LIMITATION ON GUARANTEES OF COMPANY INDEBTEDNESS BY RESTRICTED
SUBSIDIARIES.
(a) The Company shall not permit any Restricted Subsidiary, directly
or indirectly, to guarantee any Indebtedness of the Company other than the
Senior Notes (the "Other Company Indebtedness") unless (i) such Restricted
Subsidiary contemporaneously executes and delivers a supplemental indenture to
this Indenture providing for a guarantee of payment of the Senior Notes then
outstanding by such Restricted Subsidiary to the same extent as the guarantee
of payment (the "Other Company Indebtedness Guarantee") of the Other Company
Indebtedness (including waiver of subrogation, if any) and (ii) if the Other
Company Indebtedness guaranteed by such Restricted Subsidiary is (A) Senior
Indebtedness, the guarantee for the Senior Notes shall be pari passu in right
of payment with the Other Company Indebtedness Guarantee and (B) Subordinated
Indebtedness, the guarantee for the Senior Notes shall be senior in right of
payment to the Other Company Indebtedness Guarantee; provided that the
foregoing will not limit or restrict guarantees issued by Restricted
Subsidiaries in respect of Indebtedness of other Restricted Subsidiaries.
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(b) Each guarantee of the Senior Notes created by a Restricted
Subsidiary pursuant to Section 4.15(a) hereof shall be in form and substance
satisfactory to the Trustee and shall provide, among other things, that it
will be automatically and unconditionally released and discharged upon (i) any
sale, exchange or transfer permitted by this Indenture of (A) all of the
Company's Capital Stock in such Restricted Subsidiary or (B) the sale of all
or substantially all of the assets of the Restricted Subsidiary and upon the
application of the Net Proceeds from such sale in accordance with the
requirements of Section 4.14 hereof or (ii) the release or discharge of the
Other Company Indebtedness Guarantee that resulted in the creation of such
guarantee of the Senior Notes, except a discharge or release by or as a result
of direct payment under such Other Company Indebtedness Guarantee.
SECTION 4.16. DESIGNATION OF RESTRICTED AND NON-RESTRICTED SUBSIDIARIES.
(a) From and after the date of original issuance of the Senior Notes,
the Company may designate any existing or newly formed or acquired Subsidiary
as a Non-Restricted Subsidiary, provided that (i) either (A) the Subsidiary to
be so designated has total assets of $1,000,000 or less or (B) immediately
before and after giving effect to such designation on a Pro Forma Basis; (1)
the Company could incur $1.00 of additional Indebtedness pursuant to Section
4.07(a) hereof determined on a Pro Forma Basis; and (2) no Default or Event of
Default shall have occurred and be continuing, and (ii) all transactions
between the Subsidiary to be so designated and its Affiliates remaining in
effect are permitted pursuant to Section 4.08 hereof. Any Investment made by
the Company or any Restricted Subsidiary which is redesignated from a
Restricted Subsidiary to a Non-Restricted Subsidiary shall thereafter be
considered as having been a Restricted Payment (to the extent not previously
included as a Restricted Payment) made on the day such Subsidiary is
designated a Non-Restricted Subsidiary in the amount of the greater of (i) the
fair market value (as determined by the Board of Directors of the Company in
good faith) of the Equity Interests of such Subsidiary held by the Company and
its Restricted Subsidiaries on such date, and (ii) the amount of the
Investments determined in accordance with GAAP made by the Company and any of
its Restricted Subsidiaries in such Subsidiary.
(b) A Non-Restricted Subsidiary may be redesignated as a Restricted
Subsidiary. The Company shall not, and shall not permit any Restricted
Subsidiary to, take any action or enter into any transaction or series of
transactions that would result in a Person becoming a Restricted Subsidiary
(whether through an acquisition, the redesignation of a Non-Restricted
Subsidiary or otherwise, but not including through the creation of a new
Restricted Subsidiary) unless, immediately before and after giving effect to
such action, transaction or series of transactions on a Pro Forma Basis, (i)
the Company could incur at least $1.00 of additional Indebtedness pursuant to
Section 4.07(a) hereof and (ii) no Default or Event of Default shall have
occurred and be continuing.
(c) The designation of a Subsidiary as a Restricted Subsidiary or the
removal of such designation is required to be made by a resolution adopted by
a majority of the Board of Directors of the Company stating that the Board of
Directors has made such designation in accordance with this Indenture, and the
Company is required to deliver to the Trustee such resolution together with an
Officers' Certificate certifying that the designation complies with this
Indenture. Such designation shall be effective as of the date specified in the
applicable resolution, which may not be before the date the applicable
Officers' Certificate is delivered to the Trustee.
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ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER OR CONSOLIDATION.
(a) The Company shall not consolidate or merge with or into, or sell,
lease, convey or otherwise dispose of all or substantially all of its assets
to, any Person (any such consolidation, merger or sale being a "Disposition")
unless: (i) the successor corporation of such Disposition or the corporation
to which such Disposition shall have been made (each, a "Successor
Corporation") is a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia; (ii) the
Successor Corporation of such Dispositon expressly assumes the Obligations of
the Company, pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee, under this Indenture and the Senior Notes; (iii)
immediately after such Disposition, no Default or Event of Default shall exist;
and (iv) the corporation formed by or surviving any such Disposition, or the
corporation to which such Disposition shall have been made, shall (A) have
Consolidated Net Worth (immediately after the Disposition but prior to giving
any pro forma effect to purchase accounting adjustments or Restructuring Charges
resulting from the Disposition) equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the Disposition, (B) be permitted
immediately after the Disposition by the terms of this Indenture to issue at
least $1.00 of additional Indebtedness determined on a Pro Form Basis, and (C)
have a Cash Flow Coverage Ratio, for the four fiscal quarters immediately
preceding the applicable Disposition, and determined on a Pro Forma Basis,
equal to or greater than the actual Cash Flow Coverage Ratio of the Company
for such four quarter period. The limitations in this Section 5.01(a) on the
Company's ability to make a Disposition do not restrict the Company's ability
to sell less than all or substantially all of its assets, such sales being
governed by Section 4.14 hereof.
(b) Prior to the consummation of any proposed Disposition, the
Company shall deliver to the Trustee an Officers' Certificate to the foregoing
effect and an Opinion of Counsel stating that the proposed Disposition and
such supplemental indenture comply with this Indenture.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any Disposition, the Successor Corporation resulting from such
Disposition shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as
if such Successor Corporation has been named as the Company herein; provided,
however, that neither the Company nor any Successor Corporation shall be
released from its Obligation to pay the principal of, premium, if any, and
accrued and unpaid interest on, the Senior Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
(a) An Event of Default is:
(i) a default for 30 days in payment of interest on the
Senior Notes;
(ii) a default in payment when due of principal of, or
premium, if any, on the Senior Notes;
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(iii) the failure of the Company to comply with any of
its other agreements or covenants in, or provisions
of, this Indenture or the Senior Notes outstanding
under this Indenture and the Default continues for
the period, if applicable, and after the notice
specified in Section 6.01(b) hereof;
(iv) a default by the Company or any Restricted
Subsidiary under any mortgage, indenture or
instrument under which there may be issued or by
which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or
any Restricted Subsidiary (or the payment of which
is guaranteed by the Company or any Restricted
Subsidiary), whether such Indebtedness or guarantee
now exists or shall be created hereafter, if (A)
either (1) such default results from the failure to
pay principal of or interest on any such
Indebtedness (after giving effect to any extensions
thereof) or (2) as a result of such default the
maturity of such Indebtedness has been accelerated
prior to its expressed maturity, and (B) the
principal amount of such Indebtedness, together
with the principal amount of any other such
Indebtedness in default for failure to pay
principal or interest thereon, or because of the
acceleration of the maturity thereof, aggregates in
excess of $5,000,000;
(v) a failure by the Company or any Restricted
Subsidiary to pay final judgments (not covered by
insurance) aggregating in excess of $5,000,000
which judgments a court of competent jurisdiction
does not rescind, annul or stay within 45 days
after their entry;
(vi) in existence when the Company or any Significant
Subsidiary pursuant to or within the meaning of any
Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for
relief against it in an involuntary case,
(C) consents to the appointment of a Custodian
of it or for all or substantially all of
its property, or
(D) makes a general assignment for the benefit
of its creditors; and
(vii) in existence when a court of competent jurisdiction
enters an order or decree under any Bankruptcy Law
that:
(A) is for relief against the Company or any
Significant Subsidiary in an involuntary
case,
(B) appoints a Custodian of the Company or any
Significant Subsidiary or for all or
substantially all of the property of the
Company or any Significant Subsidiary, or
(C) orders the liquidation of the Company or
any Significant Subsidiary,
and any such order or decree remains unstayed and in
effect for 60 days.
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(b) A Default under Section 6.01(a)(iii) hereof (other than an Event
of Default arising under Section 5.01, which shall be an Event of Default with
the notice but without the passage of time specified in this Section 6.01(b)),
is not an Event of Default under this Indenture until the Trustee or the
Holders of at least 25% in principal amount of the Senior Notes then
outstanding notify the Company of the Default and the Company does not cure
the Default within 30 days after receipt of the notice. The notice must
specify the Default, demand that it be remedied, and state that the notice is
a "Notice of Default."
(c) In the case of any Event of Default pursuant to Section
6.01(a)(i) or (ii) hereof occurring by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding payment of the premium that the Company would have to pay if the
Company then had elected to redeem the Senior Notes pursuant to Section 3.07
hereof, an equivalent premium shall also become and be immediately due and
payable to the extent permitted by law, anything in this Indenture or in the
Senior Notes contained to the contrary notwithstanding.
(d) The Trustee shall not be charged with knowledge of any Default or
Event of Default unless written notice thereof shall have been given to a
Trust Officer at the Corporate Trust Office of the Trustee by the Company or
any other Person.
SECTION 6.02. ACCELERATION.
(a) Upon the occurrence of an Event of Default (other than an Event
of Default under Section 6.01(a)(vi) or (vii) hereof), the Trustee or the
holders of at least 25% in principal amount of the then outstanding Senior
Notes may declare all Senior Notes (i) to be due and payable immediately and,
upon such declaration, the principal of, premium, if any, and any accrued and
unpaid interest on, all Senior Notes shall be due and payable immediately;
provided, however, that if an Event of Default arises under Section
6.01(a)(vi) or (vii) hereof, the principal of, premium, if any, and any
accrued and unpaid interest on, all Senior Notes, shall ipso facto become and
be immediately due and payable without any declaration or other act on the
part of the Trustee or any Holders of Senior Notes.
(b) The holders of a majority in principal amount of the Senior Notes
then outstanding under this Indenture, by notice to the Trustee, may rescind
any declaration of acceleration of such Senior Notes and its consequences (if
the rescission would not conflict with any judgment or decree) if all existing
Events of Default (other than the nonpayment of principal of or interest on
such Senior Notes that shall have become due by such declaration) shall have
been cured or waived.
(c) If there has been a declaration of acceleration of the Senior
Notes because an Event of Default under Section 6.01(a)(iv) hereof has
occurred and is continuing, such declaration of acceleration shall be
automatically annulled if the holders of the Indebtedness described in Section
6.01(a)(iv) hereof have rescinded the declaration of acceleration in respect
of such Indebtedness within 30 Business Days thereof and if (i) the annulment
of such acceleration would not conflict with any judgment or decree of a court
of competent jurisdiction, (ii) all existing Events of Default, except
non-payment of principal, premium or interest that shall have become due
solely because of the acceleration, have been cured or waived, and (iii) the
Company has delivered an Officers' Certificate to the Trustee to the effect of
clauses (i) and (ii) above.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal of, premium,
if any, or any accrued and unpaid interest on, the Senior Notes or to enforce
the performance of any provision of the Senior Notes or this Indenture.
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The Trustee may maintain a proceeding even if it does not possess any
of the Senior Notes or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
The holders of a majority in aggregate principal amount of the Senior
Notes then outstanding by notice to the Trustee may on behalf of all Holders
of Senior Notes waive any existing Default or Event of Default under this
Indenture and its consequences, except a continuing Default in the payment of
the principal of, premium, if any, and interest on, such Senior Notes, which
may only be waived with the consent of each Holder of Senior Notes 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 this Indenture; provided that no such waiver shall extend to any subsequent
or other Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Subject to Section 7.01(e) hereof, the Holders of a majority in
principal amount of the then outstanding Senior Notes may direct the time,
method and place of conducting any proceeding for exercising any remedy
available to the Trustee or exercising any trust or power conferred on it by
this Indenture. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that the Trustee determines may be
unduly prejudicial to the rights of other Holders or would involve the Trustee
in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or the
Senior Notes only if (i) the Holder gives to the Trustee notice of a
continuing Event of Default; (ii) the Holders of at least 25% in principal
amount of the then outstanding Senior Notes make a request to the Trustee to
pursue the remedy; (iii) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense; (iv) the
Trustee does not comply with the request within 60 days after receipt of the
request and the offer of indemnity; and (v) during such 60-day period the
Holders of a majority in principal amount of the then outstanding Senior Notes
do not give the Trustee a direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
Holders of the Senior Notes may not enforce this Indenture, except as
provided herein.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of, premium, if any, and any
accrued and unpaid interest on, a Senior Note, on or after a respective due
date expressed in the Senior Note, or to bring suit for the enforcement of any
such payment on or after such respective date, shall not be impaired or
affected without the consent of the Holder.
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SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a)(i) or (ii) hereof
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for (i) the
principal, premium and interest remaining unpaid on the Senior Notes, (ii)
interest on overdue principal and premium, if any, and, to the extent lawful,
interest, and (iii) such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel
("Trustee Expenses").
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable to have the claims of the Trustee
(including any claim for Trustee Expenses) and the Holders allowed in any
Insolvency or Liquidation Proceeding or other judicial proceeding relative to
the Company (or any other obligor upon the Senior Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and
distribute to Holders any money or other property payable or deliverable on
any such claims and each Holder authorizes any Custodian in any such
Insolvency or Liquidation Proceeding or other judicial proceeding to make such
payments to the Trustee, and if the Trustee shall consent to the making of
such payments directly to the Holders any such Custodian is hereby authorized
to make such payments directly to the Holders, and to pay to the Trustee any
amount due to it hereunder for Trustee Expenses, and any other amounts due the
Trustee under Section 7.07 hereof. To the extent that the payment of any such
Trustee Expenses, and any other amounts due the Trustee under Section 7.07
hereof out of the estate in any such proceeding, shall be denied for any
reason, payment of the same shall be secured by a Lien on, and shall be paid
out of, any and all distributions, dividends, money, securities and other
properties which the Holders may be entitled to receive in such proceeding,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the Senior
Notes or the rights of any Holder, or to authorize the Trustee to vote in
respect of the claim of any Holder in any Insolvency or Liquidation
Proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07 hereof;
Second: to Holders for amounts due and unpaid on the Senior Notes
for principal, premium and interest, ratably, without
preference or priority of any kind, according to the amounts
due and payable on the Senior Notes for principal, premium
and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders.
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SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as a Trustee, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit, and
the court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.07 hereof, or a suit by Holders of more than 10%
in principal amount of the then outstanding Senior Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default occurs (and has not been cured) the
Trustee shall (i) exercise the rights and powers vested in it by this
Indenture, and (ii) use the same degree of care and skill in exercising such
rights and powers as a prudent person would exercise or use under the
circumstances in the conduct of its own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee's duties shall be determined solely by
the express provisions of this Indenture and the
Trustee need perform only those duties that are
specifically set forth in this Indenture and no
others, and no implied covenants or obligations
shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions
expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the
requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions
to determine whether they conform to this
Indenture's requirements.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own wilful
misconduct, except that:
(i) this paragraph does not limit the effect of Section
7.01(b) hereof;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer,
unless it is proved that the Trustee was negligent
in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in
accordance with a direction it receives pursuant to
Section 6.05 hereof.
(d) Whether or not expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), (c) and (e) of this Section.
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(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders unless such Holders shall have offered
to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money it
receives except as the Trustee may agree in writing with the Company. Money
the Trustee holds in trust need not be segregated from other funds except to
the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document it believes to be genuine
and to have been signed or presented by the proper Person. The Trustee shall
not be obligated to investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
reasonably require an Officers' Certificate or an Opinion of Counsel, or both.
The Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such Officers' Certificate or Opinion of Counsel.
The Trustee may consult with counsel and advice of such counsel or any Opinion
of Counsel shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any Agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take, except to the extent that such action or omission to act constitutes
negligence or wilful misconduct on the part of the Trustee.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Senior Notes and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. However,
if the Trustee acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the Commission for permission to continue as
Trustee or resign. Any Agent may do the same with like rights. The Trustee is
also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Senior Notes, it shall
not be accountable for the Company's use of the proceeds from the Senior Notes
or for any money paid to the Company or upon the Company's direction under any
provisions hereof, it shall not be responsible for the use or application of
any money any Paying Agent other than the Trustee receives, and it shall not
be responsible for any statement or recital herein or any statement in the
Senior Notes or any other document furnished or issued in connection with the
sale of the Senior Notes or pursuant to this Indenture, other than its
certificate of authentication.
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SECTION 7.05. NOTICE TO HOLDERS OF DEFAULTS AND EVENTS OF DEFAULT.
If a Default or Event of Default occurs and is continuing and if it
is actually known to the Trustee, the Trustee shall mail to Holders a notice
of the Default or Event of Default within 90 days after it occurs. Except in
the case of a Default or Event of Default in payment on any Senior Note
(including any failure to redeem Senior Notes called for redemption or any
failure to purchase Senior Notes tendered pursuant to an Offer that are
required to be purchased by the terms of this Indenture), the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in
good faith determines that withholding the notice is in the Holders'
interests.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each ___________ beginning with __________,
1997, the Trustee shall mail to Holders a brief report dated as of such
reporting date that complies with section 313(a) of the TIA (but if no event
described in section 313(a) of the TIA has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with section 313(b)(2) of the TIA. The Trustee shall also
transmit by mail all reports as required by section 313(c) of the TIA.
Commencing at the time this Indenture is qualified under the TIA, a
copy of each report at the time of its mailing to Holders shall be filed with
the Commission and each national securities exchange on which the Senior Notes
are listed. The Company shall notify the Trustee when the Senior Notes are
listed on any national securities exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee (in its capacities as Trustee,
Paying Agent and/or Registrar) from time to time reasonable compensation for
its services hereunder. The Trustee's compensation shall not be limited by any
law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable disbursements, advances,
fees and expenses it incurs or makes in addition to the compensation for its
services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify and hold harmless the Trustee (in its
capacities as Trustee, Paying Agent and/or Registrar) against any and all
losses, liabilities or expenses the Trustee incurs arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, except as set forth below. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure by the Trustee
to so notify the Company shall not relieve the Company of its Obligations
hereunder. The Company shall defend the claim and the Trustee shall reasonably
cooperate in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The
Company need not pay for any settlement made without its consent, which
consent shall not be unreasonably withheld.
The Company's Obligations under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
The Company need not reimburse any expense or indemnify against any
loss or liability the Trustee incurs through negligence or bad faith.
To secure the Company's payment of its Obligations in this Section,
the Trustee shall have a Lien prior to the Senior Notes on all money or
property the Trustee holds or collects, except that held in trust
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to pay principal of, premium, if any, and any accrued and unpaid interest on,
particular Senior Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(a)(vi) or (vii) hereof occurs, the
expenses and the compensation for the services (including the fees and
expenses of its agents and counsel) are intended to constitute administrative
expenses under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign and be discharged from the trust hereby
created by so notifying the Company. The Holders of a majority in principal
amount of the then outstanding Senior Notes may remove the Trustee by so
notifying the Trustee and the Company. The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10 hereof;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee
under any Bankruptcy Law;
(iii) a Custodian or public officer takes charge of the Trustee or
its property; or
(iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee, provided that the Holders of a majority in principal amount
of the then outstanding Senior Notes may appoint a successor Trustee to
replace any successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the then outstanding Senior
Notes may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any Holder
may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
appointment to Holders. The retiring Trustee shall promptly transfer all
property it holds as Trustee to the successor Trustee, provided all sums owing
to the retiring Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Company's obligations under Section
7.07 hereof shall continue for the retiring Trustee's benefit with respect to
expenses and liabilities it incurred prior to being replaced.
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SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
The Trustee shall at all times (i) be a corporation organized and
doing business under the laws of the United States of America, of any state
thereof, or the District of Columbia authorized under such laws to exercise
corporate trustee power, (ii) be subject to supervision or examination by
federal or state authority, (iii) have a combined capital and surplus of at
least $100,000,000 as set forth in its most recent published annual report of
condition, and (iv) satisfy the requirements of sections 310(a)(1), (2) and
(5) of the TIA. The Trustee is subject to section 310(b) of the TIA.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee is subject to section 311(a) of the TIA, excluding any
creditor relationship listed in section 311(b) of the TIA. A Trustee who has
resigned or been removed shall be subject to section 311(a) of the TIA to the
extent indicated therein.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. DISCHARGE OF LIABILITY ON SENIOR NOTES; DEFEASANCE.
(a) When (i) the Company delivers to the Trustee all outstanding
Senior Notes (other than Senior Notes replaced pursuant to Section 2.07
hereof) for cancellation, or (ii) all outstanding Senior Notes have become due
and payable and the Company irrevocably deposits with the Trustee funds
sufficient to pay at maturity all outstanding Senior Notes, including interest
and premium thereon (other than Senior Notes replaced pursuant to Section 2.07
hereof), and if in either case the Company pays all other sums payable under
this Indenture by the Company, then this Indenture shall, subject to Sections
8.01(c) and 8.06 hereof, cease to be of further effect.
(b) Subject to Sections 8.01(c), 8.02, and 8.06 hereof, the Company
at any time may terminate (i) all its obligations under the Senior Notes and
this Indenture ("legal defeasance option") or (ii) its obligations under
Sections 4.02, 4.03, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.13, 4.14,
4.15, and 4.16 hereof, and the operation of Sections 5.01(a)(iii),
5.01(a)(iv), or 6.01(a)(iii) through (a)(v) hereof ("covenant defeasance
option"). The Company may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Senior Notes may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Senior Notes
shall not be accelerated because of an Event of Default specified in Section
6.01(a)(iii) through (a)(v) hereof or because of the Company's failure to
comply with Section 5.01(a)(iii) and 5.01(a)(iv) hereof.
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Upon satisfaction of the conditions set forth herein and upon the
Company's request (and at the Company's expense), the Trustee shall
acknowledge in writing the discharge of those obligations that the Company has
terminated.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 4.01, 4.04, 7.07, 7.08,
8.04, 8.05 and 8.06 hereof, and the Trustee's and the Paying Agent's
obligations in Section 8.04 hereof shall survive until the Senior Notes have
been paid in full. Thereafter, the Company's obligations in Sections 7.07 and
8.05 hereof and the Company's, the Trustee's and the Paying Agent's
obligations in Section 8.04 hereof shall survive.
SECTION 8.02. CONDITIONS TO DEFEASANCE.
The Company may exercise its legal defeasance option or its covenant
defeasance option only if:
(1) the Company irrevocably deposits in trust (the "defeasance
trust") with the Trustee money or U.S. Government
Obligations sufficient for the payment in full of the
principal of, premium, if any, and any accrued and unpaid
interest on, the Senior Notes then outstanding, as of the
maturity date, the redemption date or the Purchase Date, as
the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants
expressing their opinion that the payments of principal and
interest when due and without reinvestment of the deposited
U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such
amounts as will be sufficient to pay when due principal of,
premium, if any, and any accrued and unpaid interest on, all
the Senior Notes to maturity or redemption, as the case may
be;
(3) since the Company's irrevocable deposit provided for in
Section 8.02(1) hereof, 91 days have passed;
(4) no Default has occurred and is continuing on the date of
such deposit and after giving effect to it;
(5) the deposit does not constitute a default under any other
agreement binding on the Company;
(6) the Company delivers to the Trustee an Opinion of Counsel to
the effect that the trust resulting from the deposit does
not constitute, or is qualified as, a regulated investment
company under the Investment Company Act of 1940, as
amended;
(7) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel
stating that (i) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or
(ii) under applicable federal income tax law, in either
case, to the effect that, and based thereon such Opinion of
Counsel shall confirm that, the Holders will not recognize
income, gain or loss for federal income tax purposes as a
result of such deposit and defeasance and will be subject to
federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such
defeasance had not occurred;
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(8) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders will not recognize income, gain
or loss for federal income tax purposes as a result of such
deposit and covenant defeasance and will be subject to
federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such
covenant defeasance had not occurred; and
(9) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Senior
Notes contemplated by this Article 8 have been satisfied.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption or purchase of Senior Notes at
a future date in accordance with Article 3.
SECTION 8.03. APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to this Article 8. It shall apply the deposited
money and the money from U.S. Government Obligations through the Paying Agent
and in accordance with this Indenture to the payment of principal of, premium,
if any, and any accrued and unpaid interest on, the Senior Notes.
SECTION 8.04. REPAYMENT TO THE COMPANY.
After the Senior Notes have been paid in full, the Trustee and the
Paying Agent shall promptly turn over to the Company any excess money or
securities they hold.
The Trustee and the Paying Agent shall pay to the Company upon
written request by the Company any money they hold for the payment of
principal, premium or interest that remains unclaimed for 1 year after the
date upon which such payment shall have become due; provided, however, that
the Company shall have either caused notice of such payment to be mailed to
each Holder entitled thereto no less than 30 days prior to such repayment or
within such period shall have published such notice in a financial newspaper
of widespread circulation published in The City of New York (including,
without limitation, The Wall Street Journal). After payment to the Company,
Holders entitled to the money must look to the Company for payment as general
creditors unless an applicable abandoned property law designates another
Person, and all liability of the Trustee and such Paying Agent with respect to
such money shall cease.
SECTION 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS.
The Company shall pay and shall indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against deposited U.S.
Government Obligations or the principal and interest received on such U.S.
Government Obligations.
SECTION 8.06. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Article 8 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Senior
Notes shall be revived and reinstated as
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though no deposit had occurred pursuant to this Article 8 until such time as
the Trustee or Paying Agent is permitted to apply all such money or U.S.
Government Obligations in accordance with this Article 8; provided, however,
that, if the Company has made any payment of principal of, premium, if any,
and any accrued and unpaid interest on, any Senior Notes because of the
reinstatement of its Obligations, the Company shall be subrogated to the
Holders' rights to receive such payment from the money or U.S.
Government Obligations the Trustee or Paying Agent holds.
ARTICLE 9
AMENDMENTS
SECTION 9.01. AMENDMENTS AND SUPPLEMENTS PERMITTED WITHOUT CONSENT OF
HOLDERS.
Notwithstanding Section 9.02 hereof, the Company and the Trustee may
amend or supplement this Indenture or the Senior Notes without the consent of
any Holder (a) to cure any ambiguity, defect or inconsistency; (b) to provide
for uncertificated Senior Notes in addition to or in place of certificated
Senior Notes; (c) to provide for the assumption by a Successor Corporation of
the Company's Obligations to the Holders in the event of a Disposition
pursuant to Article 5; (d) to comply with Commission's requirements to effect
or maintain the qualification of this Indenture under the TIA; (e) to provide
for guarantees with respect to the Senior Notes; or (f) to make any change
that does not materially adversely affect any Holder's legal rights under this
Indenture.
Upon the Company's request, after receipt by the Trustee of a
resolution of the Board of Directors authorizing the execution of any amended
or supplemental indenture, the documents described in Section 9.06 hereof, the
Trustee shall join with the Company in the execution of any amended or
supplemental indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations that may be
contained in any such amended or supplemental indenture, but the Trustee shall
not be obligated to enter into an amended or supplemental indenture that
affects its own rights, duties or immunities under this Indenture or
otherwise.
SECTION 9.02. AMENDMENTS AND SUPPLEMENTS REQUIRING CONSENT OF HOLDERS.
Subject to Section 6.07 hereof, the Company and the Trustee may amend
or supplement this Indenture or the Senior Notes with the written consent of
the Holders of at least a majority in principal amount of the then outstanding
Senior Notes (including consents obtained in connection with a tender offer or
exchange offer for the Senior Notes). Subject to Sections 6.04 and 6.07
hereof, the Holders of a majority in principal amount of the Senior Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for the Senior Notes) may also waive any existing Default or
Event of Default (other than a payment Default) and its consequences or
compliance in a particular instance by the Company with any provision of this
Indenture or the Senior Notes.
Upon the Company's request and after receipt by the Trustee of a
resolution of the Board of Directors authorizing the execution of any
supplemental indenture, evidence of the Holders' consent, and the documents
described in Section 9.06 hereof, the Trustee shall join with the Company in
the execution of such amended or supplemental indenture unless such amended or
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but not be obligated to, enter into such amended or supplemental
indenture.
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<PAGE>
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver,
but it shall be sufficient if such consent approves the substance thereof.
After an amendment or waiver under this Section becomes effective,
the Company shall mail to each Holder affected thereby a notice briefly
describing the amendment, supplement or waiver. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such amended or supplemental indenture or
waiver. Without the consent of each Holder affected, an amendment, supplement
or waiver under this Section may not (1) reduce the principal amount of Senior
Notes whose Holders must consent to an amendment, supplement or waiver; (2)
reduce the rate of or change the time for payment of interest, including
default interest as set forth in Section 4.01 hereof or alter the redemption
or purchase provisions with respect thereto (other than the provisions of
Sections 4.13 and 4.14 hereof) or the price at which the Company is required
to offer to purchase any Senior Note; (3) reduce the principal of or change
the fixed maturity of any Senior Note; (4) make any Senior Note payable in
money other than that stated in the Senior Note; (5) make any change in
Section 6.04 or 6.07 hereof or in this sentence of this Section 9.02 hereof;
or (6) waive a default in the payment of the principal of, or premium, if any,
or any accrued and unpaid interest on, or redemption or purchase payment with
respect to, any Senior Note (except a rescission of acceleration of the Senior
Notes by the Holders of at least a majority in aggregate principal amount of
the then outstanding Senior Notes and a waiver of the payment default that
resulted from such acceleration).
SECTION 9.03. COMPLIANCE WITH TIA.
Every amendment or supplement to this Indenture or the Senior Notes
shall be set forth in an amended supplemental indenture that complies with the
TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Senior Note is a continuing consent by the Holder and
every subsequent Holder of a Senior Note or portion of a Senior Note that
evidences the same Indebtedness as the consenting Holder's Senior Note, even
if notation of the consent is not made on any Senior Note. However, any such
Holder or subsequent Holder may revoke the consent as to his or her Senior
Note or portion of a Senior Note if the Trustee receives the notice of
revocation before the date on which the Trustee receives an Officer's
Certificate certifying that the Holders of the requisite principal amount of
Senior Notes have consented to the amendment or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders of Senior Notes entitled to consent to
any amendment or waiver. If a record date is fixed, then, notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
Holders of Senior Notes at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to consent to such
amendment or waiver or to revoke any consent previously given, whether or not
such Persons continue to be Holders of Senior Notes after such record date. No
consent shall be valid or effective for more than 90 days after such record
date unless consents from Holders of the principal amount of Senior Notes
required hereunder for such amendment or waiver to be effective shall have
also been given and not revoked within such 90-day period.
After an amendment or waiver becomes effective it shall bind every
Holder, unless it is of the type described in any of clauses (1) through (6)
of Section 9.02 hereof. In such case, the amendment or
49
<PAGE>
waiver shall bind each Holder who has consented to it and every subsequent
Holder of a Senior Note that evidences the same debt as the consenting
Holder's Senior Note.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SENIOR NOTES.
The Trustee may (at the Company's expense) place an appropriate
notation about an amendment, supplement or waiver on any Senior Note
thereafter authenticated. The Company in exchange for all Senior Notes may
issue and the Trustee shall authenticate new Senior Notes that reflect the
amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Senior Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. TRUSTEE PROTECTED.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if the amendment does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. If it
does, the Trustee may, but need not, sign it. In signing such amendment or
supplemental indenture, the Trustee shall be entitled to receive and, subject
to Section 7.01 hereof, shall be fully protected in relying upon, an Officers'
Certificate and Opinion of Counsel as conclusive evidence that such amendment
or supplemental indenture is authorized or permitted by this Indenture, that
it is not inconsistent herewith, and that it will be valid and binding upon
the Company in accordance with its terms. The Company may not sign an
amendment or supplemental indenture until the Board of Directors approves it.
SECTION 9.07. PAYMENT FOR CONSENTS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
of Senior Notes for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of this Indenture or the Senior Notes unless
such consideration is offered to be paid or agreed to be paid to all Holders
of the Senior Notes that consent, waive or agree to amend in the time frame
set forth in the solicitation documents relating to such consent, waiver or
agreement.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of section 318(c) of the TIA, the imposed
duties shall control.
SECTION 10.02. NOTICES.
Any notice or communication by the Company or the Trustee to the
other is duly given if in writing and delivered in person, mailed by
registered or certified mail, postage prepaid, return receipt requested or
delivered by telecopier or overnight air courier guaranteeing next day
delivery to the other's address:
50
<PAGE>
If to the Company:
AmeriKing, Inc.
2215 Enterprise Drive
Suite 1502
Westchester, Illinois 60154
Attention: Chief Financial Officer
Telecopier No.: (708) 947-2161
with a copy to:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: James B. Carlson, Esq.
Telecopier No.: (212) 262-1910
If to the Trustee:
[Address]
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; the date receipt is acknowledged, if mailed by
registered or certified mail; when answered back, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first-class mail to his or her address shown on the register kept by the
Registrar. Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 10.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to section 312(b) of the TIA with
other Holders with respect to their rights under this Indenture or the Senior
Notes. The Company, the Trustee, the Registrar and any other Person shall have
the protection of section 312(c) of the TIA.
51
<PAGE>
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate (which shall include the statements
set forth in Section 10.05 hereof) stating that, in the
opinion of the signers, all conditions precedent and
covenants, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(b) an Opinion of Counsel (which shall include the statements
set forth in Section 10.05 hereof) stating that, in the
opinion of such counsel, all such conditions precedent
provided for in this Indenture relating to the proposed
action have been complied with.
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to section 314(a)(4) of the TIA) shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in such Person's opinion, such
condition or covenant has been complied with.
SECTION 10.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 10.07. LEGAL HOLIDAYS.
If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
SECTION 10.08. NO RECOURSE AGAINST OTHERS.
No officer, employee, director or stockholder of the Company shall
have any liability for any Obligations of the Company under the Senior Notes
or this Indenture, or for any claim based on, in respect of, or by reason of,
such Obligations or the creation of any such Obligation, except, in the case
of a Subsidiary, for an express guarantee or an express creation of any Lien
by such Subsidiary of the Company's Obligations under the Senior Notes issued in
accordance with this Indenture. Each Holder by accepting a Senior Note waives
and
52
<PAGE>
releases all such liability, and such waiver and release is part of the
consideration for the issuance of the Senior Notes.
SECTION 10.09. COUNTERPARTS.
This Indenture may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
SECTION 10.10. VARIABLE PROVISIONS.
The Company initially appoints the Trustee as Paying Agent, Registrar
and authenticating agent.
The first compliance certificate to be delivered by the Company to
the Trustee pursuant to Section 4.03 hereof shall be for the fiscal year
ending on January 1, 1997.
SECTION 10.11. GOVERNING LAW.
The internal laws of the State of New York shall govern this
Indenture and the Senior Notes, without regard to the conflict of laws
provisions thereof.
SECTION 10.12. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or any of its Subsidiaries, and no other
indenture, loan or debt agreement may be used to interpret this Indenture.
SECTION 10.13. SUCCESSORS.
All agreements of the Company in this Indenture and the Senior Notes
shall bind its successor. All agreements of the Trustee in this Indenture
shall bind its successor.
SECTION 10.14. SEVERABILITY.
If any provision in this Indenture or in the Senior Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 10.15. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table, and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
[NEXT PAGE IS THE SIGNATURE PAGE]
53
<PAGE>
Dated as of , 1996 AMERIKING, INC.
---------------
By:
----------------------
Name:
Title:
Dated as of , 1996 -----------------------
------------- as Trustee
By:
----------------------
Name:
Title:
54
<PAGE>
EXHIBIT A
(Face of Senior Note)
_% Senior Note due 2006
No. $__________
CUSIP No.
AMERIKING, INC.
promises to pay to
or registered assigns,
the principal sum of
Dollars on ___________, 2006.
Interest Payment Dates: ____________ and ___________.
Record Dates: _____________ and ____________.
Dated: ____________, 1996
AMERIKING, INC.
By:__________________________
Name:
Title:
Trustee's Certificate of Authentication
Dated:_________________________
This is one of the [Global] Senior Notes referred to in the within-mentioned
Indenture:
______________________,
as Trustee
By:_____________________________
(Authorized Signatory)
A-1
<PAGE>
[Unless and until it is exchanged in whole or in part for Senior
Notes in definitive form, this Senior Note may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. The Depository Trust Company shall act as the Depositary
until a successor shall be appointed by the Company and the Registrar. Unless
this certificate is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) ("DTC"), to the
Issuer or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name
as may be requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY Person IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]1
Additional provisions of this Senior Note are set forth on the other
side of this Senior Note.
- --------
1 This paragraph should be included only if the Senior Note is issued in
global form.
A-2
<PAGE>
(Back of Senior Note)
__% SENIOR NOTE DUE 2006
1. INTEREST. AmeriKing, Inc. (the "Company") promises to pay interest
on the principal amount of the Senior Notes at the rate and in the manner
specified below. Interest on the Senior Notes will accrue at __% per annum
from the date this Senior Note is issued until maturity. Interest will be
payable semiannually in cash in arrears on ________ and _________ of each
year, or if any such day is not a Business Day on the next succeeding Business
Day (each, an "Interest Payment Date"). Interest will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from the date of original issuance; provided that the first Interest Payment
Date shall be __________, 1997. The Company shall pay interest on overdue
principal and premium, if any, from time to time on demand at the rate of 2%
per annum in excess of the interest rate then in effect and shall pay interest
on overdue installments of interest (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. METHOD OF PAYMENT. The Company will pay interest on the Senior
Notes (except defaulted interest) to the Persons who are registered holders of
Senior Notes at the close of business on the record date for the next Interest
Payment Date even if such Senior Notes are cancelled after such record date
and on or before such Interest Payment Date. Holders must surrender Senior
Notes to a Paying Agent to collect principal payments on such Senior Notes.
The Company will pay principal, premium, if any, and interest, in money of the
United States that at the time of payment is legal tender for payment of
public and private debts. The Company will pay principal, premium, if any, and
interest, by wire transfer of immediately available funds to the accounts
specified by the Holders or, if no such account is specified, by mailing a
check to each such Holder's registered address; provided that payment by wire
transfer of immediately available funds will be required with respect to
principal, premium, if any, and interest, on all Global Senior Notes.
3. PAYING AGENT AND REGISTRAR. ____________________ (the "Trustee")
will initially act as the Paying Agent and Registrar. The Company may appoint
additional paying agents or co-registrars, and change the Paying Agent, any
additional paying agent, the Registrar or any co-registrar without prior
notice to any Holder. The Company or any of its Subsidiaries may act in any
such capacity.
4. INDENTURE. The Company issued the Senior Notes under an Indenture,
dated as of ___________, 1996 (the "Indenture"), among the Company and the
Trustee. The terms of the Senior Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act
of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of the
original issuance of the Senior Notes (the "Trust Indenture Act"). The Senior
Notes are subject to, and qualified by, all such terms, certain of which are
summarized herein, and Holders are referred to the Indenture and the Trust
Indenture Act for a statement of such terms (all capitalized terms not defined
herein shall have the meanings assigned them in the Indenture). The Senior
Notes are unsecured senior obligations of the Company limited to $100,000,000
in aggregate principal amount.
A-3
<PAGE>
5. OPTIONAL REDEMPTION. (a) Except as described in paragraph 5(b)
below, the Senior Notes may not be redeemed at the option of the Company prior
to ___________, 2001. During the twelve (12) month period beginning
___________ of the years indicated below, the Senior Notes will be redeemable
at the option of the Company, in whole or in part, on at least 30 but not more
than 60 days' notice to each Holder of Senior Notes to be redeemed, at the
redemption prices (expressed as percentages of the principal amount) set forth
below, plus any accrued and unpaid interest to the date of redemption:
Year Percentage
---- -----------
2001...................................................... %
2002...................................................... %
2003...................................................... %
2004 and thereafter....................................... 100.000%
(b) Notwithstanding the foregoing, prior to ___________, 1999, the
Company may (but shall not have the obligation to) redeem up to 35% of the
original aggregate principal amount of the Senior Notes at a redemption price
of ___% of the principal amount thereof, plus accrued and unpaid interest to
the redemption date, with the net proceeds of one or more Equity Offerings;
provided that at least 65% of the aggregate principal amount of Senior Notes
originally issued remain outstanding immediately after the occurrence of any
such redemption; and provided, further, that any such redemption shall occur
within 60 days of the date of the closing of such Equity Offering.
6. MANDATORY REDEMPTION. Subject to the Company's obligation to make
an offer to purchase Senior Notes under certain circumstances pursuant to
Sections 4.13 and 4.14 of the Indenture (as described in paragraph 7 below),
the Company is not required to make any mandatory redemption, purchase or
sinking fund payments with respect to the Senior Notes.
7. MANDATORY OFFERS TO PURCHASE SENIOR NOTES. (a) Upon the occurrence
of a Change of Control Triggering Event (such date being the "Change of
Control Trigger Date"), each Holder of Senior Notes shall have the right to
require the Company to purchase all or any part (equal to $1,000 or an
integral multiple thereof) of such Holder's Senior Notes pursuant to an offer
(a "Change of Control Offer") at a purchase price in cash equal to 101% of the
aggregate principal amount thereof, plus any accrued and unpaid interest to
the date of purchase.
(b) If the Company or any Restricted Subsidiary consummates one or
more Asset Sales and does not use all of the Net Proceeds from such Asset
Sales as provided in the Indenture, the Company will be required, under
certain circumstances, to utilize the Excess Proceeds from such Asset Sales to
offer (an "Asset Sale Offer") to purchase Senior Notes at a purchase price
equal to 100% of the principal amount of the Senior Notes, plus any accrued
and unpaid interest to the date of purchase. If the Excess Proceeds are
insufficient to purchase all Senior Notes tendered pursuant to any Asset Sale
Offer, the Trustee shall select the Senior Notes to be purchased in accordance
with the terms of the Indenture.
(c) Holders may tender all or, subject to paragraph 8 below, any
portion of their Senior Notes in a Change of Control Offer or Asset Sale Offer
(collectively, an "Offer") by completing the form below entitled "OPTION OF
HOLDER TO ELECT PURCHASE."
(d) The Indenture provides that the Company will comply with any
tender offer rules under the Exchange Act which may then be applicable,
including Rule 14e-1, in connection with an Offer required to be made by the
Company to repurchase the Senior Notes as a result of a Change of Control
Trigger Date or an Asset Sale Trigger Date. To the extent that the provisions
of any securities laws or
A-4
<PAGE>
regulations conflict with provisions of the Indenture, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under the Indenture by virtue thereof.
8. NOTICE OF REDEMPTION OR PURCHASE. Notice of an optional redemption
or an Offer will be mailed to each Holder at its registered address at least
30 days but not more than 60 days before the date of redemption or purchase.
Senior Notes may be redeemed or purchased in part, but only in whole multiples
of $1,000 unless all Senior Notes held by a Holder are to be redeemed or
purchased. On or after any date on which Senior Notes are redeemed or
purchased, interest ceases to accrue on the Senior Notes or portions thereof
called for redemption or accepted for purchase on such date.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples thereof. The transfer of Senior Notes may be registered and Senior
Notes may be exchanged as provided in the Indenture. Holders seeking to
transfer or exchange their Senior Notes may be required, among other things,
to furnish appropriate endorsements and transfer documents and to pay any
taxes and fees required by law or permitted by the Indenture. The Registrar
need not exchange or register the transfer of any Senior Note or portion of a
Senior Note selected for redemption or tendered pursuant to an Offer. Also, it
need not exchange or register the transfer of any Senior Notes for a period of
15 Business Days before a selection of Senior Notes to be redeemed or between
a record date and the next succeeding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Senior Note may
be treated as its owner for all purposes.
11. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the
Indenture or the Senior Notes may be amended or supplemented with the written
consent of the Holders of at least a majority in principal amount of the then
outstanding Senior Notes, and any existing Default or Event of Default (except
a payment Default) may be waived with the consent of the Holders of a majority
in principal amount of the then outstanding Senior Notes. Without the consent
of any Holder, the Indenture or the Senior Notes may be amended to: cure any
ambiguity, defect or inconsistency; provide for uncertificated Senior Notes in
addition to or in place of certificated Senior Notes; provide for the
assumption by another corporation of the Company's obligations to Holders in
the event of a merger or consolidation of the Company in which the Company is
not the surviving corporation or a sale of substantially all of the Company's
assets to such other corporation; comply with the Securities and Exchange
Commission's requirements to effect or maintain the qualification of the
Indenture under the Trust Indenture Act; provide for guarantees with respect
to the Senior Notes; or, make any change that does not materially adversely
affect any Holder's rights under the Indenture.
12. DEFAULTS AND REMEDIES. Events of Default include: default for 30
days in payment of interest on the Senior Notes; default in payment of
principal of, or premium, if any, on the Senior Notes; subject to certain
exceptions, failure by the Company for 30 days after notice to it to comply
with any of its other agreements or covenants in, or provisions of, the
Indenture or the Senior Notes; certain defaults under and acceleration prior
to maturity of, or failure to pay at maturity, certain other Indebtedness;
certain final judgments that remain undischarged; and certain events of
bankruptcy or insolvency involving the Company or any Restricted Subsidiary
that is a Significant Subsidiary. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Senior Notes may declare all the Senior Notes to be immediately due and
payable in an amount equal to the principal of, premium, if any, and any
accrued and unpaid interest on, such Senior Notes; provided, however, that in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency, the principal of, premium, if any, and any accrued and unpaid
interest on, the Senior Notes
A-5
<PAGE>
becomes due and payable immediately without further action or notice. Subject
to certain exceptions, Holders of a majority in principal amount of the then
outstanding Senior Notes may direct the Trustee in its exercise of any trust
or power, provided that the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of Holders
unless such Holders have offered to the Trustee security and indemnity
satisfactory to it. Holders may not enforce the Indenture or the Senior Notes
except as provided in the Indenture. The Trustee may withhold from Holders
notice of any continuing default (except a payment Default) if it determines
that withholding notice is in their interests. The Company must furnish an
annual compliance certificate to the Trustee.
13. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee, in its individual
or any other capacity, may make loans to, accept deposits from, and perform
services for the Company or any Affiliate, and may otherwise deal with the
Company or any Affiliate, as if it were not Trustee.
14. NO RECOURSE AGAINST OTHERS. No officer, employee, director or
stockholder of the Company shall have any liability for any Obligations of the
Company under the Senior Notes or the Indenture, or for any claim based on, in
respect of, or by reason of, such Obligations or the creation of any such
Obligation, except, in the case of a Subsidiary, for an express guarantee or
an express creation of any Lien by such Subsidiary of the Company's
Obligations under the Senior Notes. Each Holder by accepting a Senior Note
waives and releases all such liability, and such waiver and release is part of
the consideration for the issuance of the Senior Notes.
16. SUCCESSOR SUBSTITUTED. Upon the consolidation or merger by the
Company with or into another corporation, or upon the sale, lease, conveyance
or other disposition of all or substantially all of its assets to another
corporation, in accordance with the Indenture, the corporation surviving any
such merger or consolidation (if not the Company) or the corporation to which
such assets were sold or transferred to shall succeed to, and be substituted
for, and may exercise every right and power of the Company under the Indenture
with the same effect as if such surviving or other corporation had been named
as the Company in the Indenture.
17. GOVERNING LAW. This Senior Note shall be governed by and
construed in accordance with the internal laws of the State of New York
without regard to the conflict of laws provisions thereof.
18. AUTHENTICATION. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
19. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (=Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Senior Note Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Senior Notes and have directed the
Trustee to use CUSIP numbers in notices of redemption as a convenience to
Holders. No representation is made as to the accuracy of such numbers either
as printed on the Senior Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers printed on the
Senior Notes.
A-6
<PAGE>
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture, which has in it the text of this
Senior Note in larger type. Request may be made to:
AmeriKing, Inc.
2215 Enterprise Drive, Suite 1502
Westchester, Illinois 60154
Attention: Chief Financial Officer
A-7
<PAGE>
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to:
- ------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
------------------------------------------------------
- -------------------------------------------- as agent to transfer this Senior
Note on the books of the Company. The agent may substitute another to act
for him.
Date: Your Signature:
--------------------- -----------------------------------
(Sign exactly as your name appears
on the face of this Senior Note)
Signature Guarantee:
- ---------------------------------------
A-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you elect to have this Senior Note purchased by the Company
pursuant to Section 4.13 of the Indenture, check the box: [ ]
If you elect to have this Senior Note purchased by the Company
pursuant to Section 4.14 of the Indenture, check the box: [ ]
If you elect to have only part of this Senior Note purchased by the
Company pursuant to Section 4.13 or 4.14 of the Indenture, state the amount
(multiples of $1000 only):
$
------------------------------
Date: Your Signature:
--------------------- -----------------------------------
(Sign exactly as your name appears
on the face of this Senior Note)
Signature Guarantee:
- ---------------------------------------
A-9
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SENIOR NOTES2
The following exchanges of a part of this Global Senior Note
for Definitive Senior Notes have been made:
<TABLE>
<CAPTION>
Principal Amount of this Signature of
Amount of decrease in Amount of increase in Global Senior Note authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Senior
Date of Exchange this Global Senior Note this Global Senior Note (or increase) Note Custodian
- ---------------------- ----------------------- ------------------------ ------------------------ --------------
<S> <C> <C> <C> <C>
</TABLE>
- --------
2 This should be included only if the Senior Note is issued in global form.
A-10
EXHIBIT 4.40
L&W DRAFT OF 10/30/96
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AMERIKING, INC.
----------------------------------------
___% SUBORDINATED EXCHANGE DEBENTURES DUE 2008
----------------------------------------
-------------------
INDENTURE
DATED AS OF __________, 1996
-------------------
----------------------------------------------
Trustee
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions............................................................................... 1
Section 1.02. Other Definitions......................................................................... 14
Section 1.03. Incorporation by Reference of Trust Indenture Act......................................... 14
Section 1.04. Rules of Construction..................................................................... 14
Section 1.05. Incorporation of Burger King Agreement.................................................... 15
ARTICLE 2
THE EXCHANGE DEBENTURES
Section 2.01. Form and Dating........................................................................... 15
Section 2.02. Execution and Authentication.............................................................. 15
Section 2.03. Registrar and Paying Agent................................................................ 16
Section 2.04. Paying Agent to Hold Money in Trust....................................................... 16
Section 2.05. Holder Lists.............................................................................. 17
Section 2.06. Transfer and Exchange..................................................................... 17
Section 2.07. Replacement Exchange Debentures........................................................... 20
Section 2.08. Outstanding Exchange Debentures........................................................... 20
Section 2.09. Treasury Exchange Debentures.............................................................. 20
Section 2.10. Temporary Exchange Debentures............................................................. 21
Section 2.11. Cancellation.............................................................................. 21
Section 2.12. Defaulted Interest........................................................................ 21
Section 2.13. Record Date............................................................................... 21
Section 2.14. CUSIP Number.............................................................................. 21
ARTICLE 3
OPTIONAL REDEMPTION AND MANDATORY OFFERS TO PURCHASE
Section 3.01. Notices to Trustee........................................................................ 22
Section 3.02. Selection of Exchange Debentures to be Redeemed or Purchased.............................. 22
Section 3.03. Notice of Redemption...................................................................... 23
Section 3.04. Effect of Notice of Redemption............................................................ 24
Section 3.05. Deposit of Redemption Price............................................................... 24
Section 3.06. Exchange Debentures Redeemed in Part...................................................... 24
Section 3.07. Optional Redemption Provisions............................................................ 24
Section 3.08. Mandatory Purchase Provisions............................................................. 25
ARTICLE 4
COVENANTS
Section 4.01. Payment of Exchange Debentures............................................................ 26
Section 4.02. Commission Reports........................................................................ 27
Section 4.03. Compliance Certificate.................................................................... 27
Section 4.04. Stay, Extension and Usury Laws............................................................ 28
Section 4.05. Limitation on Restricted Payments......................................................... 28
Section 4.06. Corporate Existence....................................................................... 30
Section 4.07. Limitation on Incurrence of Indebtedness.................................................. 31
Section 4.08. Limitation on Transactions With Affiliates................................................ 31
Section 4.09. Limitation on Liens....................................................................... 32
Section 4.10. Compliance With Laws, Taxes............................................................... 32
(i)
<PAGE>
Section 4.11. Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries............................................ 32
Section 4.12. Maintenance of Office or Agencies......................................................... 33
Section 4.13. Change of Control......................................................................... 33
Section 4.14. Limitation on Asset Sales................................................................. 34
Section 4.15. Limitation on Guarantees of Company
Indebtedness by Restricted Subsidiaries................................................... 35
Section 4.16. Designation of Restricted and Non-Restricted Subsidiaries................................. 36
Section 4.17. Senior Subordinated Debt.................................................................. 36
ARTICLE 5
SUCCESSORS
Section 5.01. Merger or Consolidation................................................................... 37
Section 5.02. Successor Corporation Substituted......................................................... 37
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default......................................................................... 37
Section 6.02. Acceleration.............................................................................. 39
Section 6.03. Other Remedies............................................................................ 40
Section 6.04. Waiver of Past Defaults................................................................... 40
Section 6.05. Control by Majority....................................................................... 40
Section 6.06. Limitation on Suits....................................................................... 40
Section 6.07. Rights of Holders to Receive Payment...................................................... 41
Section 6.08. Collection Suit by Trustee................................................................ 41
Section 6.09. Trustee May File Proofs of Claim.......................................................... 41
Section 6.10. Priorities................................................................................ 41
Section 6.11. Undertaking for Costs..................................................................... 42
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee......................................................................... 42
Section 7.02. Rights of Trustee......................................................................... 43
Section 7.03. Individual Rights of Trustee.............................................................. 43
Section 7.04. Trustee's Disclaimer...................................................................... 44
Section 7.05. Notice to Holders of Defaults and Events of Default....................................... 44
Section 7.06. Reports by Trustee to Holders............................................................. 44
Section 7.07. Compensation and Indemnity................................................................ 44
Section 7.08. Replacement of Trustee.................................................................... 45
Section 7.09. Successor Trustee by Merger, Etc.......................................................... 46
Section 7.10. Eligibility; Disqualification............................................................. 46
Section 7.11. Preferential Collection of Claims Against the Company..................................... 46
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.01. Discharge of Liability on Exchange Debentures; Defeasance................................. 46
Section 8.02. Conditions to Defeasance.................................................................. 47
Section 8.03. Application of Trust Money................................................................ 48
Section 8.04. Repayment to the Company.................................................................. 48
Section 8.05. Indemnity for Government Obligations...................................................... 49
(ii)
<PAGE>
Section 8.06. Reinstatement............................................................................. 49
ARTICLE 9
AMENDMENTS
Section 9.01. Amendments and Supplements Permitted Without Consent of Holders........................... 49
Section 9.02. Amendments and Supplements Requiring Consent of Holders................................... 49
Section 9.03. Compliance with TIA....................................................................... 50
Section 9.04. Revocation and Effect of Consents......................................................... 50
Section 9.05. Notation on or Exchange of Exchange Debentures............................................ 51
Section 9.06. Trustee Protected......................................................................... 51
Section 9.07. Payment for Consents...................................................................... 51
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate.................................................................. 52
Section 10.02. Liquidation; Dissolution; Bankruptcy...................................................... 52
Section 10.03. Default on Designated Senior Debt......................................................... 52
Section 10.04. Acceleration of Securities................................................................ 53
Section 10.05. When Distribution Must Be Paid Over....................................................... 53
Section 10.06. Notice by Company......................................................................... 54
Section 10.07. Subrogation............................................................................... 54
Section 10.08. Relative Rights........................................................................... 54
Section 10.09. Subordination May Not Be Impaired by Company.............................................. 55
Section 10.10. Distribution or Notice to Representative.................................................. 55
Section 10.11. Rights of Trustee and Paying Agent........................................................ 55
Section 10.12. Authorization to Effect Subordination..................................................... 55
Section 10.13. Amendments................................................................................ 55
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.............................................................. 56
Section 11.02. Notices................................................................................... 56
Section 11.03. Communication by Holders with Other Holders............................................... 57
Section 11.04. Certificate and Opinion as to Conditions Precedent........................................ 57
Section 11.05. Statements Required in Certificate or Opinion............................................. 57
Section 11.06. Rules by Trustee and Agents............................................................... 58
Section 11.07. Legal Holidays............................................................................ 58
Section 11.08. No Recourse Against Others................................................................ 58
Section 11.09. Counterparts.............................................................................. 58
Section 11.10. Variable Provisions....................................................................... 58
Section 11.11. Governing Law............................................................................. 58
Section 11.12. No Adverse Interpretation of Other Agreements............................................. 58
Section 11.13. Successors................................................................................ 58
Section 11.14. Severability.............................................................................. 59
Section 11.15. Table of Contents, Headings, Etc.......................................................... 59
EXHIBITS
Exhibit A Form of Exchange Debenture ...............................................................A-1
Exhibit B Burger King Agreement.....................................................................B-1
(iii)
</TABLE>
<PAGE>
This Indenture, dated as of ____________, 1996, is between AmeriKing,
Inc., a Delaware corporation (the "Company"), and ____________, as trustee
(the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the holders of the Company's __%
Subordinated Exchange Debentures due 2008 (the "Exchange Debentures"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Affiliate" means any of the following: (i) any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company, (ii) any spouse, immediate family member or other
relative who has the same principal residence as any Person described in
clause (i) above, (iii) any trust in which any such Persons described in
clause (i) or (ii) above has a beneficial interest, and (iv) any corporation
or other organization of which any such Persons described above collectively
own 50% or more of the equity of such entity.
"Agent" means any Registrar, Paying Agent or co-registrar or any
successor thereto.
"Asset Sale" means the sale, lease, conveyance or other disposition
by the Company or a Restricted Subsidiary of assets or property whether owned
on the Exchange Debenture Issue Date or thereafter acquired, in a single
transaction or in a series of related transactions; provided that Asset Sales
will not include such sales, leases, conveyances or dispositions in connection
with (i) the sale or disposition of any Restricted Investment, (ii) any Equity
Offering by (a) the Company or (b) any Restricted Subsidiary if the proceeds
therefrom are used to make mandatory prepayments of Indebtedness under the
Credit Agreement or Indebtedness of the Restricted Subsidiaries or redeem
Exchange Debentures as described in Section 3.07 hereof, (iii) the surrender
or waiver of contract rights or the settlement, release or surrender of
contract, tort or other claims of any kind, (iv) the sale of inventory in the
ordinary course of business, (v) a sale-leaseback of assets within one year
following the acquisition of such assets, (vi) the grant of any license of
patents, trademarks, registration therefor and other similar intellectual
property, (vii) a transfer of assets by the Company or a Restricted Subsidiary
to any of the Company, a Restricted Subsidiary or a NonRestricted Subsidiary,
(viii) the designation of a Restricted Subsidiary as a Non-Restricted Subsidiary
pursuant to Section 4.16 hereof, (ix) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company as
permitted under Section 5.01 hereof, (x) the sale or disposition of
obsolete equipment or other obsolete assets, or (xi) Restricted Payments
permitted by Section 4.05 hereof, (xii) the BKC Designated Transfer, or (xiii)
the exchange of assets for other non-cash assets that (a) are useful in the
business of the Company and its Restricted Subsidiaries and (b) have a fair
market value at least equal to the fair market value of the assets being
exchanged (as determined by the Board of Directors in good faith).
"BBI Note" means the promissory note in the aggregate principal amount
of $600,000 issued by the Company to BancBoston and all related Obligations as
in effect on the Preferred Stock Issue Date.
"BKC" means Burger King Corporation and its successors and assigns.
"BKC Agreements" means the franchise, trademark, royalty, lease,
sublease and other agreements, obligations and liabilities of the Company and
its Subsidiaries with or to BKC.
"BKC Designated Transfer" means the sale by the Company of up to 10
Burger King restaurants to a franchisee to be designated by BKC.
"Bankruptcy Law" means Title II, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Company's board of directors or any
authorized committee of such board of directors.
"Burger King Agreement" means the Agreement, dated the date of this
Indenture, between the Trustee and Burger King Corporation in the form of
Exhibit B.
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" means any and all shares, interests, participations
or other equivalents (however designated) of corporate stock, including any
preferred stock.
1
<PAGE>
"Cash Flow" means, for any given period and Person, the sum of,
without duplication, Consolidated Net Income, plus (a) the portion of Net
Income attributable to the minority interests in its Restricted Subsidiaries, to
the extent not included in calculating Consolidated Net Income, plus (b) any
provision for taxes based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income, plus (c)
Consolidated Interest Expense, to the extent deducted in computing
Consolidated Net Income, plus (d) the amortization of all intangible assets,
to the extent such amortization was deducted in computing Consolidated Net
Income (including, but not limited to, inventory write-ups, goodwill, debt and
financing costs, and Incentive Arrangements), plus (e) any non-capitalized
transaction costs incurred in connection with financings, acquisitions or
divestitures (including, but not limited to, financing and refinancing fees, to
the extent deducted in computing Consolidated Net Income, including those in
connection with the Offerings, to the extent deducted in computing Consolidated
Net Income), plus (f) all depreciation and all other non-cash charges
(including, without limitation, those charges relating to purchase accounting
adjustments and LIFO adjustments), to the extent deducted in computing
Consolidated Net Income, plus (g) any interest income, to the extent such income
was not included in computing Consolidated Net Income, plus (h) all
dividend payments on preferred stock (whether or not paid in cash) to the
extent deducted in computing Consolidated Net Income, plus (i) any
extraordinary or non-recurring charge or expense arising out of the
implementation of SFAS 106 or SFAS 109 to the extent deducted in computing
Consolidated Net Income, plus (j) fees paid or payable in respect of the TJC
Agreement to the extent deducted in computing Consolidated Net Income, plus (k)
the net loss of any Person, other than those of a Restricted Subsidiary, to the
extent deducted in computing Consolidated Net Income, plus (l) net losses in
respect of any discontinued operations, as determined in accordance with GAAP,
to the extent deducted in computing Consolidated Net Income; provided, however,
that if any such calculation includes any period during which an acquisition or
sale of a Person or the incurrence or repayment of Indebtedness occurred, then
such calculation for such period shall be made on a Pro Forma Basis.
"Cash Flow Coverage Ratio" means, for any given period and person,
the ratio of: (i) Cash Flow, divided by (ii) the sum of Consolidated Interest
Expense and all dividend payments on any series of preferred stock of such
Person (except dividends paid or payable in additional shares of Capital Stock
(other than Disqualified Stock) and except for accrued and unpaid dividends with
respect to preferred stock outstanding on the Preferred Stock Issue Date), in
each case, without duplication; provided, however, that if any such calculation
includes any period during which an acquisition or sale of a person or the
incurrence or repayment of Indebtedness occurred, then such calculation for such
period shall be made on a Pro Forma Basis.
"Change of Control" means the occurrence of each of the following:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), excluding the Existing Stockholders, is or becomes
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a Person shall be deemed to have "beneficial ownership" of
all securities that such Person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Stock of the Company; and
(ii) the Company consolidates with, or merges with or into, another Person or
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates
with, or merges with or into, the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is converted
into or exchanged for cash, securities or other property, other than any such
transaction where (A) the outstanding Voting Stock of the Company is converted
into or exchanged for (1) Voting Stock (other than Redeemable Capital Stock)
of the surviving or transferee corporation or (2) cash, securities and other
property in an amount which could be paid by the Company as a Restricted
Payment under this Indenture and (B) immediately after such transaction no
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), excluding the Existing Stockholders, is the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
Person shall be deemed to have "beneficial ownership"
2
<PAGE>
of all securities that such Person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly
or indirectly, of more than 50% of the total Voting Stock of the surviving or
transferee corporation; and (iii) during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by
such Board of Directors or whose nomination for election by the stockholders
of the Company was approved by a vote of a majority of the directors then
still in office who are entitled to vote to elect such new director and were
either directors at the beginning of such period or Persons whose election as
directors or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company then
in office.
"Commission" means the Securities and Exchange Commission.
"Company" means AmeriKing, Inc. until a successor replaces it in
accordance with Article 5 hereof and thereafter means the successor, and shall
include any and all other obligors on the Exchange Debentures.
"Consolidated Interest Expense" means, for any given period and
Person, the aggregate of the interest expense in respect of all Indebtedness
of such Person and its Restricted Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP (including amortization
of original issue discount on any such Indebtedness, all non-cash interest
payments, the interest portion of any deferred payment obligation and the
interest component of capital lease obligations, but excluding amortization of
deferred financing fees if such amortization would otherwise be included in
interest expense); provided, however, that for the purpose of the Cash Flow
Coverage Ratio, Consolidated Interest Expense shall be calculated on a Pro Forma
Basis; provided further that any premiums, fees and expenses (including the
amortization thereof) payable in connection with the Offerings and the
application of the net proceeds therefrom or any other refinancing of
Indebtedness will be excluded.
"Consolidated Net Income" means, for any given period and Person, the
aggregate of the Net Income of such Person and its Restricted Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that: (i) the Net Income of any Person acquired in a pooling
of interests transaction for any period prior to the date of such acquisition
shall be excluded, and (ii) Consolidated Net Income of any Person will not
include, without duplication, any deduction for: (A) any increased amortization
or depreciation resulting from the write-up of assets pursuant to Accounting
Principles Board Opinion Nos. 16 and 17, as amended or supplemented from time to
time, (B) the amortization of all intangible assets (including amortization
attributable to inventory write-ups, goodwill, debt and financing costs, and
Incentive Arrangements), (C) any non-capitalized transaction costs incurred in
connection with financings, acquisitions or divestitures (including, but not
limited to, financing and refinancing fees), (D) any extraordinary or
nonrecurring charges relating to any premium or penalty paid, write-off or
deferred financing costs or other financial recapitalization charges in
connection with redeeming or retiring any Indebtedness prior to its stated
maturity, and (E) any Restructuring Charges; provided, however, that for
purposes of determining the Cash Flow Coverage Ratio, Consolidated Net Income
shall be calculated on a Pro Forma Basis.
"Consolidated Net Worth" with respect to any Person means, as of any
date, the consolidated equity of the common stockholders of such Person
(excluding the cumulated foreign currency translation adjustment), all
determined on a consolidated basis in accordance with GAAP, but without any
reduction in respect of the payment of dividends on any series of such
Person's preferred stock if such dividends
3
<PAGE>
are paid in additional shares of Capital Stock (other than Disqualified
Stock); provided, however, that Consolidated Net Worth shall also include,
without duplication: (a) the amortization of all write-ups of inventory, (b)
the amortization of all intangible assets (including amortization of goodwill,
debt and financing costs, and Incentive Arrangements), (c) any non-capitalized
transaction costs incurred in connection with financings, acquisitions or
divestitures (including, but not limited to, financing and refinancing fees),
(d) any increased amortization or depreciation resulting from the write-up of
assets pursuant to Accounting Principles Board Opinion Nos. 16 and 17, as
amended and supplemented from time to time, (e) any extraordinary or
nonrecurring charges or expenses relating to any premium or penalty paid, write-
off or deferred financing costs or other financial recapitalization charges
incurred in connection with redeeming or retiring any Indebtedness prior to its
stated maturity, (f) any Restructuring Charges, and (g) any extraordinary or
non-recurring charge arising out of the implementation of SFAS 106 or SFAS
109; provided, however, that Consolidated Net Worth shall be calculated on a
Pro Forma Basis.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 11.02 of this Indenture or such other address
as to which the Trustee gives notice to the Company.
"Credit Agreement" means the credit agreement, dated February 7, 1996,
among the Company, certain of its subsidiaries and the lenders party thereto in
their capacities as lenders thereunder and The First National Bank of Boston, as
agent, together with all loan documents and instruments thereunder (including,
without limitation, any guarantee agreements and security documents), in each
case as such agreements may be amended (including any amendment and
restatement thereof), supplemented or otherwise modified from time to time,
including any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including, without limitation, increasing the amount
of available borrowings thereunder, and all Obligations with respect thereto,
in each case, to the extent permitted by Section 4.07 hereof, or adding
Subsidiaries of the Company as additional borrowers or guarantors thereunder)
all or any portion of the Indebtedness under such agreement or any successor
or replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Definitive Exchange Debentures" means Exchange Debentures that are
in the form of Exhibit A attached hereto (but without including the text
referred to in footnotes 1 and 2 thereto).
"Depositary" means, with respect to the Exchange Debentures issuable
or issued in whole or in part in global form, the Person specified in Section
2.03 hereof as the Depositary with respect to the Exchange Debentures, until a
successor shall have been appointed and become such pursuant to the applicable
provision of this Indenture and, thereafter, "Depositary" shall mean or
include such successor.
"Designated Senior Debt" means (a) Indebtedness under the Company's
__ % Senior Notes due 2006 and the indenture relating thereto, (b)
Indebtedness under the Credit Agreement and (c) any other Senior Indebtedness
permitted to be incurred pursuant to this Indenture in a principal amount of
not less than $20,000,000 designated by the Company as Designated Senior Debt.
"Disqualified Stock" means any Capital Stock that by its terms (or by
the terms of any security into which it is convertible--or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
4
<PAGE>
redeemable at the option of the holder thereof, in whole or in part on, or
prior to, the maturity date of the Exchange Debentures.
"Equity Interests" means Capital Stock or partnership interests or
warrants, options or other rights to acquire Capital Stock or partnership
interests (but excluding (i) any debt security that is convertible into, or
exchangeable for, Capital Stock or partnership interests, and (ii) any other
Indebtedness or Obligation) provided, however, that Equity Interests will not
include any Incentive Arrangements or obligations or payments thereunder.
"Equity Offering" means a public or private offering by the Company
and/or its Subsidiaries for cash of Capital Stock or other Equity Interests
and all warrants, options or other rights to acquire Capital Stock, other than
(i) an offering of Disqualified Stock or (ii) Incentive Arrangements or
obligations or payments thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Debenture Custodian" means the Trustee, as custodian with
respect to the Exchange Debentures in global form, or any successor entity
thereto.
"Exchange Debenture Issue Date" means the date on which the Exchange
Debentures are issued under this Indenture.
"Executive Employment Agreements" means the Employment Agreements,
effective as of September 1, 1994, between the Company, on the one hand, and
Lawrence E. Jaro, William C. Osborn, Gary W. Hubert, Joel D. Aaseby and Scott E.
Vasatka, on the other hand, as in effect at the Preferred Stock Issue Date.
"Existing Stockholders" means (a) The Jordan Company and
Jordan/Zalaznick Capital Corporation and their respective affiliates,
principals, partners and employees, family members of any of the foregoing and
trusts for the benefit of any of the foregoing, including, without limitation,
MCIT PLC, Leucadia National Corporation and Jordan Industries, Inc., and their
respective Subsidiaries and (b) the officers and directors of the Company on the
Preferred Stock Issue Date and their respective affiliates and family members
and trusts for the benefit of any of the foregoing.
"GAAP" means generally accepted accounting principles, consistently
applied, as of the Preferred Stock Issue Date. All financial and accounting
determinations and calculations under this Indenture will be made in accordance
with GAAP.
"Global Exchange Debenture" means an Exchange Debenture that contains
the paragraph referred to in footnote 1 and the additional schedule referred
to in footnote 2 to the form of the Exchange Debenture attached hereto as
Exhibit A.
"Hedging Obligations" means, with respect to any Person, the
Obligations of such Persons under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, (ii) foreign exchange
contracts, currency swap agreements or similar agreements, and (iii) other
agreements or arrangements designed to protect such Person against
fluctuations, or otherwise to establish financial hedges in respect of,
exchange rates, currency rates or interest rates.
"Holder" means a Person in whose name an Exchange Debenture is
registered.
"Incentive Arrangements" means any earn-out agreements, stock
appreciation rights, "phantom" stock plans, employment agreements,
non-competition agreements, subscription and stockholders agreements and other
incentive and bonus plans and similar arrangements made in connection with
acquisitions of Persons or businesses by the Company or the Restricted
Subsidiaries or the retention of executives, officers or employees by the
Company or the Restricted Subsidiaries.
"Indebtedness" means, with respect to any Person, any indebtedness,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing the deferred and
unpaid balance of the purchase price of any property (including pursuant to
capital leases), except any such balance that constitutes an accrued expense
or a trade payable, and any Hedging Obligations, if and to the extent such
indebtedness (other than a Hedging Obligation) would appear as a liability
upon a balance
5
<PAGE>
sheet of such Person prepared on a consolidated basis in accordance with GAAP,
and also includes, to the extent not otherwise included, the guarantee of
items that would be included within this definition; provided, however, that
"Indebtedness" will not include (i) any Incentive Arrangements or obligations or
payments thereunder, or (ii) any BKC Agreement, except for any indebtedness in
respect of borrowed money or evidenced by bonds, notes, debentures or similar
instruments or representing the deferred and unpaid balance of the purchase
price of any property (including pursuant to capital leases).
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy or similar case or proceeding, or any reorganization, receivership,
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, or (ii) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company.
"Investment" means any capital contribution to, or other debt or
equity investment in, any Person.
"Investment Grade" means a rating of BBB- or higher by S&P and Baa3
or higher by Moody's or the equivalent of such ratings by S&P or Moody's and
the equivalent in respect of Rating Categories of any Rating Agencies
substituted for S&P or Moody's.
"issue" means create, issue, assume, guarantee, incur or otherwise
become directly or indirectly liable for any Indebtedness or Capital Stock, as
applicable; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Restricted Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be deemed
to be issued by such Restricted Subsidiary at the time it becomes a Restricted
Subsidiary. For this definition, the terms "issuing," "issuer," "issuance" and
"issued" have meanings correlative to the foregoing.
"Jaro Leases" means the leases between the Company's Subsidiaries and
Lawrence E. Jaro relating to two Burger King restaurants as in effect at the
Preferred Stock Issue Date.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized
by law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell and any filing of
or agreement to give any financing statement under the Uniform Commercial Code
(or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP, excluding, however, any
gain or loss, together with any related
6
<PAGE>
provision for taxes, realized in connection with any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions).
"Net Proceeds" means, with respect to any Asset Sale, the aggregate
amount of cash proceeds (including any cash received by way of deferred
payment pursuant to a note receivable issued in connection with such Asset
Sale, other than the portion of such deferred payment constituting interest,
and including any amounts received as disbursements or withdrawals from any
escrow or similar account established in connection with any such Asset Sale,
but, in either such case, only as and when so received) received by the
Company or any of its Restricted Subsidiaries in respect of such Asset Sale,
net of: (i) the cash expenses of such Asset Sale (including, without
limitation, the payment of principal of, and premium, if any, and interest on,
Indebtedness required to be paid as a result of such Asset Sale (other than
the Exchange Debentures) and legal, accounting, management and advisory and
investment banking fees and sales commissions), (ii) taxes paid or payable as
a result thereof, (iii) any portion of cash proceeds that the Company
determines in good faith should be reserved for post-closing adjustments, it
being understood and agreed that on the day that all such post-closing
adjustments have been determined, the amount (if any) by which the reserved
amount in respect of such Asset Sale exceeds the actual post-closing
adjustments payable by the Company or any of its Restricted Subsidiaries shall
constitute Net Proceeds on such date, (iv) any relocation expenses and
pension, severance and shutdown costs incurred as a result thereof, and (v)
any deduction or appropriate amounts to be provided by the Company or any of
its Restricted Subsidiaries as a reserve in accordance with GAAP against any
liabilities associated with the asset disposed of in such transaction and
retained by the Company or such Restricted Subsidiary after such sale or other
disposition thereof, including, without limitation, pension and other
post-employment benefit liabilities and liabilities related to environmental
matters or against any indemnification obligations associated with such
transaction.
"Non-Restricted Subsidiary" means any Subsidiary of the Company other
than a Restricted Subsidiary.
"Obligations" means, with respect to any Indebtedness, all principal,
interest, premiums, penalties, fees, indemnities, expenses (including legal
fees and expenses), reimbursement obligations and other liabilities payable to
the holder of such Indebtedness under the documentation governing such
Indebtedness, and any other claims of such holder arising in respect of such
Indebtedness.
"Offering" means the offer and sale of the Exchange Debentures as
contemplated by the Prospectus.
"Officer" means, with respect to any Person, the Chief Executive
Officer, the President, the Chief Operating Officer, the Chief Financial
Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary
or any Vice President of such Person.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee that meets the requirements of Section
11.05 hereof. Such counsel may be an employee of or counsel to the Company,
any Subsidiary of the Company or the Trustee.
"Other Permitted Indebtedness" means: (i) Indebtedness of the Company
and its Restricted Subsidiaries existing as of the Exchange Debenture Issue
Date and all related Obligations as in effect on such date; (ii) Indebtedness of
the Company and its Restricted Subsidiaries in respect of bankers acceptances
and letters of credit (including, without limitation, letters of credit in
respect of workers' compensation claims) issued in the ordinary course of
7
<PAGE>
business, or other Indebtedness in respect of respect to reimbursement-type
obligations regarding workers' compensation claims; (iii) Refinancing
Indebtedness, provided that: (A) the principal amount of such Refinancing
Indebtedness shall not exceed the outstanding principal amount of Indebtedness
(including unused commitments) extended, refinanced, renewed, replaced,
substituted or refunded plus any amounts incurred to pay premiums, fees and
expenses in connection therewith, (B) the Refinancing Indebtedness shall have
a Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of the Indebtedness being extended, refinanced,
renewed, replaced, substituted or refunded; provided, however, that this
limitation in this clause (B) does not apply to Refinancing Indebtedness of
Senior Indebtedness, and (C) in the case of Refinancing Indebtedness of
Subordinated Indebtedness, such Refinancing Indebtedness shall be subordinated
to the Exchange Debentures at least to the same extent as the Subordinated
Indebtedness being extended, refinanced, renewed, replaced, substituted or
refunded; (iv) intercompany Indebtedness of and among the Company and its
Restricted Subsidiaries (excluding guarantees by Restricted Subsidiaries of
Indebtedness of the Company not issued in compliance with Section 4.15
hereof); (v) Indebtedness of the Company and its Restricted Subsidiaries
incurred in connection with making permitted Restricted Payments under clauses
(iii) or (x) of Section 4.05(b) hereof; (vi) Indebtedness of any
Non-Restricted Subsidiary created after the Exchange Debenture Issue Date,
provided that such Indebtedness is nonrecourse to the Company and its
Restricted Subsidiaries and the Company and its Restricted Subsidiaries have
no Obligations with respect to such Indebtedness; (vii) Indebtedness of the
Company and its Restricted Subsidiaries under Hedging Obligations; (viii)
Indebtedness of the Company and its Restricted Subsidiaries arising from the
honoring by a bank or other financial institution of a check, draft or similar
instrument inadvertently (except in the case of daylight overdrafts, which
will not be, and will not be deemed to be, inadvertent) drawn against
insufficient funds in the ordinary course of business; (ix) Indebtedness of
any Person at the time it is acquired as a Restricted Subsidiary, provided
that such Indebtedness was not issued by such Person in connection with or in
anticipation of such acquisition; (x) guarantees by Restricted Subsidiaries of
Indebtedness of any Restricted Subsidiary if such Indebtedness so guaranteed
is permitted under this Indenture; (xi) guarantees by a Restricted Subsidiary
of Indebtedness of the Company if the Indebtedness so guaranteed is permitted
under this Indenture and the Exchange Debentures are guaranteed by such
Restricted Subsidiary to the extent required by Section 4.15 hereof; (xii)
guarantees by the Company of Indebtedness of any Restricted Subsidiary if the
Indebtedness so guaranteed is permitted under this Indenture; (xiii)
Indebtedness of the Company and its Restricted Subsidiaries in connection with
performance, surety, statutory, appeal or similar bonds in the ordinary course
of business; and (xiv) Indebtedness of the Company and its Restricted
Subsidiaries in connection with agreements providing for indemnification,
purchase price adjustments and similar obligations in connection with the sale
or disposition of any of their business, properties or assets; and (xv) if the
Company issues Exchange Debentures in exchange for the Senior Preferred Stock,
the issuance of additional Exchange Debentures in lieu of cash interest with
respect to all interest payments payable on or prior to ,2001,
in accordance with this Indenture.
"Permitted Liens" means:
(a) with respect to the Company and its Restricted Subsidiaries, (i)
Liens for taxes, assessments, governmental charges or claims which are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and if a reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made therefor;
(ii) statutory Liens of landlords and carriers', warehousemen's, mechanics',
suppliers', materialmen's, repairmen's or other like Liens arising in the
ordinary course of business and with respect to amounts not yet delinquent or
being contested in good faith by appropriate proceedings, if a reserve or
other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made therefor; (iii) Liens incurred on deposits made in
the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (iv) Liens incurred
on deposits made to secure the performance of tenders, bids, leases, statutory
obligations, surety and appeal bonds, government contracts, performance and
return of money bonds and other obligations of a like nature incurred in the
8
<PAGE>
ordinary course of business (exclusive of obligations for the payment of
borrowed money); (v) easements, rights-of-way, zoning or other restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the business of the
Company or any of its Restricted Subsidiaries incurred in the ordinary course
of business; (vi) Liens (including extensions, renewals and replacements
thereof) upon property acquired (the "Acquired Property") after the Exchange
Debenture Issue Date, provided that: (A) any such Lien is created solely for
the purpose of securing Indebtedness representing, or issued to finance,
refinance or refund, the cost (including the cost of construction) of the
Acquired Property, (B) the principal amount of the Indebtedness secured by
such Lien does not exceed 100% of the cost of the Acquired Property, (C) such
Lien does not extend to or cover any property other than the Acquired Property
and any improvements on such Acquired Property, and (D) the issuance of the
Indebtedness to purchase the Acquired Property is permitted by Section 4.07
hereof; (vii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; (viii) judgment and attachment Liens not giving rise to
an Event of Default; (ix) leases or subleases granted to others not
interfering in any material respect with the business of the Company or any of
its Restricted Subsidiaries; (x) Liens securing Indebtedness under Hedging
Obligations; (xi) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty requirements;
(xii) Liens arising out of consignment or similar arrangements for the sale of
goods entered into by the Company or its Restricted Subsidiaries in the
ordinary course of business; (xiii) any interest or title of a lessor in
property subject to any capital lease obligation or operating lease; (xiv)
Liens arising from filing Uniform Commercial Code financing statements
regarding leases; (xv) Liens existing on the Exchange Debenture Issue Date and
any extensions, refinancings, renewals, replacements, substitutions or
refundings thereof; (xvi) any Lien granted to the Trustee and any
substantially equivalent Lien granted to any trustee or similar institution
under any indenture for Senior Indebtedness permitted by the terms of this
Indenture; (xvii) Liens in respect of (A) the BKC Intercreditor Agreement or (B)
other BKC Agreements that do not constitute Indebtedness; and (xviii) additional
Liens at any one time outstanding in respect of properties or assets where
aggregate fair market value does not exceed $6,000,000 (the fair market value to
be determined on the date such Lien is granted on such properties or assets);
(b) with respect to the Restricted Subsidiaries, (i) Liens securing
Restricted Subsidiaries' reimbursement Obligations with respect to letters of
credit that encumber documents and other property relating to such letters of
credit and the products and proceeds thereof; (ii) Liens securing Indebtedness
issued by Restricted Subsidiaries if such Indebtedness is (A) under the Credit
Agreement, or (B) permitted by Section 4.07(a) hereof, clauses (i), (ii) or
(iii) of Section 4.07(b) hereof, or clauses (i), (iii) (to the extent the
Indebtedness subject to such Refinancing Indebtedness was subject to Liens),
(vi), (vii), (ix) or (x) of the definition of Other Permitted Indebtedness;
(iii) Liens securing intercompany Indebtedness issued by any Restricted
Subsidiary to the Company or another Restricted Subsidiary; and (iv) Liens
securing guarantees by Restricted Subsidiaries of Indebtedness issued by the
Company if such guarantees permitted by clause (xi) (but only in respect of
the property, rights and assets of the Restricted Subsidiaries issuing such
guarantees) of the definition of Other Permitted Indebtedness;
(c) with respect to the Company, (i) Liens securing Indebtedness
issued by the Company if such Indebtedness is (A) under the Credit Agreement,
or (B) if such Indebtedness is permitted by Section 4.07 hereof (including,
but not limited to, Indebtedness issued by the Company under the Credit
Agreement pursuant to clause (i) and/or clause (iii) of Section 4.07(b)
hereof); (ii) Liens securing Indebtedness of the Company if such Indebtedness
is permitted by clauses (i), (iii) (to the extent the Indebtedness subject to
such Refinancing Indebtedness was subject to Liens) or (vii) of the definition
of Other Permitted Indebtedness; (iii) Liens securing guarantees by the
Company of Indebtedness issued by Restricted Subsidiaries if such Indebtedness
is permitted by Section 4.07 hereof (including, but not limited to,
Indebtedness issued by Restricted Subsidiaries under the Credit Agreement
pursuant to clause (i) and/or clause (iii) of Section 4.07(b) hereof) and if
such guarantees are permitted by clause (xii) (but only in
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<PAGE>
respect of Indebtedness issued by the Restricted Subsidiaries under the Credit
Agreement pursuant to Section 4.07 hereof) of the definition of Other
Permitted Indebtedness; and (iv) Liens securing the Company's reimbursement
obligations with respect to letters of credit that encumber documents and
other property relating to such letters of credit and the products and
proceeds thereof; provided, however, that, notwithstanding any of the
foregoing, the Permitted Liens referred to in clause (c) of this definition
shall not include any Lien on Capital Stock of Restricted Subsidiaries held
directly by the Company (as distinguished from Liens on Capital Stock of
Restricted Subsidiaries held by other Restricted Subsidiaries) other than
Liens securing (A) Indebtedness of the Company issued under the Credit
Agreement pursuant to Section 4.07 hereof and any permitted Refinancing
Indebtedness of such Indebtedness, (B) Liens in respect of (1) the BKC
Intercreditor Agreement (2) other BKC Agreements that do not constitute
Indebtedness and (C) guarantees by the Company of Indebtedness issued by
Restricted Subsidiaries under the Credit Agreement pursuant to Section 4.07
hereof and any permitted Refinancing Indebtedness of such Indebtedness.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Post-Petition Interest" means, with respect to any Indebtedness, all
interest accrued or accruing on such Indebtedness after the commencement of
any Insolvency or Liquidation proceeding in accordance with and at the
contract rate (including, without limitation, any rate applicable upon
default) specified in the agreement or instrument creating, evidencing or
governing such Indebtedness, whether or not, pursuant to applicable law or
otherwise, the claim for such interest is allowed as a claim in such
Insolvency or Liquidation Proceeding.
"Preferred Stock" means the ___% Senior Exchangeable Preferred Stock
of the Company.
"Preferred Stock Issue Date" means the date on which the Preferred
Stock is originally issued under the Certificate of Designation relating
thereto.
"Pro Forma Basis" means, for purposes of determining Consolidated Net
Income in connection with the Cash Flow Coverage Ratio (including in
connection with Section 4.05, Section 4.16 and Section 5.01 hereof, the
incurrence of Indebtedness pursuant to Section 4.07(a) hereof and Consolidated
Net Worth for purposes of Section 5.01 hereof), giving pro forma effect to (x)
any acquisition or sale of a Person, business or asset, related incurrence,
repayment or refinancing of Indebtedness or other related transactions,
including any Restructuring Charges which would otherwise be accounted for as
an adjustment pursuant to Regulation S-X under the Securities Act or on a pro
forma basis under GAAP, or (y) any incurrence, repayment or refinancing of any
Indebtedness and the application of the proceeds therefrom, in each case, as
if such acquisition or sale and related transactions, restructurings,
consolidations, cost savings, reductions, incurrence, repayment or refinancing
were realized on the first day of the relevant period permitted by Regulation
S-X under the Securities Act or on a pro forma basis under GAAP. Furthermore, in
calculating the Cash Flow Coverage Ratio, (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the determination date
and which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the determination date; (2) if interest on any
Indebtedness actually incurred on the determination date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate,
a eurocurrency interbank offered rate, or other rates, then the interest rate
in effect on the determination date will be deemed to have been in effect
during the relevant period; and (3) notwithstanding clause (1) above, interest
on Indebtedness determined on a fluctuating basis, to the extent such interest
is covered by agreements relating to interest rate swaps or similar interest
rate protection Hedging Obligations, shall be deemed to accrue at the rate per
annum resulting after giving effect to the operation of such agreements.
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"Prospectus" means the Prospectus, dated ____________, 1996, relating
to the Company's offering and placement of the Exchange Debentures to the
public.
"Redeemable Preferred Stock" means preferred stock that by its terms
or otherwise is required to be redeemed or is redeemable at the option of the
holder thereof on, or prior to, the maturity date of the Exchange Debentures.
"Refinancing Indebtedness" means (i) Indebtedness of the Company and
its Restricted Subsidiaries issued or given in exchange for, or the proceeds
of which are used to, extend, refinance, renew, replace, substitute or refund
any Indebtedness permitted under this Indenture or any Indebtedness issued to
so extend, refinance, renew, replace, substitute or refund such Indebtedness,
(ii) any refinancings of Indebtedness issued under the Credit Agreement, and
(iii) any additional Indebtedness issued to pay premiums and fees in
connection with clauses (i) and (ii).
"Restricted Investment" means any Investment in any person; provided
that Restricted Investments will not include: (i) Investments in marketable
securities and other negotiable instruments permitted by this Indenture; (ii)
any Incentive Arrangements; (iii) Investments in the Company; or (iv)
Investments in any Restricted Subsidiary (provided that any Investment in a
Restricted Subsidiary was made for fair market value (as determined by the
Board of Directors in good faith)). The amount of any Restricted Investment
shall be the amount of cash and the fair market value at the time of transfer of
all other property (as determined by the Board of Directors in good faith)
initially invested or paid for such Restricted Investment, plus all additions
thereto, without any adjustments for increases or decreases in value of or
write-ups, write-downs or write-offs with respect to, such Restricted
Investment.
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"Restricted Subsidiary" means: (i) any Subsidiary of the Company
existing on the date of original issuance of the Senior Notes, and (ii) any
other Subsidiary of the Company formed, acquired or existing after the date of
original issuance of the Senior Notes that is designated as a "Restricted
Subsidiary" by the Company pursuant to a resolution approved by a majority of
the Board of Directors, provided, however, that the term Restricted Subsidiary
shall not include any Subsidiary of the Company that has been redesignated by
the Company pursuant to a resolution approved by a majority of the Board of
Directors as a Non-Restricted Subsidiary in accordance with Section 4.16 hereof
unless such Subsidiary shall have subsequently been redesignated a Restricted
Subsidiary in accordance with clause (ii) of this definition.
"Restructuring Charges" means any charges or expenses in respect of
restructuring or consolidating any business, operations or facilities, any
compensation or headcount reduction, or any other cost savings, of any Persons
or businesses either alone or together with the Company or any Restricted
Subsidiary, permitted by GAAP or Regulation S-X under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means: (i) all Obligations (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law) on any Indebtedness of
the Company, whether outstanding on the Exchange Debenture Issue Date or
thereafter created, incurred or assumed, of the following types: (A) all
Indebtedness of the Company for money borrowed, and (B) all Indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which the Company is responsible or liable; (ii) all capitalized
lease obligations of the Company; (iii) all Obligations of the Company: (A)
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction, (B) all constituting Hedging
Obligations, or (C) issued as the deferred purchase price of property and all
conditional sale Obligations of the Company and all Obligations of the Company
under any title retention agreement; (iv) all guarantees of the Company with
respect to Obligations of other Persons of the type referred to in clauses
(ii) and (iii) and with respect to the payment of dividends of other Persons;
and (v) all Obligations of the Company consisting of modifications, renewals,
extensions, replacements and refundings of any Obligations described in
clauses (i), (ii), (iii) or (iv) unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is
expressly provided that such Obligations are subordinated or junior in right
of payment to the Exchange Debentures; provided, however, that Senior
Indebtedness shall not be deemed to include: (1) any Obligation of the Company
to any Subsidiary, (2) any liability for federal, state, local or other taxes
owed or owing by the Company, (3) any accounts payable or other liability to
trade creditors arising in the ordinary course of business (including
guarantees thereof or instruments evidencing such liabilities), (4) any
Indebtedness, guarantee or Obligation of the Company that is contractually
subordinated or junior in any respect to any other Indebtedness, guarantee or
Obligation of the Company, or (5) any Indebtedness to the extent the same is
incurred in violation of this Indenture.
To the extent any payment on the Exchange Debentures, whether by or
on behalf of the Company, as proceeds of security or enforcement of any right
of setoff or otherwise, is declared to be fraudulent or preferential, set
aside or required to be paid to a trustee, receiver or other similar party
12
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under any bankruptcy, insolvency, receivership or similar law, then if such
payment is recovered by, or paid over to, such trustee, receiver or other
similar party, the Exchange Debentures or part thereof originally intended to
be satisfied by such payment shall be deemed to be reinstated and outstanding
as if such payment had not occurred.
"Senior Preferred Stock" means the Company's % Senior Exchangeable
Preferred Stock due 2008.
"Senior Preferred Stock Issue Date" means , 1996.
"SFAS 106" means Statement of Financial Accounting Standards No. 106.
"SFAS 109" means Statement of Financial Accounting Standards No. 109.
"Significant Subsidiary" means any Restricted Subsidiary of the
Company that would be a "significant subsidiary" as defined in clause (2) of
the definition of such term in Rule 1-02 of Regulation S-X under the
Securities Act and the Exchange Act.
"Subordinated Indebtedness" means all Obligations of the type
referred to in clauses (i) through (v) of the definition of Senior
Indebtedness, if the instrument creating or evidencing the same, or pursuant
to which the same is outstanding, designates such Obligations as subordinated
or junior in right of payment to Senior Indebtedness.
"Subsidiary" of any Person means any entity of which the Equity
Interests entitled to cast at least a majority of the votes that may be cast
by all Equity Interests having ordinary voting power for the election of
directors or other governing body of such entity are owned by such Person
(regardless of whether such Equity Interests are owned directly by such Person
or through one or more Subsidiaries).
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb), as amended, as in effect on the date hereof.
"TJC Agreement" means the Management Consulting Agreement, dated
February 7, 1996, between the Company and TJC Management Corporation, as in
effect on the Preferred Stock Issue Date.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Trust Officer" means, when used with respect to the Trustee, any
officer within the corporate trust administration department of the Trustee
(or any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above designated officers, and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referenced
because of his knowledge of, and familiarity with, the particular subject.
"U.S. Government Obligations" means direct obligations of the United
States of America for the payment of which the full faith and credit of the
United States of America is pledged, provided that no U.S. Government
Obligation shall be callable at the issuer's option.
"Voting Stock" means any class or classes of Capital Stock pursuant
to which the holders thereof have the general voting power under ordinary
circumstances to elect the board of directors.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the
then outstanding principal amount of such Indebtedness into (ii) the sum of
the product(s) obtained by multiplying (a) the amount of each then remaining
installment,
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sinking fund, serial maturity or other requirement payment of principal,
including payment at final maturity, in respect thereof, by (b) the number of
years (calculated to the nearest one-twelfth) which will elapse between such
date and the making of such payment.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction".............................................................4.08
"Asset Sale Disposition Date".......................................................4.14
"Asset Sale Trigger Date"...........................................................4.14
"Change of Control Trigger Date"....................................................4.13
"covenant defeasance option"........................................................8.01
"Disposition".......................................................................5.01
"DTC"...............................................................................2.03
"Event of Default"..................................................................6.01
"Excess Proceeds"...................................................................4.14
"legal defeasance option"...........................................................8.01
"Notice of Default".................................................................6.01
"Offer".............................................................................3.08
"Other Company Indebtedness"........................................................4.15
"Other Indebtedness Guarantee"......................................................4.15
"Paying Agent"......................................................................2.03
"Purchase Date".....................................................................3.08
"Registrar".........................................................................2.03
"Restricted Payments"...............................................................4.05
"Successor Corporation".............................................................5.01
"Trustee Expenses"..................................................................6.08
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in, and made a part of, this Indenture.
Any terms incorporated by reference in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
under the TIA have the meanings so assigned to them therein.
SECTION 1.04 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein;
(2) an accounting term not otherwise defined herein has the
meaning assigned to it under GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
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(5) provisions apply to successive events and transactions.
SECTION 1.05. INCORPORATION OF BURGER KING AGREEMENT.
Concurrently with the execution of this Indenture, the Trustee shall
execute and deliver to Burger King Corporation the Burger King Agreement. The
Exchange Debentures shall be subject to the terms of the Agreement, which are
incorporated by reference herein.
ARTICLE 2
THE EXCHANGE DEBENTURES
SECTION 2.01. FORM AND DATING.
The Exchange Debentures and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A, which is part
of this Indenture. The Exchange Debentures may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Exchange
Debenture shall be dated the date of its authentication. The Exchange
Debentures shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Exchange Debentures shall
constitute, and are hereby expressly made, a part of this Indenture and, to
the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and
to be bound thereby.
Each Global Exchange Debenture shall represent such of the
outstanding Exchange Debentures as shall be specified therein and each shall
provide that it shall represent the aggregate amount of outstanding Exchange
Debentures from time to time endorsed thereon and that the aggregate amount of
outstanding Exchange Debentures represented thereby may from time to time be
reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Exchange Debenture to reflect the amount of any
increase or decrease in the amount of outstanding Exchange Debentures
represented thereby shall be made by the Trustee or the Exchange Debenture
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
One Officer shall sign the Exchange Debentures for the Company by
manual or facsimile signature.
If an Officer whose signature is on an Exchange Debenture no longer
holds that office at the time an Exchange Debenture is authenticated, the
Exchange Debenture shall nevertheless be valid.
An Exchange Debenture shall not be valid until authenticated by the
manual signature of an authorized signatory of the Trustee, and the Trustee's
signature shall be conclusive evidence that the Exchange Debenture has been
authenticated under this Indenture. The form of Trustee's certificate of
authentication to be borne by the Exchange Debentures shall be substantially
as set forth in Exhibit A.
The Trustee shall, upon a written order of the Company signed by two
Officers directing the Trustee to authenticate the Exchange Debentures and
certifying that all conditions precedent to the issuance of the Exchange
Debentures contained herein have been complied with, authenticate Exchange
Debentures for original issuance up to an aggregate principal amount stated in
paragraph 4 of the Exchange Debentures (the aggregate principal amount of
outstanding Exchange Debentures may not exceed that amount at any time, except
as provided in Section 2.07 hereof).
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The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Exchange Debentures. Unless limited by the terms of
such appointment, an authenticating agent may authenticate Exchange Debentures
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company
or an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency (the "Registrar")
where Exchange Debentures may be presented for registration of transfer or for
exchange and an office or agency (the "Paying Agent") where Exchange
Debentures may be presented for payment. The Registrar shall keep a register
of the Exchange Debentures and of their transfer and exchange. The Company may
appoint one or more co-registrars and one or more additional paying agents.
The term "Registrar" includes any co-registrar, and the term "Paying Agent"
includes any additional paying agent. The Company may change any Paying Agent
or Registrar without prior notice to any Holder. The Company shall notify in
writing the Trustee and the Trustee shall notify the Holders in writing of the
name and address of any Agent not a party to this Indenture. If the Company
fails to appoint or maintain another entity as Registrar or Paying Agent, the
Trustee shall act as such. The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, and such agreement
shall incorporate the TIA's provisions and implement the provisions of this
Indenture that relate to such Agent.
The Company initially appoints The Depository Trust Company ("DTC")
to act as Depositary with respect to the Global Exchange Debentures.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the Exchange
Debentures and as Exchange Debenture Custodian with respect to the Global
Exchange Debentures. The Company or any of its Subsidiaries may act as Paying
Agent, Registrar or co-registrar. If the Company fails to appoint or maintain
a Registrar and Paying Agent, the Trustee shall act as such, and shall be
entitled to appropriate compensation in accordance with Section 7.07 hereof.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the Holders'
benefit or the Trustee all money the Paying Agent holds for redemption or
purchase of the Exchange Debentures or for the payment of principal of, or
premium, if any, or interest on, the Exchange Debentures, and will promptly
notify the Trustee of any Default by the Company in providing the Paying Agent
with sufficient funds to (i) purchase Exchange Debentures tendered pursuant to
an Offer arising under Section 4.13 hereof, (ii) redeem Exchange Debentures
called for redemption, or (iii) make any payment of principal, premium or
interest due on the Exchange Debentures. While any such Default continues, the
Trustee may require the Paying Agent to pay all money it holds to the Trustee
and to account for any funds disbursed. The Company at any time may require
the Paying Agent to pay all money it holds to the Trustee and to account for
any funds disbursed. Upon payment over to the Trustee, the Paying Agent (if
other than the Company or any of its Subsidiaries) shall have no further
liability for the money it delivered to the Trustee. If the Company or any of
its Subsidiaries acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the Holders' benefit or the Trustee all money it holds
as Paying Agent.
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SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require that sets forth the names and addresses of, and
the aggregate principal amount of Exchange Debentures held by, each Holder,
and the Company shall otherwise comply with Section 312(a) of the TIA.
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Definitive Exchange Debentures. When
Definitive Exchange Debentures are presented by a Holder to the Registrar with
a request:
(x) to register the transfer of the Definitive Exchange
Debentures; or
(y) to exchange such Definitive Exchange Debentures for
an equal principal amount of Definitive Exchange
Debentures of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Exchange Debentures presented or surrendered for register of
transfer or exchange shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing.
(b) Transfer of a Definitive Exchange Debenture for a Beneficial
Interest in a Global Exchange Debenture. A Definitive Exchange Debenture may
not be exchanged for a beneficial interest in a Global Exchange Debenture
except upon satisfaction of the requirements set forth herein. Upon receipt by
the Trustee of a Definitive Exchange Debenture, duly endorsed or accompanied
by appropriate instruments of transfer, in form satisfactory to the Trustee,
together with written instructions from the Holder thereof directing the
Trustee to make, or to direct the Exchange Debenture Custodian to make, an
endorsement on the Global Exchange Debenture to reflect an increase in the
aggregate principal amount of the Exchange Debentures represented by the
Global Exchange Debenture, the Trustee shall cancel such Definitive Exchange
Debenture in accordance with Section 2.11 hereof and cause, or direct the
Exchange Debenture Custodian to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the Exchange
Debenture Custodian, the aggregate principal amount of Exchange Debentures
represented by the Global Exchange Debenture to be increased accordingly. If
no Global Exchange Debentures are then outstanding, the Company shall issue
and, upon receipt of an authentication order in accordance with Section 2.02
hereof, the Trustee shall authenticate a new Global Exchange Debenture in the
appropriate principal amount.
(c) Transfer and Exchange of Global Exchange Debentures. The transfer
and exchange of Global Exchange Debentures or beneficial interests therein
shall be effected through the Depositary, in accordance with this Indenture
and the procedures of the Depositary therefor, which shall include
restrictions on transfer comparable to those set forth herein to the extent
required by the Securities Act.
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(d) Transfer of a Beneficial Interest in a Global Exchange
Debenture for a Definitive
Exchange Debenture.
(i) Any Person having a beneficial interest in a Global
Exchange Debenture may upon request exchange such
beneficial interest for a Definitive Exchange
Debenture. Upon receipt by the Trustee of written
instructions or such other form of instructions as
is customary for the Depositary, from the
Depositary or its nominee on behalf of any Person
having a beneficial interest in a Global Exchange
Debenture, the Trustee or the Exchange Debenture
Custodian, at the direction of the Trustee, shall,
in accordance with the standing instructions and
procedures existing between the Depositary and the
Exchange Debenture Custodian, cause the aggregate
principal amount of Global Exchange Debentures to
be reduced accordingly and, following such
reduction, the Company shall execute and, upon
receipt of an authentication order in accordance
with Section 2.02 hereof, the Trustee shall
authenticate and deliver to the transferee a
Definitive Exchange Debenture in the appropriate
principal amount.
(ii) Definitive Exchange Debentures issued in exchange
for a beneficial interest in a Global Exchange
Debenture pursuant to this Section 2.06(d) shall be
registered in such names and in such authorized
denominations as the Depositary, pursuant to
instructions from its direct or indirect
participants or otherwise, shall instruct the
Trustee. The Trustee shall deliver in accordance
with the standard procedures of the Depositary such
Definitive Exchange Debentures to the Persons in
whose names such Exchange Debentures are so
registered.
(e) Restrictions on Transfer and Exchange of Global Exchange
Debentures. Notwithstanding any other provision of this Indenture (other than
the provisions set forth in subsection (f) of this Section 2.06), a Global
Exchange Debenture may not be transferred as a whole except by the Depositary
to a nominee of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary.
(f) Authentication of Definitive Exchange Debentures in Absence
of Depositary. If at any time:
(i) the Depositary for the Exchange Debentures notifies
the Company that the Depositary is unwilling or
unable to continue as Depositary for the Global
Exchange Debentures and a successor Depositary for
the Global Exchange Debentures is not appointed by
the Company within 90 days after delivery of such
notice; or
(ii) The Company, at its sole discretion, notifies the
Trustee in writing that it elects to cause the
issuance of Definitive Exchange Debentures under
this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Exchange Debentures in an aggregate principal amount equal
to the principal amount of the Global Exchange Debentures in exchange for such
Global Exchange Debentures and registered in such names as the Depositary
shall instruct the Trustee or the Company in writing.
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(g) Cancellation and/or Adjustment of Global Exchange Debentures. At
such time as all beneficial interests in Global Exchange Debentures have been
exchanged for Definitive Exchange Debentures, redeemed, repurchased or
cancelled, all Global Exchange Debentures shall be returned to or retained and
cancelled by the Trustee in accordance with Section 2.11 hereof. At any time
prior to such cancellation, if any beneficial interest in a Global Exchange
Debenture is exchanged for Definitive Exchange Debentures, redeemed,
repurchased or cancelled, the principal amount of Exchange Debentures
represented by such Global Exchange Debenture shall be reduced accordingly and
an endorsement shall be made on such Global Exchange Debenture, by the Trustee
or the Exchange Debentures Custodian, at the direction of the Trustee, to
reflect such reduction.
(h) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall
authenticate Definitive Exchange Debentures and
Global Exchange Debentures at the Registrar's
request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the
Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental
charge payable in connection therewith (other than
any such transfer taxes or similar governmental
charge payable upon exchange or transfer pursuant
to Sections 3.07, 4.13, 4.14 and 9.05 hereof).
(iii) Neither the Company nor the Registrar shall be
required to register the transfer of or exchange
any Exchange Debenture selected for redemption in
whole or in part, except the unredeemed portion of
any Exchange Debenture being redeemed in part.
(iv) All Definitive Exchange Debentures and Global
Exchange Debentures issued upon any registration of
transfer or exchange of Definitive Exchange
Debentures or Global Exchange Debentures in
accordance with this Indenture (including any
increase in the aggregate principal amount of the
Exchange Debentures represented by the Global
Exchange Debenture pursuant to subsection (b)
above) shall be the valid obligations of the
Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the
Definitive Exchange Debentures or Global Exchange
Debentures surrendered upon such registration of
transfer or exchange.
(v) The Company shall not be required to issue Exchange
Debentures and the Registrar shall not be required
to register the transfer of or to exchange Exchange
Debentures during a period beginning at the opening
of business 15 days before the day of any selection
of Exchange Debentures for redemption under Section
3.02 hereof and ending at the close of business on
the day of selection, or to register the transfer
of or to exchange an Exchange Debenture between a
record date and the next succeeding interest
payment date.
(vi) Prior to due presentment for the registration of a
transfer of any Exchange Debenture, the Trustee,
any Agent and the Company may deem and treat the
Person in whose name any Exchange Debenture is
registered as the absolute owner of such Exchange
Debenture for the purpose of receiving payment of
principal of, premium, if any, and accrued and
unpaid interest on such Exchange
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Debentures, and neither the Trustee, any Agent nor
the Company shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Definitive Exchange
Debentures and Global Exchange Debentures in
accordance with the provisions of Section 2.02
hereof.
SECTION 2.07. REPLACEMENT EXCHANGE DEBENTURES.
If any mutilated Exchange Debenture is surrendered to the Trustee, or
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Exchange Debenture, the Company shall issue
and the Trustee, upon the Company's written order signed by two Officers,
shall authenticate a replacement Exchange Debenture if the Trustee's
requirements are met. If the Trustee or the Company requires it, the Holder
must supply an indemnity bond that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent or any
authenticating agent from any loss that any of them may suffer if an Exchange
Debenture is replaced. The Company and the Trustee may charge for their
expenses in replacing an Exchange Debenture. Every replacement Exchange
Debenture is an additional Obligation of the Company.
SECTION 2.08. OUTSTANDING EXCHANGE DEBENTURES.
The Exchange Debentures outstanding at any time are all the Exchange
Debentures the Trustee has authenticated except for those it has cancelled,
those delivered to it for cancellation, those representing reductions in the
interest in a Global Exchange Debenture effected by the Trustee in accordance
with the provisions hereof, and those described in this Section as not
outstanding.
If an Exchange Debenture is replaced pursuant to Section 2.07 hereof,
it ceases to be outstanding unless the Trustee receives proof satisfactory to
it that a bona fide purchaser holds the replaced Exchange Debenture.
If the entire principal of, and premium, if any, and accrued interest
on, any Exchange Debenture is considered paid under Section 4.01 hereof, it
ceases to be outstanding and interest on it ceases to accrue.
Subject to Section 2.09 hereof, an Exchange Debenture does not cease
to be outstanding because the Company or an Affiliate holds the Exchange
Debenture.
SECTION 2.09. TREASURY EXCHANGE DEBENTURES.
In determining whether the Holders of the required principal amount
of Exchange Debentures have concurred in any direction, waiver or consent,
Exchange Debentures owned by the Company or an Affiliate shall be considered
as though not outstanding, except that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, waiver or
consent, only Exchange Debentures that a Trust Officer of the Trustee knows
are so owned shall be so disregarded. Notwithstanding the foregoing, Exchange
Debentures that the Company or an Affiliate offers to purchase or acquires
pursuant to an Offer, exchange offer, tender offer or otherwise shall not be
deemed to be owned by the Company or an Affiliate until legal title to such
Exchange Debentures passes to the Company or such Affiliate, as the case may
be.
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SECTION 2.10. TEMPORARY EXCHANGE DEBENTURES.
Until Definitive Exchange Debentures are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Exchange
Debentures. Temporary Exchange Debentures shall be substantially in the form
of Definitive Exchange Debentures but may have variations that the Company
considers appropriate for temporary Exchange Debentures. Without unreasonable
delay, the Company shall prepare and the Trustee, upon receipt of the
Company's written order signed by two Officers which shall specify the amount
of temporary Exchange Debentures to be authenticated and the date on which the
temporary Exchange Debentures are to be authenticated, shall authenticate
Definitive Exchange Debentures and deliver them in exchange for temporary
Exchange Debentures. Until such exchange, Holders of temporary Exchange
Debentures shall be entitled to the same rights, benefits and privileges as
Definitive Exchange Debentures.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Exchange Debentures to the
Trustee for cancellation. The Registrar and the Paying Agent shall forward to
the Trustee any Exchange Debentures surrendered to them for registration of
transfer, exchange, replacement, payment (including all Exchange Debentures
called for redemption and all Exchange Debentures accepted for payment
pursuant to an Offer) or cancellation, and the Trustee shall cancel all such
Exchange Debentures and shall destroy all cancelled Exchange Debentures
(subject to the Exchange Act's record retention requirements) and deliver a
certificate of their destruction to the Company unless by written order,
signed by two Officers of the Company, the Company shall direct that cancelled
Exchange Debentures be returned to it. The Company may not issue new Exchange
Debentures to replace any Exchange Debentures that have been cancelled by the
Trustee or that have been delivered to the Trustee for cancellation. If the
Company or an Affiliate acquires any Exchange Debentures (other than by
redemption or pursuant to an Offer), such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Exchange
Debentures unless and until such Exchange Debentures are delivered to the
Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Exchange
Debentures, it shall pay the defaulted interest in any lawful manner plus, to
the extent lawful, interest payable on the defaulted interest, to Holders on a
subsequent special record date, in each case at the rate provided in the
Exchange Debentures and in Section 4.01 of this Indenture. The Company shall
fix or cause to be fixed each such special record date and payment date. As
early as practicable prior to the special record date, the Company (or the
Trustee, in the name of and at the expense of the Company) shall mail a notice
that states the special record date, the related payment date and the amount
of interest to be paid.
SECTION 2.13. RECORD DATE.
The record date for purposes of determining the identity of Holders
of Exchange Debentures entitled to vote or consent to any action by vote or
consent authorized or permitted under this Indenture shall be determined as
provided for in section 316(c) of the TIA.
SECTION 2.14. CUSIP NUMBER.
A "CUSIP" number shall be printed on the Exchange Debentures, and the
Trustee shall use the CUSIP number in notices of redemption, purchase or
exchange as a convenience to Holders, provided that any such notice may state
that no representation is made as to the correctness or accuracy of the
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CUSIP number printed in the notice or on the Exchange Debentures and that
reliance may be placed only on the other identification numbers printed on the
Exchange Debentures. The Company shall promptly notify the Trustee of any
change in the CUSIP number.
ARTICLE 3
OPTIONAL REDEMPTION AND MANDATORY OFFERS TO PURCHASE
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Exchange Debentures pursuant to
Section 3.07 hereof, it shall furnish to the Trustee, at least 10 but not more
than 15 days before notice of redemption is to be mailed by the Company to
Holders, an Officers' Certificate stating that the Company has elected to
redeem Exchange Debentures pursuant to Section 3.07(a) or 3.07(b) hereof, as
the case may be, the date notice of redemption is to be mailed to Holders, the
redemption date, the aggregate principal amount of Exchange Debentures to be
redeemed, the redemption price for such Exchange Debentures and the amount of
accrued and unpaid interest on such Exchange Debentures as of the redemption
date. If the Trustee is not the Registrar, the Company shall, concurrently
with delivery of its notice to the Trustee of a redemption, cause the
Registrar to deliver to the Trustee a certificate (upon which the Trustee may
rely) setting forth the name of, and the aggregate principal amount of
Exchange Debentures held by, each Holder.
If the Company is required to offer to purchase Exchange Debentures
pursuant to Section 4.13 or 4.14 hereof, it shall furnish to the Trustee, at
least two Business Days before notice of the Offer is to be mailed to Holders,
an Officers' Certificate setting forth that the Offer is being made pursuant
to Section 4.13 or 4.14 hereof, as the case may be, the Purchase Date, the
maximum principal amount of Exchange Debentures the Company is offering to
purchase pursuant to the Offer, the purchase price for such Exchange
Debentures, and the amount of accrued and unpaid interest on such Exchange
Debentures as of the Purchase Date.
The Company will also provide the Trustee with any additional
information that the Trustee reasonably requests in connection with any
redemption or Offer.
SECTION 3.02. SELECTION OF EXCHANGE DEBENTURES TO BE REDEEMED OR PURCHASED.
If less than all outstanding Exchange Debentures are to be redeemed
or if less than all Exchange Debentures tendered pursuant to an Offer are to
be accepted for payment, the Trustee shall select the outstanding Exchange
Debentures to be redeemed or accepted for payment pro rata, by lot or by a
method that complies with the requirements of any stock exchange on which the
Exchange Debentures are listed and that the Trustee considers fair and
appropriate. If the Company elects to mail notice of a redemption to Holders,
the Trustee shall at least 5 business days prior to the date notice of
redemption is to be mailed, (i) select the Exchange Debentures to be redeemed
from Exchange Debentures outstanding not previously called for redemption and
(ii) notify the Company of the names of each Holder of Exchange Debentures
selected for redemption, the principal amount of Exchange Debentures held by
each such Holder and the principal amount of such Holder's Exchange Debentures
that are to be redeemed. If less than all Exchange Debentures tendered
pursuant to an Offer on the Purchase Date are to be accepted for payment, the
Trustee shall select on or promptly after the Purchase Date the Exchange
Debentures to be accepted for payment. The Trustee shall select for redemption
or purchase Exchange Debentures or portions of Exchange Debentures in
principal amounts of $1,000 or integral multiples of $1,000; except that if
all of the Exchange Debentures of a Holder are selected for redemption or
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purchase, the aggregate principal amount of the Exchange Debentures held by
such Holder, even if not a multiple of $1,000, shall be redeemed or purchased.
Except as provided in the preceding sentence, provisions of this Indenture
that apply to Exchange Debentures called for redemption or tendered pursuant
to an Offer also apply to portions of Exchange Debentures called for
redemption or tendered pursuant to an Offer. The Trustee shall notify the
Company promptly of the Exchange Debentures or portions of Exchange Debentures
to be called for redemption or selected for purchase.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail a notice of redemption to each Holder of Exchange
Debentures or portions thereof that are to be redeemed at such Holder's
registered address.
The notice shall identify the Exchange Debentures or portions thereof
to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price for the Exchange Debentures
and separately stating the amount of unpaid and
accrued interest on such Exchange Debentures as of
the date of redemption;
(3) if any Exchange Debenture is being redeemed in
part, the portion of the principal amount of such
Exchange Debentures to be redeemed and that, after
the redemption date, upon surrender of such
Exchange Debenture, a new Exchange Debenture or
Exchange Debentures in principal amount equal to
the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Exchange Debentures called for redemption must
be surrendered to the Paying Agent to collect the
redemption price for, and any accrued and unpaid
interest on, such Exchange Debentures;
(6) that, unless the Company defaults in making such
redemption payment, interest on Exchange Debentures
called for redemption ceases to accrue on and after
the redemption date;
(7) the paragraph of the Exchange Debentures pursuant
to which the Exchange Debentures called for
redemption are being redeemed; and
(8) the CUSIP number; provided that no representation
is made as to the correctness or accuracy of the
CUSIP number listed in such notice and printed on
the Exchange Debentures.
At the Company's request, the Trustee shall (at the Company's
expense) give the notice of redemption in the Company's name at least 30 but
not more than 60 days before a redemption; provided, however, that the Company
shall deliver to the Trustee, at least 45 days prior to the redemption date
and at least 10 days prior to the date that notice of the redemption is to be
mailed to Holders, an Officers' Certificate that (i) requests the Trustee to
give notice of the redemption to Holders, (ii) sets forth the
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information to be provided to Holders in the notice of redemption, as set
forth in the preceding paragraph, (iii) states that the Company has elected to
redeem Exchange Debentures pursuant to Section 3.07(a) or 3.07(b) hereof, as
the case may be, and (iv) sets forth the aggregate principal amount of
Exchange Debentures to be redeemed and the amount of accrued and unpaid
interest thereon as of the redemption date. If the Trustee is not the
Registrar, the Company shall, concurrently with any such request, cause the
Registrar to deliver to the Trustee a certificate (upon which the Trustee may
rely) setting forth the name of, the address of, and the aggregate principal
amount of Exchange Debentures held by, each Holder.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Exchange Debentures called for
redemption become due and payable on the redemption date at the price set
forth in the Exchange Debenture. Upon surrender to the Trustee or Paying
Agent, such Exchange Debentures called for redemption shall be paid at the
redemption price (which shall include accrued interest thereon to the
redemption date) but installments of interest, the maturity of which is on or
prior to the redemption date, shall be payable to Holders of record at the
close of business on the relevant record dates. On and after any redemption or
purchase date, interest shall cease to accrue on the Exchange Debentures or
portions thereof called for redemption or accepted for payment.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or prior to any redemption date, the Company shall deposit with
the Trustee or with the Paying Agent money sufficient to pay the redemption
price of, and accrued interest on, all Exchange Debentures to be redeemed on
that date. The Trustee or the Paying Agent shall return to the Company any
money that the Company deposited with the Trustee or the Paying Agent in
excess of the amounts necessary to pay the redemption price of, and accrued
interest on, all Exchange Debentures to be redeemed.
If the Company complies with the preceding paragraph, interest on the
Exchange Debentures to be redeemed will cease to accrue on such Exchange
Debentures on the applicable redemption date, whether or not such Exchange
Debentures are presented for payment. If an Exchange Debenture is redeemed on
or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Exchange Debenture was registered at the close of business
on such record date. If any Exchange Debenture called for redemption shall not
be so paid upon surrender for redemption because of the failure of the Company
to comply with the preceding paragraph, interest will be paid on the unpaid
principal, premium, if any, and interest from the redemption date until such
principal, premium and interest is paid, at the rate of interest provided in
the Exchange Debentures and Section 4.01 hereof.
SECTION 3.06. EXCHANGE DEBENTURES REDEEMED IN PART.
Upon surrender of an Exchange Debenture that is redeemed in part, the
Company shall issue and the Trustee shall authenticate for the Holder at the
Company's expense a new Exchange Debenture equal in principal amount to the
unredeemed portion of the Exchange Debenture surrendered.
SECTION 3.07. OPTIONAL REDEMPTION PROVISIONS.
(a) Except as provided in Section 3.07(b) hereof, the Exchange
Debentures may not be redeemed at the option of the Company prior to
____________, 2001. During the twelve (12) month period beginning on
____________ of the years indicated below, the Exchange Debentures will be
redeemable at the option of the Company, in whole or in part, on at least 30
but not more than 60 days'
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notice to each Holder of Exchange Debentures to be redeemed, at the redemption
prices (expressed as percentages of the principal amount) set forth below,
plus any accrued and unpaid interest to the redemption date:
Year Percentage
------ ----------
(b) Notwithstanding the foregoing, the Company may (but shall not
have the obligation to), at any time, redeem Exchange Debentures in whole, but
not in part, at a redemption price of ___% of the principal amount thereof,
plus accrued and unpaid interest to the redemption date, with the net proceeds
of a public offering of common stock of the Company; provided that such
redemption shall occur within 60 days of the date of the closing of such
public offering.
SECTION 3.08. MANDATORY PURCHASE PROVISIONS.
(a) Within 30 days after any Change of Control Trigger Date or Asset
Sale Trigger Date, the Company shall mail a notice to each Holder at such
Holder's registered address stating: (i) that an offer ("Offer") is being made
pursuant to Section 4.13 or Section 4.14 hereof, as the case may be, the
length of time the Offer shall remain open and the maximum aggregate principal
amount of Exchange Debentures that will be accepted for payment pursuant to
such Offer; (ii) the purchase price for the Exchange Debentures (as set forth
in Section 4.13 or Section 4.14 hereof, as the case may be), the amount of
accrued and unpaid interest on such Exchange Debentures as of the purchase
date, and the purchase date (which shall be no earlier than 30 days and no
later than 40 days from the date such notice is mailed (the "Purchase Date"));
(iii) that any Exchange Debenture not accepted for payment will continue to
accrue interest; (iv) that, unless the Company fails to deposit with the
Paying Agent on the Purchase Date an amount sufficient to purchase all
Exchange Debentures accepted for payment, interest shall cease to accrue on
such Exchange Debentures after the Purchase Date; (v) that Holders electing to
tender any Exchange Debenture or portion thereof will be required to surrender
their Exchange Debenture, with a form entitled "Option of Holder to Elect
Purchase" completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day preceding the
Purchase Date, provided that Holders electing to tender only a portion of any
Exchange Debenture must tender a principal amount of $1,000 or integral
multiples thereof; (vi) that Holders will be entitled to withdraw their
election to tender Exchange Debentures, if the Paying Agent receives, not
later than the close of business on the third Business Day preceding the
Purchase Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of Exchange Debentures
delivered for purchase, and a statement that such Holder is withdrawing his
election to have such Exchange Debenture purchased; and (vii) that Holders
whose Exchange Debentures are accepted for payment in part will be issued new
Exchange Debentures equal in principal amount to the unpurchased portion of
Exchange Debentures surrendered; provided that only Exchange Debentures in a
principal amount of $1,000 or integral multiples thereof will be accepted for
payment in part.
(b) On the Purchase Date for any Offer, the Company shall, to the
extent required by this Indenture and such Offer, (i) in the case of an Offer
resulting from a Change of Control, accept for payment all Exchange Debentures
or portions thereof tendered pursuant to such Offer and, in the case of an Offer
resulting from an Asset Sale Trigger Date, accept for payment the maximum
principal amount of Exchange Debentures or portions thereof tendered pursuant to
such Offer that can be purchased out of the Excess Proceeds, (ii) deposit with
the Paying Agent the aggregate purchase
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price of all Exchange Debentures or portions thereof accepted for payment and
any accrued and unpaid interest on such Exchange Debentures as of the Purchase
Date, and (iii) deliver or cause to be delivered to the Trustee all Exchange
Debentures tendered pursuant to the Offer.
(c) With respect to any Offer, if less than all of the Exchange
Debentures tendered pursuant to an Offer are to be purchased by the Company,
the Trustee shall select on the Purchase Date the Exchange Debentures or
portions thereof to be accepted for payment pursuant to Section 3.02 hereof.
(d) Promptly after consummation of an Offer, (i) the Paying Agent
shall mail (or cause to be transferred by book entry) to each Holder of
Exchange Debentures or portions thereof accepted for payment an amount equal
to the purchase price for, plus any accrued and unpaid interest on, such
Exchange Debentures, (ii) with respect to any tendered Exchange Debenture not
accepted for payment in whole or in part, the Trustee shall return such
Exchange Debenture to the Holder thereof, and (iii) with respect to any
Exchange Debenture accepted for payment in part, the Trustee shall
authenticate and mail to each such Holder a new Exchange Debenture equal in
principal amount to the unpurchased portion of the tendered Exchange
Debenture.
(e) The Company will publicly announce the results of the Offer on or
as soon as practicable after the Purchase Date.
(f) The Company shall comply with any tender offer rules under the
Exchange Act which may then be applicable, including Rule 14e-1, in connection
with an Offer required to be made by the Company to repurchase the Exchange
Debentures as a result of a Change of Control Trigger Date or an Asset Sale
Trigger Date. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Indenture, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Indenture by virtue
thereof.
(g) With respect to any Offer, if the Company deposits prior to 10
a.m. New York City time with the Paying Agent on the Purchase Date an amount
in available funds sufficient to purchase all Exchange Debentures accepted for
payment, interest shall cease to accrue on such Exchange Debentures after the
Purchase Date; provided, however, that if the Company fails to deposit such
amount on the Purchase Date, interest shall continue to accrue on such
Exchange Debentures until such deposit is made.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF EXCHANGE DEBENTURES.
The Company shall pay the principal of, and premium, if any, and
accrued and unpaid interest on, the Exchange Debentures on the dates and in
the manner provided in the Exchange Debentures. Holders of Exchange Debentures
must surrender their Exchange Debentures to the Paying Agent to collect
principal payments. Principal of, premium, if any, and accrued and unpaid
interest shall be considered paid on the date due if the Paying Agent (other
than the Company or any of its Subsidiaries), the Global Exchange Debenture
Holder or each Holder that has specified an account, holds, as of 10:00 a.m.
New York City time, money the Company deposited in immediately available funds
designated for and sufficient to pay in cash all principal, premium, if any,
and accrued and unpaid interest then due; provided that, to the extent that
the Holders have not specified accounts, such amounts shall be considered paid
on the date due if the Company mails a check for such amounts on such date.
The Paying Agent shall return to the Company, no later than five days
following the date of payment, any money (including
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accrued interest) that exceeds the amount of principal, premium, if any, and
accrued and unpaid interest, paid on the Exchange Debentures.
To the extent lawful, the Company shall pay interest (including
Post-Petition Interest) on (i) overdue principal and premium at the rate equal
to 2% per annum in excess of the then applicable interest rate on the Exchange
Debentures, compounded semiannually and (ii) overdue installments of interest
(without regard to any applicable grace period) at the same rate as set forth
in clause (i), compounded semiannually.
SECTION 4.02. COMMISSION REPORTS.
(a) The Company shall file with the Trustee, within 15 days after it
files them with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) that
the Company is required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act. Notwithstanding the foregoing, if the Company is not
subject to the requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall file with the Commission and with the Trustee, within 15 days
after it files with the Commission, financial statements, including any notes
thereto (and with respect to annual reports, an auditor's report by a firm of
established national reputation), and a "Management's Discussion and Analysis of
Financial Condition and Results of Operations," both comparable to that which
the Company would have been required to include in such annual reports,
information, documents or other reports if the Company were subject to the
requirements of Section 13 or 15(d) of the Exchange Act. Subsequent to the
qualification of this Indenture under the TIA, the Company also shall comply
with the provisions of section 314(a) of the TIA.
(b) If the Company is required to furnish annual or quarterly reports
to its stockholders pursuant to the Exchange Act, the Company shall cause any
annual report furnished to its stockholders generally and any quarterly or
other financial reports it furnishes to its stockholders generally to be filed
with the Trustee and the Company shall mail to the Holders at their addresses
appearing in the register of Exchange Debentures maintained by the Registrar.
If the Company is not required to furnish annual or quarterly reports to its
stockholders pursuant to the Exchange Act, the Company shall cause its
financial statements referred to in Section 4.02(a) hereof, including any
notes thereto (and with respect to annual reports, an auditors' report by a
firm of established national reputation), and a "Management's Discussion and
Analysis of Financial Condition and Results of Operations," to be so mailed to
the Holders within 120 days after the end of each of the Company's fiscal
years and within 60 days after the end of each of the first three fiscal
quarters of each year. The Company shall cause to be disclosed in a statement
accompanying any annual report or comparable information as of the date of the
most recent financial statements in each such report or comparable information
the amount available for payments pursuant to Section 4.05 hereof. As of the
date hereof, the Company's fiscal year ends on [January 1].
SECTION 4.03. COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year of the Company, an Officers' Certificate stating that
a review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that, to the best
of his or her knowledge, the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and is not in
default in the performance or observance of any of the terms, provisions and
conditions hereof (or, if a Default or Event of Default shall have occurred,
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describing all such Defaults or Events of Default of which he or she may have
knowledge and what action the Company has taken or proposes to take with
respect thereto) and that, to the best of his or her knowledge no event has
occurred and remains in existence by reason of which payments on account of
the principal of, premium, if any, and accrued and unpaid interest on, the
Exchange Debentures are prohibited or if such event has occurred, a
description of the event and what action the Company is taking or proposes to
take with respect thereto.
So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the financial statements
delivered pursuant to Section 4.02 hereof shall be accompanied by a written
statement of the Company's independent public accountants (who shall be a firm
of established national reputation reasonably satisfactory to the Trustee)
that in making the examination necessary for certification of such financial
statements nothing has come to their attention that would lead them to believe
that the Company has violated any provisions of Section 4.01, 4.05, 4.06,
4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15 or 4.16 or of Article 5
hereof or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall
not be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
The Company shall, so long as any of the Exchange Debentures are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes
to take with respect thereto.
SECTION 4.04. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that might affect the
covenants or the performance of this Indenture; and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
has been enacted.
SECTION 4.05. LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, (i) declare or pay any dividend or make
any distribution on account of the Company's or such Restricted Subsidiary's
Capital Stock or other Equity Interests (other than dividends or distributions
payable in Capital Stock or other Equity Interests (other than Disqualified
Stock) of the Company or a Restricted Subsidiary and other than dividends or
distributions payable by a Restricted Subsidiary to a Restricted Subsidiary or
to the Company); (ii) purchase, redeem or otherwise acquire or retire for value
any Capital Stock or other Equity Interests of the Company or any of its
Restricted Subsidiaries (other than any such Equity Interest purchased from the
Company or any Restricted Subsidiary for fair market value (as determined by the
Board of Directors in good faith)); (iii) voluntarily prepay any Subordinated
Indebtedness of the Company, whether any such Subordinated Indebtedness
is outstanding on, or issued after, the Exchange Debenture Issue Date except
as specifically permitted by the covenants of this Indenture; (iv) make any
Restricted Investment (all such dividends, distributions, purchases,
redemptions or other acquisitions, retirements, prepayments and Restricted
Investments, together with any Investments deemed to be Restricted Payments as
set forth in Section 4.16 hereof, being collectively referred to as
"Restricted Payments"), if, at the time of such Restricted Payment:
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(A) a Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence thereof; or
(B) immediately after such Restricted Payment and after giving
effect thereto on a pro forma basis, the Company shall not
be able to issue $1.00 of additional Indebtedness pursuant
to Section 4.07(a) of this Indenture; or
(C) such Restricted Payment, together with the aggregate of all
other Restricted Payments made from the Preferred Stock
Issue Date, without duplication, exceeds the sum of (1) 50%
of the aggregate Consolidated Net Income (including, for
this purpose, gains from Asset Sales and, to the extent not
included in Consolidated Net Income, any gain from a sale or
disposition of a Restricted Investment) of the Company (or, in
case such aggregate is a loss, 100% of such loss) for the
period (taken as one accounting period) from the beginning of
the first quarter commencing immediately after the Preferred
Stock Issue Date and ended as of the Company's most recently
ended fiscal quarter at the time of such Restricted Payment,
plus (2) 100% of the aggregate net cash proceeds and the
fair market value of any property or securities (as
determined by the Board of Directors in good faith) received
by the Company since the Preferred Stock Issue Date from the
issue or sale of Capital Stock or other Equity Interests of
the Company (other than (x) Capital Stock or other Equity
Interests issued or sold to a Restricted Subsidiary and (y)
the issuance or sale of Disqualified Stock), plus (3)
$6,000,000, plus (4) the amount by which the principal
amount of and any accrued interest on either (x) Senior
Indebtedness of the Company or (y) any Indebtedness of any
Restricted Subsidiary, is reduced on the Company's
consolidated balance sheet upon the conversion or exchange
(other than by a Restricted Subsidiary) subsequent to the
Preferred Stock Issue Date of any Indebtedness of the
Company or any Restricted Subsidiary (not held by the
Company or any Restricted Subsidiary) for Capital Stock or
other Equity Interests (other than Disqualified Stock) of
the Company (less the amount of any cash, or the fair market
value of any other property or securities (as determined by
the Board of Directors in good faith), distributed by the
Company or any Restricted Subsidiary (to Persons other than
the Company or any other Restricted Subsidiary) upon such
conversion or exchange), plus (5) if any Non-Restricted
Subsidiary is redesignated as a Restricted Subsidiary, the
value of the deemed Restricted Payment that would result if
such subsidiary were redesignated as a Non-Restricted
Subsidiary at such time, as determined in accordance
with the second sentence of Section 4.16 hereof; provided,
however, that for purposes of this clause (5), the value of
any redesignated Non- Restricted Subsidiary shall be reduced
by the amount that any such redesignation replenishes or
increases the amount of Restricted Investments permitted to
be made pursuant to Section 4.05(b)(ii) hereof.
(b) Notwithstanding Section 4.05(a) hereof, the following shall not
be prohibited as Restricted Payments: (i) the payment of any dividend within
60 days after the date of declaration thereof, if at said date of declaration
such payment would comply with all the provisions hereof (including, but not
limited to, this Section 4.05); (ii) making Restricted Investments at any
time, and from time to time, in an aggregate outstanding amount of $12,000,000
after the Preferred Stock Issue Date (it being understood that if any
Restricted Investment after the Preferred Stock Issue Date pursuant to this
clause (ii) is sold, transferred or otherwise conveyed to any Person other
than the Company or a Restricted Subsidiary, the portion of the net cash
proceeds or fair market value of securities or properties paid or transferred
to the Company and its Restricted Subsidiaries in connection with such sale,
transfer or conveyance that relates or corresponds to the repayment or return
of the original cost of such a Restricted Investment will replenish or
increase the amount of Restricted Investments permitted to be made pursuant to
this Section
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4.05(b)(ii), so that up to $12,000,000 of Restricted Investments may be
outstanding under this Section 4.05(b)(ii) at any given time); provided that,
without otherwise limiting this clause (ii), any Restricted Investment in a
Subsidiary made pursuant to this clause (ii) is made for fair market value (as
determined by the Board of Directors in good faith); (iii) the repurchase,
redemption, retirement or acquisition of the Company's stock from the
executives, management, employees or consultants of the Company or its
Subsidiaries pursuant to the terms of any subscription, stockholder or other
agreement or plan, up to an aggregate amount not to exceed $6,000,000; (iv)
any loans, advances, distributions or payments from the Company to its
Restricted Subsidiaries, or any loans, advances, distributions or payments by
a Restricted Subsidiary to the Company or to another Restricted Subsidiary, in
each case pursuant to intercompany Indebtedness, intercompany management
agreements and other intercompany agreements and obligations; (v) the
purchase, redemption, retirement or other acquisition of (A) any Senior
Indebtedness of the Company or any Indebtedness of Restricted Subsidiaries
required by its terms to be purchased, redeemed, retired or acquired with the
net proceeds from asset sales (as defined in the instrument evidencing such
Senior Indebtedness or Indebtedness) or upon a change of control (as defined
in the instrument evidencing such Senior Indebtedness or Indebtedness) and (B)
the Exchange Debentures pursuant to Sections 4.13 and 4.14 hereof; (vi) the
payment of (A) consulting, financial and investment banking fees under the TJC
Agreement, provided, that no Default or Event of Default shall have occurred
and be continuing or shall occur as a consequence thereof, and the Company's
Obligations to pay such fees under the TJC Agreement shall be subordinated
expressly to the Company's Obligations in respect of the Exchange Debentures,
and (B) indemnities, expenses and other amounts under the TJC Agreement;
(vii) the redemption, repurchase, retirement or other acquisition of any Capital
Stock or other Equity Interests of the Company or any Restricted Subsidiary in
exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to a Subsidiary of the Company) of other Capital Stock or other
Equity Interests of the Company (other than any Disqualified Stock) or the
redemption, repurchase, retirement or other acquisition of any Capital Stock or
other Equity Interests of any Restricted Subsidiary in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to the Company or
a Subsidiary of the Company) of other Capital Stock or other Equity Interests of
such Restricted Subsidiary; provided that, in each case, any net cash proceeds
that are utilized for any such redemption, repurchase, retirement or other
acquisition, and any Net Income resulting therefrom, shall be excluded from
Section 4.05(a)(C)(1) and (C)(2) hereof; (viii) the defeasance, redemption or
repurchase of pari passu or Subordinated Indebtedness with the net cash proceeds
from an issuance of permitted Refinancing Indebtedness or the substantially
concurrent sale (other than to a Subsidiary of the Company) of Capital Stock or
other Equity Interests of the Company (other than Disqualified Stock); provided
that any net cash proceeds that are utilized for any such defeasance, redemption
or repurchase, and any Net Income resulting therefrom, shall be excluded from
Section 4.05(a)(C)(1) and (C)(2) hereof; (ix) Restricted Investments made or
received in connection with the sale, transfer or disposition of any business,
properties or assets of the Company or any Restricted Subsidiary, provided, that
if such sale, transfer or disposition constitutes an Asset Sale, the Company
complies with Section 4.14 hereof; (x) any Restricted Investment constituting
securities or instruments of a Person issued in exchange for trade or other
claims against such Person in connection with a financial reorganization or
restructuring of such Person; (xi) payments in connection with the application
of the net proceeds of the offerings as described under "Use of Proceeds" in the
Prospectus; and (xii) payments of fees, expenses and indemnities to the
directors of the Company and its Restricted Subsidiaries.
SECTION 4.06. CORPORATE EXISTENCE.
Subject to Section 4.14 and Article 5 hereof, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or other
existence of each of its Restricted Subsidiaries in accordance with the
respective organizational documents of each of its Restricted Subsidiaries and
the rights (charter and statutory), licenses and franchises of the Company and
each of its Restricted Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any Restricted Subsidiary, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Restricted
Subsidiaries taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders.
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SECTION 4.07. LIMITATION ON INCURRENCE OF INDEBTEDNESS.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, issue any Indebtedness (other than the Indebtedness represented
by the Exchange Debentures) unless the Company's Cash Flow Coverage Ratio for
its four full fiscal quarters next preceding the date such additional
Indebtedness is issued would have been at least 2.0 to 1 determined on a Pro
Forma Basis (including, for this purpose, any other Indebtedness incurred
since the end of the applicable four-quarter period) as if such additional
Indebtedness and any other Indebtedness issued since the end of such
four-quarter period had been issued at the beginning of such four-quarter
period.
(b) Section 4.07(a) hereof shall not apply to the issuance of (i)
Indebtedness of the Company and/or its Restricted Subsidiaries as measured on
such date of issuance in an aggregate principal amount outstanding on any such
date of issuance not exceeding $90,000,000 aggregate principal amount under the
Credit Agreement (provided that the aggregate principal amount of Indebtedness
outstanding under this clause (i) together with the aggregate principal amount
of Indebtedness outstanding under clause (iii) below shall not exceed
$96,000,000 in aggregate principal amount at any one time outstanding); (ii)
Indebtedness of the Company and its Restricted Subsidiaries in connection with
capital leases, sale and leaseback transactions, purchase money obligations,
capital expenditures or similar financing transactions relating to: (A) their
properties, assets and rights as of the date of original issuance of the
Exchange Debentures up to $6,000,000 in aggregate principal amount, or (B) their
properties, assets and rights acquired after the date of original issuance of
the Exchange Debentures, provided that the aggregate principal amount of such
Indebtedness under this clause (ii)(B) does not exceed 100% of the cost of such
properties, assets and rights; (iii) additional Indebtedness of the Company and
its Restricted Subsidiaries in an aggregate principal amount up to $30,000,000
(all or any portion of which may be issued as additional Indebtedness under the
Credit Agreement); provided that the aggregate principal amount of Indebtedness
outstanding under this clause (iii) together with the aggregate principal amount
of Indebtedness outstanding under clause (i) above shall not exceed $96,000,000
in aggregate principal amount at any one time outstanding; and (iv) Other
Permitted Indebtedness.
(c) Notwithstanding Sections 4.07(a) and (b) hereof, no Restricted
Subsidiary shall under any circumstances issue a guarantee of any Indebtedness
of the Company except for guarantees issued by Restricted Subsidiaries
pursuant to Section 4.15 hereof, provided, however, that the foregoing will
not limit or restrict guarantees issued by Restricted Subsidiaries in respect
of Indebtedness of other Restricted Subsidiaries.
SECTION 4.08. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) Except as otherwise set forth herein, neither the Company nor any
of its Restricted Subsidiaries shall make any loan, advance, guarantee or
capital contribution to, or for the benefit of, or sell, lease, transfer or
dispose of any properties or assets to, or for the benefit of, or purchase or
lease any property or assets from, or enter into or amend any contract,
agreement or understanding with, or for the benefit of, an Affiliate (each
such transaction or series of related transactions that are part of a common
plan are referred to as an "Affiliate Transaction"), except in good faith and
on terms that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable
transaction on an arm's length basis from an unrelated Person.
(b) The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any Affiliate Transaction involving aggregate
payments or other transfers by the Company and its Restricted Subsidiaries in
excess of $3,000,000 (including cash and non-cash payments and benefits valued
at their fair market value by the Board of Directors of the Company in good
faith) unless the Company delivers to the Trustee: (i) a resolution of the
Board of Directors of the Company stating that the Board of Directors
(including a majority of the disinterested directors, if any) has, in good
faith, determined that such Affiliate Transaction complies with the provisions
of this Indenture; and (ii)(A) with respect to any Affiliate Transaction
involving the incurrence of Indebtedness, a written opinion of a nationally
recognized investment banking or accounting firm experienced in the review of
similar types of transactions, (B) with respect to any Affiliate Transaction
involving the transfer of real property, fixed
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assets or equipment, either directly or by a transfer of 50% or more of the
Capital Stock of a Restricted Subsidiary which holds any such real property,
fixed assets or equipment, a written appraisal from a nationally recognized
appraiser experienced in the review of similar types of transactions or (C)
with respect to any Affiliate Transaction not otherwise described in (A) or
(B) above, a written certification from a nationally recognized professional
or firm experienced in evaluating similar types of transactions, in each case,
stating that the terms of such transaction are fair to the Company or such
Restricted Subsidiary, as the case may be, from a financial point of view.
(c) Notwithstanding Sections 4.08(a) and (b) hereof, this Section
4.08 shall not apply to: (i) transactions between the Company and any
Restricted Subsidiary or between Restricted Subsidiaries; (ii) payments under
the TJC Agreement or the JII Services Agreement; (iii) any other payments or
transactions permitted pursuant to Section 4.05 hereof; (iv) (A) payments and
transactions under the Executive Employment Agreements and (B) reasonable
compensation paid to officers, employees or consultants of the Company or any
Subsidiary as determined in good faith by the Company's Board of Directors or
executives; (v) payments and transactions under the Jaro Leases; (vi) payments
and transactions involving First National Bank of Boston and its subsidiaries
and affiliates in connection with BBI Note, the Credit Agreement and any other
Indebtedness permitted by Section 4.07 hereof; and (vii) payments and
transactions in connection with the Offerings and the application of the net
proceeds therefrom as described under "Use of Proceeds" in the Prospectus.
SECTION 4.09. LIMITATION ON LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien (other than Permitted Liens) upon any asset now owned or
hereafter acquired by them, or any income or profits therefrom, or assign or
convey any right to receive income therefrom; provided, however, that in
addition to creating Permitted Liens on its properties or assets, the Company
and any of its Restricted Subsidiaries may create any Lien upon any of their
properties or assets (including, but not limited to, any Capital Stock of its
Subsidiaries) if the Exchange Debentures are equally and ratably secured.
SECTION 4.10. COMPLIANCE WITH LAWS, TAXES.
The Company shall, and shall cause each of its Restricted
Subsidiaries to, comply with all statutes, laws, ordinances, or government
rules and regulations to which it is subject, the non-compliance with which
would materially adversely affect the business, prospects, earnings,
properties, assets or condition, financial or otherwise, of the Company and
its Restricted Subsidiaries taken as a whole.
The Company shall, and shall cause each of its Restricted
Subsidiaries to, pay prior to delinquency all taxes, assessments and
governmental levies, except those contested in good faith by appropriate
proceedings.
SECTION 4.11. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective, any encumbrance or restriction on the ability of
any Restricted Subsidiary to: (i) pay dividends or make any other
distributions on its Capital Stock or any other interest or participation in,
or measured by, its profits, owned by the Company or any Restricted
Subsidiary, or pay any Indebtedness owed to, the Company or any Restricted
Subsidiary; (ii) make loans or advances to the Company; or (iii) transfer any
of its properties or assets to the Company, except for such encumbrances or
restrictions existing under or by reason of: (A) applicable law; (B)
Indebtedness permitted (1) under Section 4.07(a) hereof, (2) under Sections
4.07(b)(i) and (iii) hereof and clauses (i), (v), (vi), (vii), (ix), (x) and
(xi) of the definition of Other Permitted Indebtedness, or (3) by agreements
and transactions permitted under Section 4.05 hereof; (C) customary provisions
restricting subletting or assignment of any lease or license of the Company or
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any Restricted Subsidiary; (D) (1) the terms of the BKC Intercreditor Agreement
and any other BKC Agreement, and (2) customary provisions of any franchise,
distribution or similar agreement; (E) any instrument governing Indebtedness
or any other encumbrance or restriction of a Person acquired by the Company or
any Restricted Subsidiary at the time of such acquisition, which encumbrance
or restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets of the Person, so
acquired; (F) Indebtedness or other agreements existing on the Exchange
Debenture Issue Date; (G) any Refinancing Indebtedness permitted under Section
4.07(b) hereof and clauses (i), (v), (vi), (vii), (ix), (x) and (xi) of the
definition of Other Permitted Indebtedness; provided that the encumbrances and
restrictions created in connection with such Refinancing Indebtedness are no
more restrictive in any material respect with regard to the interests of the
Holders of Exchange Debentures than the encumbrances and restrictions in the
refinanced Indebtedness; (H) any restrictions, with respect to a Restricted
Subsidiary, imposed pursuant to an agreement that has been entered into for
the sale or disposition of the stock, business, assets or properties of such
Restricted Subsidiary; (I) the terms of any Indebtedness of the Company
incurred in connection with Section 4.07 hereof, provided that the terms of
such Indebtedness constitute no greater encumbrance or restriction on the
ability of any Restricted Subsidiary to pay dividends or make distributions,
make loans or advances or transfer properties or assets than is otherwise
permitted by this Section 4.11; or (J) the terms of purchase money
obligations, but only to the extent such purchase money obligations restrict
or prohibit the transfer of the property so acquired.
(b) Nothing contained in this Section 4.11 shall prevent the Company
from entering into any agreement or instrument providing for the incurrence of
Permitted Liens or restricting the sale or other disposition of property or
assets of the Company or any of its Restricted Subsidiaries that are subject
to Permitted Liens.
SECTION 4.12. MAINTENANCE OF OFFICE OR AGENCIES.
The Company shall maintain in the Borough of Manhattan, the City of
New York an office or an agency (which may be an office of any Agent) where
Exchange Debentures may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of
the Exchange Debentures and this Indenture may be served. The Company shall
give prompt written notice to the Trustee of any change in the location of
such office or agency. If at any time the Company shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office.
The Company may also from time to time designate one or more other
offices or agencies where the Exchange Debentures may be presented or
surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
shall in any matter relieve the Company of its obligation to maintain an
office or agency in the Borough of Manhattan, the City of New York for such
purposes. The Company shall give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee located at __________ ______ as one such office or agency of the
Company in accordance with Section 2.03 hereof.
SECTION 4.13. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control (such date being the
"Change of Control Trigger Date"), each Holder of Exchange Debentures shall have
the right to require the Company to purchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's
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Exchange Debentures pursuant to an Offer at a purchase price in cash equal to
101% of the aggregate principal amount thereof, plus any accrued and unpaid
interest to the date of purchase. Although the failure of the Company to
purchase all Exchange Debentures tendered in such an Offer shall be a Default,
if the Company is unable to purchase all Exchange Debentures tendered in such
an Offer, the Company shall nevertheless purchase the maximum principal amount
of Exchange Debentures that it is able to purchase at that time.
Prior to the mailing of the notice referred to in Section 3.08(a)
hereof, but in any event within 30 days following any Change of Control
Trigger Date, the Company covenants to (i) repay in full and terminate all
commitments under Indebtedness under the Credit Agreement and all other Senior
Indebtedness the terms of which require repayment upon a Change of Control or
offer to repay in full and terminate all commitments under all Indebtedness
under the Credit Agreement and all other such Senior Indebtedness and to repay
the Indebtedness owed to each lender which has accepted such offer or (ii)
obtain the requisite consents under the Credit Agreement and all such other
Senior Indebtedness to permit the repurchase of the Exchange Debentures as
provided herein. The Company shall first comply with the covenant in the
immediately preceding sentence before it shall be required to repurchase
Exchange Debentures as provided herein. The Company's failure to comply with
this covenant shall constitute an Event of Default described in clause (iii)
and not in clause (ii) under Section 6.01(a) hereof.
(b) In the event of a Change of Control, the Company shall not offer to
purchase or redeem any Subordinated Indebtedness required or entitled by its
terms to be redeemed or purchased until the Offer for the Exchange Debentures
has been consummated and all Exchange Debentures tendered pursuant to such Offer
have been accepted for payment.
SECTION 4.14. LIMITATION ON ASSET SALES.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, consummate an Asset Sale (including the
sale of any of the Capital Stock of any Restricted Subsidiary) providing for
Net Proceeds in excess of $3,000,000 unless at least 75% of the Net Proceeds
from such Asset Sale are applied (in any manner otherwise permitted hereunder)
to one or more of the following purposes in such combination as the Company
shall elect: (i) an investment in another asset or business in the same line
of business as, or a line of business similar to that of, the line of business
of the Company and its Restricted Subsidiaries at the time of the Asset Sale;
provided that such investment occurs on or prior to the 365th day following
the date of such Asset Sale (the "Asset Sale Disposition Date"), (ii) to
reimburse the Company or its Subsidiaries for expenditures made, and costs
incurred, to repair, rebuild, replace or restore property subject to loss,
damage or taking to the extent that the Net Proceeds consist of insurance
proceeds received on account of such loss, damage or taking, (iii) the
purchase, redemption or other prepayment or repayment of outstanding Senior
Indebtedness of the Company or Indebtedness of the Company's Restricted
Subsidiaries on or prior to the 365th day following the Asset Sale Disposition
Date or (iv) an Offer expiring on or prior to the Purchase Date.
(b) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, consummate an Asset Sale unless at
least 75% of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of cash, cash equivalents or marketable
securities; provided that, solely for purposes of calculating such 75% of the
consideration, the amount of (i) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet or in the notes
thereto, excluding contingent liabilities and trade payables) of the Company
or any Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Exchange Debentures) that are assumed by the transferee of
any such assets and (ii) any notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that are
promptly, but in no event more
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than 30 days after receipt, converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received), shall be deemed to
be cash and cash equivalents for purposes of this provision. Any Net Proceeds
from any Asset Sale that are not applied or invested as provided in Section
4.14(a) hereof shall constitute "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $6,000,000
(such date being an "Asset Sale Trigger Date"), the Company shall make an
Offer to all Holders of Exchange Debentures to purchase the maximum principal
amount of the Exchange Debentures then outstanding that may be purchased out
of Excess Proceeds, at an offer price in cash in an amount equal to 100% of
principal amount thereof plus any accrued and unpaid interest to the Purchase
Date in accordance with the procedures set forth in this Indenture.
(d) To the extent that any Excess Proceeds remain after completion of
an Offer, the Company may use such remaining amount for general corporate
purposes.
(e) If the aggregate principal amount of Exchange Debentures
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Exchange Debentures to be purchased on a pro rata
basis.
(f) Upon completion of an Offer, the amount of Excess Proceeds shall
be reset at zero.
(g) Notwithstanding the foregoing, to the extent that any or all of
the Net Proceeds of an Asset Sale is prohibited or delayed by applicable local
law from being repatriated to the United States, the portion of such Net
Proceeds so affected will not be required to be applied pursuant to this
Section 4.14, but may be retained for so long, but only for so long, as the
applicable local law prohibits repatriation to the United States. The Company
will promptly take all reasonable actions required by the applicable local law
to permit such repatriation, and once such repatriation of any affected Net
Proceeds is not prohibited under applicable local law, such repatriation will
be immediately effected and such repatriated Net Proceeds will be applied in
the manner set forth above as if such Asset Sale have occurred on the date of
repatriation.
SECTION 4.15. LIMITATION ON GUARANTEES OF COMPANY INDEBTEDNESS
BY RESTRICTED SUBSIDIARIES.
(a) The Company shall not permit any Restricted Subsidiary, directly
or indirectly, to guarantee any Indebtedness of the Company other than the
Exchange Debentures (the "Other Company Indebtedness") unless (i) such
Restricted Subsidiary contemporaneously executes and delivers a supplemental
indenture to this Indenture providing for a guarantee of payment of the
Exchange Debentures then outstanding by such Restricted Subsidiary to the same
extent as the guarantee of payment (the "Other Company Indebtedness
Guarantee") of the Other Company Indebtedness (including waiver of
subrogation, if any) and (ii) if the Other Company Indebtedness guaranteed by
such Restricted Subsidiary is (A) Senior Indebtedness, the guarantee for the
Exchange Debentures shall be pari passu in right of payment with the Other
Company Indebtedness Guarantee and (B) Subordinated Indebtedness, the
guarantee for the Exchange Debentures shall be senior in right of payment to
the Other Company Indebtedness Guarantee; provided that the foregoing will not
limit or restrict guarantees issued by Restricted Subsidiaries in respect of
Indebtedness of other Restricted Subsidiaries.
(b) Each guarantee of the Exchange Debentures created by a Restricted
Subsidiary pursuant to Section 4.15(a) hereof shall be in form and substance
satisfactory to the Trustee and shall provide, among other things, that it
will be automatically and unconditionally released and discharged upon (i) any
sale, exchange or transfer permitted by this Indenture of (A) all of the
Company's Capital Stock in such
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Restricted Subsidiary or (B) the sale of all or substantially all of the
assets of the Restricted Subsidiary and upon the application of the Net
Proceeds from such sale in accordance with the requirements of Section 4.14
hereof or (ii) the release or discharge of the Other Company Indebtedness
Guarantee that resulted in the creation of such guarantee of the Exchange
Debentures, except a discharge or release by or as a result of direct payment
under such Other Company Indebtedness Guarantee.
SECTION 4.16. DESIGNATION OF RESTRICTED AND NON-RESTRICTED SUBSIDIARIES.
(a) From and after the Exchange Debenture Issue Date, the Company may
designate any existing or newly formed or acquired Subsidiary as a
Non-Restricted Subsidiary, provided that (i) either (A) the Subsidiary to be
so designated has total assets of $1,200,000 or less or (B) immediately before
and after giving effect to such designation on a Pro Forma Basis; (1) the
Company could incur $1.00 of additional Indebtedness pursuant to Section
4.07(a) hereof determined on a Pro Forma Basis; and (2) no Default or Event of
Default shall have occurred and be continuing, and (ii) all transactions
between the Subsidiary to be so designated and its Affiliates remaining in
effect are permitted pursuant to Section 4.08 hereof. Any Investment made by
the Company or any Restricted Subsidiary which is redesignated from a
Restricted Subsidiary to a Non-Restricted Subsidiary shall thereafter be
considered as having been a Restricted Payment (to the extent not previously
included as a Restricted Payment) made on the day such Subsidiary is
designated a Non-Restricted Subsidiary in the amount of the greater of (i) the
fair market value (as determined by the Board of Directors of the Company in
good faith) of the Equity Interests of such Subsidiary held by the Company and
its Restricted Subsidiaries on such date, and (ii) the amount of the
Investments determined in accordance with GAAP made by the Company and any of
its Restricted Subsidiaries in such Subsidiary.
(b) A Non-Restricted Subsidiary may be redesignated as a Restricted
Subsidiary. The Company shall not, and shall not permit any Restricted
Subsidiary to, take any action or enter into any transaction or series of
transactions that would result in a Person becoming a Restricted Subsidiary
(whether through an acquisition, the redesignation of a Non-Restricted
Subsidiary or otherwise, but not including through the creation of a new
Restricted Subsidiary) unless, immediately before and after giving effect to
such action, transaction or series of transactions on a Pro Forma Basis, (i)
the Company could incur at least $1.00 of additional Indebtedness pursuant to
Section 4.07(a) hereof and (ii) no Default or Event of Default shall have
occurred and be continuing.
(c) The designation of a Subsidiary as a Restricted Subsidiary or the
removal of such designation is required to be made by a resolution adopted by
a majority of the Board of Directors of the Company stating that the Board of
Directors has made such designation in accordance with this Indenture, and the
Company is required to deliver to the Trustee such resolution together with an
Officers' Certificate certifying that the designation complies with this
Indenture. Such designation shall be effective as of the date specified in the
applicable resolution, which may not be before the date the applicable
Officers' Certificate is delivered to the Trustee.
SECTION 4.17. SENIOR SUBORDINATED DEBT.
The Company shall not, and shall not permit any Restricted
Subsidiary to, incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment
to any Senior Indebtedness and senior in any respect in right of payment to
the Exchange Debentures.
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ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER OR CONSOLIDATION.
(a) The Company shall not consolidate or merge with or into, or sell,
lease, convey or otherwise dispose of all or substantially all of its assets
to, any Person (any such consolidation, merger or sale being a "Disposition")
unless: (i) the successor corporation of such Disposition or the corporation
to which such Disposition shall have been made (each, a "Successor
Corporation") is a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia; (ii) the
Successor Corporation of such Disposition expressly assumes the Obligations of
the Company, pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee, under this Indenture and the Exchange Debentures;
(iii) immediately after such Disposition, no Default or Event of Default shall
exist; and (iv) the corporation formed by or surviving any such Disposition, or
the corporation to which such Disposition shall have been made, shall (A) have
Consolidated Net Worth (immediately after the Disposition but prior to giving
any pro forma effect to purchase accounting adjustments or Restructuring
Charges resulting from the Disposition) equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the Disposition
and (B) have a Cash Flow Coverage Ratio, for the four fiscal quarters
immediately preceding the applicable Disposition, and determined on a Pro
Forma Basis, equal to or greater than the actual Cash Flow Coverage Ratio of
the Company for such four quarter period. The limitations in this Section
5.01(a) on the Company's ability to make a Disposition do not restrict the
Company's ability to sell less than all or substantially all of its assets,
such sales being governed by Section 4.14 hereof.
(b) Prior to the consummation of any proposed Disposition, the
Company shall deliver to the Trustee an Officers' Certificate to the foregoing
effect and an Opinion of Counsel stating that the proposed Disposition and
such supplemental indenture comply with this Indenture.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any Disposition, the Successor Corporation resulting from such
Disposition shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as
if such Successor Corporation has been named as the Company herein; provided,
however, that neither the Company nor any Successor Corporation shall be
released from its Obligation to pay the principal of, premium, if any, and
accrued and unpaid interest on, the Exchange Debentures.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
(a) An Event of Default is:
(i) a default for 30 days in payment of interest on the
Exchange Debentures;
(ii) a default in payment when due of principal of, or
premium, if any, on the Exchange Debentures;
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(iii) the failure of the Company to comply with any of
its other agreements or covenants in, or provisions
of, this Indenture or the Exchange Debentures
outstanding under this Indenture and the Default
continues for the period, if applicable, and after
the notice specified in Section 6.01(b) hereof;
(iv) a default by the Company or any Restricted
Subsidiary under any mortgage, indenture or
instrument under which there may be issued or by
which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or
any Restricted Subsidiary (or the payment of which
is guaranteed by the Company or any Restricted
Subsidiary), whether such Indebtedness or guarantee
now exists or shall be created hereafter, if (A)
either (1) such default results from the failure to
pay principal of or interest on any such
Indebtedness (after giving effect to any extensions
thereof) or (2) as a result of such default the
maturity of such Indebtedness has been accelerated
prior to its expressed maturity, and (B) the
principal amount of such Indebtedness, together
with the principal amount of any other such
Indebtedness in default for failure to pay
principal or interest thereon, or because of the
acceleration of the maturity thereof, aggregates in
excess of $6,000,000;
(v) a failure by the Company or any Restricted
Subsidiary to pay final judgments (not covered by
insurance) aggregating in excess of $6,000,000
which judgments a court of competent jurisdiction
does not rescind, annul or stay within 45 days
after their entry;
(vi) in existence when the Company or any Significant
Subsidiary pursuant to or within the meaning of any
Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for
relief against it in an involuntary case,
(C) consents to the appointment of a Custodian
of it or for all or substantially all of
its property, or
(D) makes a general assignment for the benefit
of its creditors; and
(vii) in existence when a court of competent jurisdiction
enters an order or decree under any Bankruptcy Law
that:
(A) is for relief against the Company or any
Significant Subsidiary in an involuntary
case,
(B) appoints a Custodian of the Company or any
Significant Subsidiary or for all or
substantially all of the property of the
Company or any Significant Subsidiary, or
(C) orders the liquidation of the Company or
any Significant Subsidiary,
and any such order or decree remains unstayed
and in effect for 60 days.
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(b) A Default under Section 6.01(a)(iii) hereof (other than an Event
of Default arising under Section 5.01, which shall be an Event of Default with
the notice but without the passage of time specified in this Section 6.01(b)),
is not an Event of Default under this Indenture until the Trustee or the
Holders of at least 25% in principal amount of the Exchange Debentures then
outstanding notify the Company of the Default and the Company does not cure
the Default within 30 days after receipt of the notice. The notice must
specify the Default, demand that it be remedied, and state that the notice is
a "Notice of Default."
(c) In the case of any Event of Default pursuant to Section
6.01(a)(i) or (ii) hereof occurring by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding payment of the premium that the Company would have to pay if the
Company then had elected to redeem the Exchange Debentures pursuant to Section
3.07 hereof, an equivalent premium shall also become and be immediately due
and payable to the extent permitted by law, anything in this Indenture or in
the Exchange Debentures contained to the contrary notwithstanding.
(d) The Trustee shall not be charged with knowledge of any Default or
Event of Default unless written notice thereof shall have been given to a
Trust Officer at the Corporate Trust Office of the Trustee by the Company or
any other Person.
SECTION 6.02. ACCELERATION.
(a) Upon the occurrence of an Event of Default (other than an Event
of Default under Section 6.01(a)(vi) or (vii) hereof), the Trustee or the
holders of at least 25% in principal amount of the then outstanding Exchange
Debentures may declare all Exchange Debentures (i) to be due and payable
immediately and, upon such declaration, the principal of, premium, if any, and
any accrued and unpaid interest on, all Exchange Debentures shall be due and
payable immediately; provided, however, that if an Event of Default arises
under Section 6.01(a)(vi) or (vii) hereof, the principal of, premium, if any,
and any accrued and unpaid interest on, all Exchange Debentures, shall ipso
facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holders of Exchange Debentures.
(b) The holders of a majority in principal amount of the Exchange
Debentures then outstanding under this Indenture, by notice to the Trustee,
may rescind any declaration of acceleration of such Exchange Debentures and
its consequences (if the rescission would not conflict with any judgment or
decree) if all existing Events of Default (other than the nonpayment of
principal of or interest on such Exchange Debentures that shall have become
due by such declaration) shall have been cured or waived.
(c) If there has been a declaration of acceleration of the Exchange
Debentures because an Event of Default under Section 6.01(a)(iv) hereof has
occurred and is continuing, such declaration of acceleration shall be
automatically annulled if the holders of the Indebtedness described in Section
6.01(a)(iv) hereof have rescinded the declaration of acceleration in respect
of such Indebtedness within 30 Business Days thereof and if (i) the annulment
of such acceleration would not conflict with any judgment or decree of a court
of competent jurisdiction, (ii) all existing Events of Default, except
non-payment of principal, premium or interest that shall have become due
solely because of the acceleration, have been cured or waived, and (iii) the
Company has delivered an Officers' Certificate to the Trustee to the effect of
clauses (i) and (ii) above.
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SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal of, premium,
if any, or any accrued and unpaid interest on, the Exchange Debentures or to
enforce the performance of any provision of the Exchange Debentures or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Exchange Debentures or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Holder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
The holders of a majority in aggregate principal amount of the
Exchange Debentures then outstanding by notice to the Trustee may on behalf of
all Holders of Exchange Debentures waive any existing Default or Event of
Default under this Indenture and its consequences, except a continuing Default
in the payment of the principal of, premium, if any, and interest on, such
Exchange Debentures, which may only be waived with the consent of each Holder
of Exchange Debentures 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 this Indenture; provided that no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Subject to Section 7.01(e) hereof, the Holders of a majority in
principal amount of the then outstanding Exchange Debentures may direct the
time, method and place of conducting any proceeding for exercising any remedy
available to the Trustee or exercising any trust or power conferred on it by
this Indenture. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that the Trustee determines may be
unduly prejudicial to the rights of other Holders or would involve the Trustee
in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or the
Exchange Debentures only if (i) the Holder gives to the Trustee notice of a
continuing Event of Default; (ii) the Holders of at least 25% in principal
amount of the then outstanding Exchange Debentures make a request to the
Trustee to pursue the remedy; (iii) such Holder or Holders offer to the
Trustee indemnity satisfactory to the Trustee against any loss, liability or
expense; (iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and (v) during such
60-day period the Holders of a majority in principal amount of the then
outstanding Exchange Debentures do not give the Trustee a direction
inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
Holders of the Exchange Debentures may not enforce this Indenture,
except as provided herein.
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SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of, premium, if any, and any
accrued and unpaid interest on, an Exchange Debenture, on or after a
respective due date expressed in the Exchange Debenture, or to bring suit for
the enforcement of any such payment on or after such respective date, shall
not be impaired or affected without the consent of the Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a)(i) or (ii) hereof
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for (i) the
principal, premium and interest remaining unpaid on the Exchange Debentures,
(ii) interest on overdue principal and premium, if any, and, to the extent
lawful, interest, and (iii) such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel ("Trustee Expenses").
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable to have the claims of the Trustee
(including any claim for Trustee Expenses) and the Holders allowed in any
Insolvency or Liquidation Proceeding or other judicial proceeding relative to
the Company (or any other obligor upon the Exchange Debentures), its creditors
or its property and shall be entitled and empowered to collect, receive and
distribute to Holders any money or other property payable or deliverable on
any such claims and each Holder authorizes any Custodian in any such
Insolvency or Liquidation Proceeding or other judicial proceeding to make such
payments to the Trustee, and if the Trustee shall consent to the making of
such payments directly to the Holders any such Custodian is hereby authorized
to make such payments directly to the Holders, and to pay to the Trustee any
amount due to it hereunder for Trustee Expenses, and any other amounts due the
Trustee under Section 7.07 hereof. To the extent that the payment of any such
Trustee Expenses, and any other amounts due the Trustee under Section 7.07
hereof out of the estate in any such proceeding, shall be denied for any
reason, payment of the same shall be secured by a Lien on, and shall be paid
out of, any and all distributions, dividends, money, securities and other
properties which the Holders may be entitled to receive in such proceeding,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Exchange Debentures or the rights of any Holder, or to authorize the Trustee
to vote in respect of the claim of any Holder in any Insolvency or Liquidation
Proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07 hereof;
Second: to Holders for amounts due and unpaid on the Exchange
Debentures for principal, premium and interest, ratably,
without preference or priority of any
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kind, according to the amounts due and payable on the
Exchange Debentures for principal, premium and interest,
respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as a Trustee, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit, and
the court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.07 hereof, or a suit by Holders of more than 10%
in principal amount of the then outstanding Exchange Debentures.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default occurs (and has not been cured) the
Trustee shall (i) exercise the rights and powers vested in it by this
Indenture, and (ii) use the same degree of care and skill in exercising such
rights and powers as a prudent person would exercise or use under the
circumstances in the conduct of its own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee's duties shall be determined solely by
the express provisions of this Indenture and the
Trustee need perform only those duties that are
specifically set forth in this Indenture and no
others, and no implied covenants or obligations
shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions
expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the
requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions
to determine whether they conform to this
Indenture's requirements.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own wilful
misconduct, except that:
(i) this paragraph does not limit the effect of Section
7.01(b) hereof;
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(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer,
unless it is proved that the Trustee was negligent
in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in
accordance with a direction it receives pursuant to
Section 6.05 hereof.
(d) Whether or not expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), (c) and (e) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders unless such Holders shall have offered
to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money it
receives except as the Trustee may agree in writing with the Company. Money
the Trustee holds in trust need not be segregated from other funds except to
the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document it believes to be genuine
and to have been signed or presented by the proper Person. The Trustee shall
not be obligated to investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
reasonably require an Officers' Certificate or an Opinion of Counsel, or both.
The Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such Officers' Certificate or Opinion of Counsel.
The Trustee may consult with counsel and advice of such counsel or any Opinion
of Counsel shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any Agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take, except to the extent that such action or omission to act constitutes
negligence or wilful misconduct on the part of the Trustee.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Exchange Debentures and may otherwise deal with the
Company or an Affiliate with the same rights it would have if it were not
Trustee. However, if the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue as Trustee or resign. Any Agent may do the same with like rights.
The Trustee is also subject to Sections 7.10 and 7.11 hereof.
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SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Exchange Debentures,
it shall not be accountable for the Company's use of the proceeds from the
Exchange Debentures or for any money paid to the Company or upon the Company's
direction under any provisions hereof, it shall not be responsible for the use
or application of any money any Paying Agent other than the Trustee receives,
and it shall not be responsible for any statement or recital herein or any
statement in the Exchange Debentures or any other document furnished or issued
in connection with the sale of the Exchange Debentures or pursuant to this
Indenture, other than its certificate of authentication.
SECTION 7.05. NOTICE TO HOLDERS OF DEFAULTS AND EVENTS OF DEFAULT.
If a Default or Event of Default occurs and is continuing and if it
is actually known to the Trustee, the Trustee shall mail to Holders a notice
of the Default or Event of Default within 90 days after it occurs. Except in
the case of a Default or Event of Default in payment on any Exchange Debenture
(including any failure to redeem Exchange Debentures called for redemption or
any failure to purchase Exchange Debentures tendered pursuant to an Offer that
are required to be purchased by the terms of this Indenture), the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in
good faith determines that withholding the notice is in the Holders'
interests.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each ___________ beginning with __________,
1997, the Trustee shall mail to Holders a brief report dated as of such
reporting date that complies with section 313(a) of the TIA (but if no event
described in section 313(a) of the TIA has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with section 313(b)(2) of the TIA. The Trustee shall also
transmit by mail all reports as required by section 313(c) of the TIA.
Commencing at the time this Indenture is qualified under the TIA, a
copy of each report at the time of its mailing to Holders shall be filed with
the Commission and each national securities exchange on which the Exchange
Debentures are listed. The Company shall notify the Trustee when the Exchange
Debentures are listed on any national securities exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee (in its capacities as Trustee,
Paying Agent and/or Registrar) from time to time reasonable compensation for
its services hereunder. The Trustee's compensation shall not be limited by any
law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable disbursements, advances,
fees and expenses it incurs or makes in addition to the compensation for its
services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify and hold harmless the Trustee (in its
capacities as Trustee, Paying Agent and/or Registrar) against any and all
losses, liabilities or expenses the Trustee incurs arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, except as set forth below. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure by the Trustee
to so notify the Company shall not relieve the Company of its Obligations
hereunder. The Company shall defend the claim and the Trustee shall reasonably
cooperate in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees
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and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The Company's Obligations under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
The Company need not reimburse any expense or indemnify against any
loss or liability the Trustee incurs through negligence or bad faith.
To secure the Company's payment of its Obligations in this Section,
the Trustee shall have a Lien prior to the Exchange Debentures on all money or
property the Trustee holds or collects, except that held in trust to pay
principal of, premium, if any, and any accrued and unpaid interest on,
particular Exchange Debentures. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(a)(vi) or (vii) hereof occurs, the
expenses and the compensation for the services (including the fees and
expenses of its agents and counsel) are intended to constitute administrative
expenses under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign and be discharged from the trust hereby
created by so notifying the Company. The Holders of a majority in principal
amount of the then outstanding Exchange Debentures may remove the Trustee by
so notifying the Trustee and the Company. The Company may remove the Trustee
if:
(i) the Trustee fails to comply with Section 7.10 hereof;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee
under any Bankruptcy Law;
(iii) a Custodian or public officer takes charge of the Trustee or
its property; or
(iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee, provided that the Holders of a majority in principal amount
of the then outstanding Exchange Debentures may appoint a successor Trustee to
replace any successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the then outstanding
Exchange Debentures may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any Holder
may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
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A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
appointment to Holders. The retiring Trustee shall promptly transfer all
property it holds as Trustee to the successor Trustee, provided all sums owing
to the retiring Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Company's obligations under Section
7.07 hereof shall continue for the retiring Trustee's benefit with respect to
expenses and liabilities it incurred prior to being replaced.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
The Trustee shall at all times (i) be a corporation organized and
doing business under the laws of the United States of America, of any state
thereof, or the District of Columbia authorized under such laws to exercise
corporate trustee power, (ii) be subject to supervision or examination by
federal or state authority, (iii) have a combined capital and surplus of at
least $100,000,000 as set forth in its most recent published annual report of
condition, and (iv) satisfy the requirements of sections 310(a)(1), (2) and
(5) of the TIA. The Trustee is subject to section 310(b) of the TIA.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee is subject to section 311(a) of the TIA, excluding any
creditor relationship listed in section 311(b) of the TIA. A Trustee who has
resigned or been removed shall be subject to section 311(a) of the TIA to the
extent indicated therein.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. DISCHARGE OF LIABILITY ON EXCHANGE DEBENTURES; DEFEASANCE.
(a) When (i) the Company delivers to the Trustee all outstanding
Exchange Debentures (other than Exchange Debentures replaced pursuant to
Section 2.07 hereof) for cancellation, or (ii) all outstanding Exchange
Debentures have become due and payable and the Company irrevocably deposits
with the Trustee funds sufficient to pay at maturity all outstanding Exchange
Debentures, including interest and premium thereon (other than Exchange
Debentures replaced pursuant to Section 2.07 hereof), and if in either case
the Company pays all other sums payable under this Indenture by the Company,
then this Indenture shall, subject to Sections 8.01(c) and 8.06 hereof, cease
to be of further effect.
(b) Subject to Sections 8.01(c), 8.02, and 8.06 hereof, the Company
at any time may terminate (i) all its obligations under the Exchange
Debentures and this Indenture ("legal defeasance option") or (ii) its
obligations under Sections 4.02, 4.03, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10,
4.11, 4.13, 4.14, 4.15, and 4.16 hereof, and the operation of Sections
5.01(a)(iii), 5.01(a)(iv), or 6.01(a)(iii) through
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(a)(v) hereof ("covenant defeasance option"). The Company may exercise its
legal defeasance option notwithstanding its prior exercise of its covenant
defeasance option.
If the Company exercises its legal defeasance option, payment of the
Exchange Debentures may not be accelerated because of an Event of Default. If
the Company exercises its covenant defeasance option, payment of the Exchange
Debentures shall not be accelerated because of an Event of Default specified
in Section 6.01(a)(iii) through (a)(v) hereof or because of the Company's
failure to comply with Section 5.01(a)(iii) and 5.01(a)(iv) hereof.
Upon satisfaction of the conditions set forth herein and upon the
Company's request (and at the Company's expense), the Trustee shall
acknowledge in writing the discharge of those obligations that the Company has
terminated.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 4.01, 4.04, 7.07, 7.08,
8.04, 8.05 and 8.06 hereof, and the Trustee's and the Paying Agent's
obligations in Section 8.04 hereof shall survive until the Exchange Debentures
have been paid in full. Thereafter, the Company's obligations in Sections 7.07
and 8.05 hereof and the Company's, the Trustee's and the Paying Agent's
obligations in Section 8.04 hereof shall survive.
SECTION 8.02. CONDITIONS TO DEFEASANCE.
The Company may exercise its legal defeasance option or its covenant
defeasance option only if:
(1) the Company irrevocably deposits in trust (the "defeasance
trust") with the Trustee money or U.S. Government
Obligations sufficient for the payment in full of the
principal of, premium, if any, and any accrued and unpaid
interest on, the Exchange Debentures then outstanding, as of
the maturity date, the redemption date or the Purchase Date,
as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants
expressing their opinion that the payments of principal and
interest when due and without reinvestment of the deposited
U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such
amounts as will be sufficient to pay when due principal of,
premium, if any, and any accrued and unpaid interest on, all
the Exchange Debentures to maturity or redemption, as the
case may be;
(3) since the Company's irrevocable deposit provided for in
Section 8.02(1) hereof, 91 days have passed;
(4) no Default has occurred and is continuing on the date of
such deposit and after giving effect to it;
(5) the deposit does not constitute a default under any other
agreement binding on the Company;
(6) the Company delivers to the Trustee an Opinion of Counsel to
the effect that the trust resulting from the deposit does
not constitute, or is qualified as, a regulated investment
company under the Investment Company Act of 1940, as
amended;
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(7) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel
stating that (i) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or
(ii) under applicable federal income tax law, in either
case, to the effect that, and based thereon such Opinion of
Counsel shall confirm that, the Holders will not recognize
income, gain or loss for federal income tax purposes as a
result of such deposit and defeasance and will be subject to
federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such
defeasance had not occurred;
(8) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders will not recognize income, gain
or loss for federal income tax purposes as a result of such
deposit and covenant defeasance and will be subject to
federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such
covenant defeasance had not occurred; and
(9) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Exchange
Debentures contemplated by this Article 8 have been
satisfied.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption or purchase of Exchange
Debentures at a future date in accordance with Article 3.
SECTION 8.03. APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to this Article 8. It shall apply the deposited
money and the money from U.S. Government Obligations through the Paying Agent
and in accordance with this Indenture to the payment of principal of, premium,
if any, and any accrued and unpaid interest on, the Exchange Debentures.
SECTION 8.04. REPAYMENT TO THE COMPANY.
After the Exchange Debentures have been paid in full, the Trustee and
the Paying Agent shall promptly turn over to the Company any excess money or
securities they hold.
The Trustee and the Paying Agent shall pay to the Company upon
written request by the Company any money they hold for the payment of
principal, premium or interest that remains unclaimed for 1 year after the
date upon which such payment shall have become due; provided, however, that
the Company shall have either caused notice of such payment to be mailed to
each Holder entitled thereto no less than 30 days prior to such repayment or
within such period shall have published such notice in a financial newspaper
of widespread circulation published in The City of New York (including,
without limitation, The Wall Street Journal). After payment to the Company,
Holders entitled to the money must look to the Company for payment as general
creditors unless an applicable abandoned property law designates another
Person, and all liability of the Trustee and such Paying Agent with respect to
such money shall cease.
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SECTION 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS.
The Company shall pay and shall indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against deposited U.S.
Government Obligations or the principal and interest received on such U.S.
Government Obligations.
SECTION 8.06. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Article 8 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Exchange
Debentures shall be revived and reinstated as though no deposit had occurred
pursuant to this Article 8 until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with this Article 8; provided, however, that, if the Company has made any
payment of principal of, premium, if any, and any accrued and unpaid interest
on, any Exchange Debentures because of the reinstatement of its Obligations,
the Company shall be subrogated to the Holders' rights to receive such payment
from the money or U.S. Government Obligations the Trustee or Paying Agent
holds.
ARTICLE 9
AMENDMENTS
SECTION 9.01. AMENDMENTS AND SUPPLEMENTS PERMITTED WITHOUT CONSENT OF
HOLDERS.
Notwithstanding Section 9.02 hereof, the Company and the Trustee may
amend or supplement this Indenture or the Exchange Debentures without the
consent of any Holder (a) to cure any ambiguity, defect or inconsistency; (b)
to provide for uncertificated Exchange Debentures in addition to or in place
of certificated Exchange Debentures; (c) to provide for the assumption by a
Successor Corporation of the Company's Obligations to the Holders in the event
of a Disposition pursuant to Article 5; (d) to comply with Commission's
requirements to effect or maintain the qualification of this Indenture under
the TIA; (e) to provide for guarantees with respect to the Exchange
Debentures; or (f) to make any change that does not materially adversely
affect any Holder's legal rights under this Indenture.
Upon the Company's request, after receipt by the Trustee of a
resolution of the Board of Directors authorizing the execution of any amended
or supplemental indenture, the documents described in Section 9.06 hereof, the
Trustee shall join with the Company in the execution of any amended or
supplemental indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations that may be
contained in any such amended or supplemental indenture, but the Trustee shall
not be obligated to enter into an amended or supplemental indenture that
affects its own rights, duties or immunities under this Indenture or
otherwise.
SECTION 9.02. AMENDMENTS AND SUPPLEMENTS REQUIRING CONSENT OF HOLDERS.
Subject to Section 6.07 hereof, the Company and the Trustee may amend
or supplement this Indenture or the Exchange Debentures with the written
consent of the Holders of at least a majority in principal amount of the then
outstanding Exchange Debentures (including consents obtained in connection
with a tender offer or exchange offer for the Exchange Debentures). Subject to
Sections 6.04 and 6.07 hereof, the Holders of a majority in principal amount
of the Exchange Debentures then outstanding (including consents obtained in
connection with a tender offer or exchange offer for the Exchange
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Debentures) may also waive any existing Default or Event of Default (other
than a payment Default) and its consequences or compliance in a particular
instance by the Company with any provision of this Indenture or the Exchange
Debentures.
Upon the Company's request and after receipt by the Trustee of a
resolution of the Board of Directors authorizing the execution of any
supplemental indenture, evidence of the Holders' consent, and the documents
described in Section 9.06 hereof, the Trustee shall join with the Company in
the execution of such amended or supplemental indenture unless such amended or
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but not be obligated to, enter into such amended or supplemental
indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver,
but it shall be sufficient if such consent approves the substance thereof.
After an amendment or waiver under this Section becomes effective,
the Company shall mail to each Holder affected thereby a notice briefly
describing the amendment, supplement or waiver. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such amended or supplemental indenture or
waiver. Without the consent of each Holder affected, an amendment, supplement
or waiver under this Section may not (1) reduce the principal amount of
Exchange Debentures whose Holders must consent to an amendment, supplement or
waiver; (2) reduce the rate of or change the time for payment of interest,
including default interest as set forth in Section 4.01 hereof or alter the
redemption or purchase provisions with respect thereto (other than the
provisions of Sections 4.13 and 4.14 hereof) or the price at which the Company
is required to offer to purchase any Exchange Debenture; (3) reduce the
principal of or change the fixed maturity of any Exchange Debenture; (4) make
any Exchange Debenture payable in money other than that stated in the Exchange
Debenture; (5) make any change in Section 6.04 or 6.07 hereof or in this
sentence of this Section 9.02 hereof; or (6) waive a default in the payment of
the principal of, or premium, if any, or any accrued and unpaid interest on,
or redemption or purchase payment with respect to, any Exchange Debenture
(except a rescission of acceleration of the Exchange Debentures by the Holders
of at least a majority in aggregate principal amount of the then outstanding
Exchange Debentures and a waiver of the payment default that resulted from
such acceleration).
SECTION 9.03. COMPLIANCE WITH TIA.
Every amendment or supplement to this Indenture or the Exchange
Debentures shall be set forth in an amended supplemental indenture that
complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of an Exchange Debenture is a continuing consent by the
Holder and every subsequent Holder of an Exchange Debenture or portion of an
Exchange Debenture that evidences the same Indebtedness as the consenting
Holder's Exchange Debenture, even if notation of the consent is not made on
any Exchange Debenture. However, any such Holder or subsequent Holder may
revoke the consent as to his or her Exchange Debenture or portion of an
Exchange Debenture if the Trustee receives the notice of revocation before the
date on which the Trustee receives an Officer's Certificate certifying that
the Holders of the requisite principal amount of Exchange Debentures have
consented to the amendment or waiver.
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The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders of Exchange Debentures entitled to
consent to any amendment or waiver. If a record date is fixed, then,
notwithstanding the provisions of the immediately preceding paragraph, those
Persons who were Holders of Exchange Debentures at such record date (or their
duly designated proxies), and only those Persons, shall be entitled to consent
to such amendment or waiver or to revoke any consent previously given, whether
or not such Persons continue to be Holders of Exchange Debentures after such
record date. No consent shall be valid or effective for more than 90 days
after such record date unless consents from Holders of the principal amount of
Exchange Debentures required hereunder for such amendment or waiver to be
effective shall have also been given and not revoked within such 90-day
period.
After an amendment or waiver becomes effective it shall bind every
Holder, unless it is of the type described in any of clauses (1) through (6)
of Section 9.02 hereof. In such case, the amendment or waiver shall bind each
Holder who has consented to it and every subsequent Holder of an Exchange
Debenture that evidences the same debt as the consenting Holder's Exchange
Debenture.
SECTION 9.05. NOTATION ON OR EXCHANGE OF EXCHANGE DEBENTURES.
The Trustee may (at the Company's expense) place an appropriate
notation about an amendment, supplement or waiver on any Exchange Debenture
thereafter authenticated. The Company in exchange for all Exchange Debentures
may issue and the Trustee shall authenticate new Exchange Debentures that
reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Exchange
Debenture shall not affect the validity and effect of such amendment,
supplement or waiver.
SECTION 9.06. TRUSTEE PROTECTED.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if the amendment does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. If it
does, the Trustee may, but need not, sign it. In signing such amendment or
supplemental indenture, the Trustee shall be entitled to receive and, subject
to Section 7.01 hereof, shall be fully protected in relying upon, an Officers'
Certificate and Opinion of Counsel as conclusive evidence that such amendment
or supplemental indenture is authorized or permitted by this Indenture, that
it is not inconsistent herewith, and that it will be valid and binding upon
the Company in accordance with its terms. The Company may not sign an
amendment or supplemental indenture until the Board of Directors approves it.
SECTION 9.07. PAYMENT FOR CONSENTS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any holder
of Exchange Debentures for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of this Indenture or the Exchange
Debentures unless such consideration is offered to be paid or agreed to be
paid to all holders of the Exchange Debentures that consent, waive or agree to
amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
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ARTICLE 10
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting an Exchange
Debenture agrees, that the Indebtedness evidenced by each Exchange Debenture
is subordinated in right of payment, to the extent and in the manner provided
herein, to the prior payment in full of the principal of, and premium, if any,
and accrued and unpaid interest on, all existing and future Senior
Indebtedness (whether outstanding on the date hereof or hereafter created,
incurred, assumed or guaranteed) of the Company, and that the subordination is
for the benefit of the holders of such Senior Indebtedness.
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon (a) any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property or (b) an assignment for the benefit of creditors or any marshalling
of the Company's assets and liabilities:
(i) the holders of Senior Indebtedness shall be entitled to
receive payment in full of all Obligations due in respect of such
Senior Indebtedness (including interest after the commencement of any
such proceeding at the rate specified in the applicable Senior
Indebtedness) before Holders of the Exchange Debentures shall be
entitled to receive any payment with respect to the Exchange
Debentures (except that Holders of the Exchange Debentures may
receive securities that are subordinated, at least to the same extent
as the Exchange Debentures, to (A) Senior Indebtedness and (B) any
securities issued in exchange for Senior Indebtedness); and
(ii) until all Obligations with respect to Senior
Indebtedness (as provided in clause (i) above) are paid in full, any
distribution to which Holders of the Exchange Debentures would be
entitled but for this Article 10 shall be made to holders of Senior
Indebtedness (except that holders of the Exchange Debentures may
receive securities that are subordinated, at least to the same extent
as the Exchange Debentures, to (A) Senior Indebtedness and (B) any
securities issued in exchange for Senior Indebtedness), as their
interests may appear.
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS.
The Company shall not make any payment or distribution to
the Trustee or any Holder of Exchange Debentures upon or in respect of
Obligations with respect to the Exchange Debentures and may not acquire from
the Trustee or any Holder of Exchange Debentures any Exchange Debentures for
cash or property (other than securities that are subordinated, at least to the
same extent as the Exchange Debentures, to (A) Senior Indebtedness and (B) any
securities issued in exchange for Senior Indebtedness) until all principal and
other Obligations with respect to the Senior Indebtedness have been paid in
full if:
(a) a default in the payment of any principal, premium, if
any, interest or other Obligations with respect to any Designated
Senior Debt occurs and is continuing beyond any applicable grace
period in the agreement, indenture or other document governing such
Designated Senior Debt (whether upon maturity, as a result of
acceleration or otherwise); or
(b) any other default occurs and is continuing with respect
to any Designated Senior Debt that permits holders of such Designated
Senior Debt to accelerate its maturity, and the Company
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and the Trustee receive a notice of such default (a "Payment Blockage
Notice") from the holders, or from the trustee, agent or other
representative (the "Representative") of the holders, of any such
Designated Senior Debt. If the Trustee receives any such notice, a
subsequent notice received within 360 days thereafter shall not be
effective for purposes of this Section 10.03. No nonpayment default
that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice unless such default shall have
been cured or waived for a period of not less than 180 days.
The Company may and shall resume payments on and
distributions in respect of the Exchange Debentures and may acquire them upon
the earlier of:
(i) the date upon which the default is cured or waived, or
(ii) in the case of a default referred to in clause (b) of
this Section 10.03, 179 days after the date on which the applicable
Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt has been accelerated,
if this Article 10 otherwise permits such payment, distribution or acquisition
at the time of such payment or acquisition.
SECTION 10.04. ACCELERATION OF SECURITIES.
If payment of the Exchange Debentures is accelerated because
of an Event of Default, the Company shall promptly notify holders of Senior
Indebtedness of such acceleration.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder of Exchange
Debentures receives any payment of any Obligations with respect to the
Exchange Debentures at a time when a Trust Officer of the Trustee has actual
knowledge that such payment is prohibited by Section 10.03 hereof, such
payment shall be held by the Trustee or such Holder of Exchange Debentures in
trust for the benefit of, and shall be paid forthwith over and delivered upon
written request to, the holders of Senior Indebtedness (or their
Representative under the indenture or other agreement (if any) pursuant to
which Senior Indebtedness may have been issued), as their respective interests
may appear, for application to the payment of all Obligations with respect to
Senior Indebtedness remaining unpaid to the extent necessary to pay such
Obligations in full in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior
Indebtedness.
If a distribution is made to the Trustee or any Holder of
Exchange Debentures that because of this Article 10 should not have been made
to it, the Trustee or such Holder of Exchange Debentures who receives the
distribution shall hold it in trust for the benefit of, and upon written
request pay it over to, the holders of Senior Indebtedness (or their
Representative under the indenture or other agreement (if any) pursuant to
which Senior Indebtedness may have been issued), as their respective interests
may appear, for application to the payment of all Obligations with respect to
Senior Indebtedness remaining unpaid to the extent necessary to pay such
Obligations in full in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior
Indebtedness.
With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform only such obligations on the part of the Trustee
as are specifically set forth in this Article 10, and no
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implied covenants or obligations with respect to the holders of Senior
Indebtedness shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
Indebtedness, and shall not be liable to any such holders if the Trustee shall
pay over or distribute to or on behalf of Holders of Exchange Debentures or
the Company or any other Person money or assets to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article 10, except if such
payment is made as a result of the willful misconduct or gross negligence of
the Trustee.
SECTION 10.06. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying
Agent of any facts known to the Company that would cause a payment of any
Obligations with respect to the Exchange Debentures to violate this Article
10, but failure to give such notice shall not affect the subordination of the
Exchange Debentures to Senior Indebtedness as provided in this Article 10.
SECTION 10.07. SUBROGATION.
After all Senior Indebtedness is paid in full and until the
Exchange Debentures are paid in full, Holders of the Exchange Debentures shall
be subrogated (equally and ratably with all other Indebtedness pari passu with
the Exchange Debentures) to the rights of holders of Senior Indebtedness to
receive distributions applicable to Senior Indebtedness to the extent that
distributions otherwise payable to the Holders of the Exchange Debentures have
been applied to the payment of Senior Indebtedness. A distribution made under
this Article 10 to holders of Senior Indebtedness that otherwise would have
been made to Holders of the Exchange Debentures is not, as between the Company
and Holders of the Exchange Debentures, a payment by the Company on the
Exchange Debentures.
SECTION 10.08. RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of
the Exchange Debentures and holders of Senior Indebtedness. Nothing in this
Indenture shall:
(a) impair, as between the Company and Holders of the
Exchange Debentures, the obligation of the Company, which is absolute
and unconditional, to pay principal of and interest on the Exchange
Debentures in accordance with their terms;
(b) affect the relative rights of Holders of the Exchange
Debentures and creditors of the Company other than their rights in
relation to holders of Senior Indebtedness; or
(c) prevent the Trustee or any Holder of Exchange Debentures
from exercising its available remedies upon a Default or Event of
Default, subject to the rights of holders and owners of Senior
Indebtedness to receive distributions and payments otherwise payable
to Holders of the Exchange Debentures.
If the Company fails because of this Article 10 to pay
principal of or interest on an Exchange Debenture on the due date, such
failure shall still constitute a Default or Event of Default.
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SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Indebtedness to enforce the
subordination of the Indebtedness evidenced by the Exchange Debentures shall
be impaired by any act or failure to act by the Company or any Holder of the
Exchange Debentures or by the failure of the Company any Holder of the
Exchange Debentures to comply with this Indenture.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to
holders of Senior Indebtedness, the distribution may be made and the notice
given to their Representative.
Upon any payment or distribution of assets of the Company
referred to in this Article 10, the Trustee and the Holders of the Exchange
Debentures shall be entitled to rely upon any order or decree made by any
court of competent jurisdiction or upon any certificate of such Representative
or of the liquidating trustee or agent or other Person making any distribution
to the Trustee or to the Holders of the Exchange Debentures for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of the Senior Indebtedness and other Indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 10.
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any
other provision of this Indenture, the Trustee shall not be charged with
knowledge of the existence of any facts that would prohibit the making of any
payment or distribution by the Trustee, and the Trustee and the Paying Agent
may continue to make payments on the Exchange Debentures, unless the Trustee
shall have received, at least five Business Days prior to the date of such
payment, written notice of facts that would cause the payment of any
Obligations with respect to the Exchange Debentures to violate this Article
10. Only the Company or a Representative may give the notice. Nothing in this
Article 10 shall impair the claims of, or payments to, the Trustee under or
pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights.
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Exchange Debentures by such Holder's
acceptance thereof authorizes and directs the Trustee on such Holder's behalf
to take such action as may be necessary or appropriate to effectuate the
subordination as provided in this Article 10, and appoints the Trustee such
Holder's attorney-in-fact for any and all such purposes. If the Trustee does
not file a proper proof of claim or proof of debt in the form required in any
proceeding referred to in Section 6.09 hereof at least 30 days before the
expiration of the time to file such claim, the Representatives are hereby
authorized to file an appropriate claim for and on behalf of the Holders of
the Exchange Debentures.
SECTION 10.13. AMENDMENTS.
The provisions of this Article 10 (including the related definitions)
shall not be amended or modified without the written consent of the holders of
all Senior Indebtedness.
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ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of section 318(c) of the TIA, the imposed
duties shall control.
SECTION 11.02. NOTICES.
Any notice or communication by the Company or the Trustee to the
other is duly given if in writing and delivered in person, mailed by
registered or certified mail, postage prepaid, return receipt requested or
delivered by telecopier or overnight air courier guaranteeing next day
delivery to the other's address:
If to the Company:
AmeriKing, Inc.
2215 Enterprise Drive
Suite 1502
Westchester, Illinois 60154
Attention: Chief Financial Officer
Telecopier No.: (708) 947-2161
with a copy to:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: James B. Carlson, Esq.
Telecopier No.: (212) 262-1910
If to the Trustee:
[Address]
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; the date receipt is acknowledged, if mailed by
registered or certified mail; when answered back, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
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Any notice or communication to a Holder shall be mailed by
first-class mail to his or her address shown on the register kept by the
Registrar. Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to section 312(b) of the TIA with
other Holders with respect to their rights under this Indenture or the
Exchange Debentures. The Company, the Trustee, the Registrar and any other
Person shall have the protection of section 312(c) of the TIA.
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate (which shall include the statements
set forth in Section 11.05 hereof) stating that, in the
opinion of the signers, all conditions precedent and
covenants, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(b) an Opinion of Counsel (which shall include the statements
set forth in Section 11.05 hereof) stating that, in the
opinion of such counsel, all such conditions precedent
provided for in this Indenture relating to the proposed
action have been complied with.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to section 314(a)(4) of the TIA) shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in such Person's opinion, such
condition or covenant has been complied with.
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SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 11.07. LEGAL HOLIDAYS.
If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
SECTION 11.08. NO RECOURSE AGAINST OTHERS.
No officer, employee, director or stockholder of the Company shall
have any liability for any Obligations of the Company under the Exchange
Debentures or this Indenture, or for any claim based on, in respect of, or by
reason of, such Obligations or the creation of any such Obligation, except, in
the case of a Subsidiary, for an express guarantee or an express creation of
any Lien by such Subsidiary of the Company's Obligations under the Exchange
Debentures issued in accordance with this Indenture. Each Holder by accepting an
Exchange Debenture waives and releases all such liability, and such waiver and
release is part of the consideration for the issuance of the Exchange
Debentures.
SECTION 11.09. COUNTERPARTS.
This Indenture may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
SECTION 11.10. VARIABLE PROVISIONS.
The Company initially appoints the Trustee as Paying Agent, Registrar
and authenticating agent.
The first compliance certificate to be delivered by the Company to
the Trustee pursuant to Section 4.03 hereof shall be for the fiscal year
ending on January 1, 1997.
SECTION 11.11. GOVERNING LAW.
The internal laws of the State of New York shall govern this
Indenture and the Exchange Debentures, without regard to the conflict of laws
provisions thereof.
SECTION 11.12. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or any of its Subsidiaries, and no other
indenture, loan or debt agreement may be used to interpret this Indenture.
SECTION 11.13. SUCCESSORS.
All agreements of the Company in this Indenture and the Exchange
Debentures shall bind its successor. All agreements of the Trustee in this
Indenture shall bind its successor.
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SECTION 11.14. SEVERABILITY.
If any provision in this Indenture or in the Exchange Debentures
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 11.15. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table, and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
[NEXT PAGE IS THE SIGNATURE PAGE]
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Dated as of ____________, 1996 AMERIKING, INC.
By:_______________________________
Name:
Title:
Dated as of ___________, 1996 ______________________________
as Trustee
By:_______________________________
Name:
Title:
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EXHIBIT A
(Face of Exchange Debenture)
_% EXCHANGE DEBENTURE DUE 2008
No. $__________
CUSIP No.
AMERIKING, INC.
promises to pay to
or registered assigns,
the principal sum of __________________________
Dollars on ___________, 2008.
Interest Payment Dates: ____________ and ___________.
Record Dates: _____________ and ____________.
Dated: ____________, 1996
AMERIKING, INC.
By:______________________________
Name:
Title:
Trustee's Certificate of Authentication
Dated:_________________________
This is one of the [Global]
Exchange Debentures referred to in the
within-mentioned Indenture:
______________________,
as Trustee
By:_____________________________
(Authorized Signatory)
A-1
<PAGE>
[Unless and until it is exchanged in whole or in part for Exchange
Debentures in definitive form, this Exchange Debenture may not be transferred
except as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. The Depository Trust Company shall
act as the Depositary until a successor shall be appointed by the Company and
the Registrar. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the Issuer or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as may be requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as may be requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
Person IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.]1
Additional provisions of this Exchange Debenture are set forth on the
other side of this Exchange Debenture.
- --------
1 This paragraph should be included only if the Senior Note is issued in
global form.
A-2
<PAGE>
(Back of Exchange Debenture)
__% EXCHANGE DEBENTURE DUE 2008
1. INTEREST. AmeriKing, Inc. (the "Company") promises to pay interest
on the principal amount of the Exchange Debentures at the rate and in the
manner specified below. Interest on the Exchange Debentures will accrue at __%
per annum from the date this Exchange Debenture is issued until maturity.
Interest will be payable semiannually in cash (or, on or prior to _________,
in additional Exchange Debentures, at the option of the Company) in arrears on
________ and _________ of each year, commencing with the first such date after
the Exchange Debenture Issue Date, or if any such day is not a Business Day on
the next succeeding Business Day (each, an "Interest Payment Date"). Interest
will accrue from the most recent date on which interest has been paid or, if
no interest has been paid, from the date of original issuance. The Company
shall pay interest on overdue principal and premium, if any, from time to time
on demand at the rate of 2% per annum in excess of the interest rate then in
effect and shall pay interest on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the
same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Exchange
Debentures (except defaulted interest) to the Persons who are registered
holders of Exchange Debentures at the close of business on the record date for
the next Interest Payment Date even if such Exchange Debentures are cancelled
after such record date and on or before such Interest Payment Date. On or
prior to ___________, interest shall be payable, at the option of the Company,
in (i) cash, (ii) additional Exchange Debentures with a principal amount equal
to such interest or (iii) in any combination of (i) and (ii). Any amount not
in denominations of $1,000 or integral multiples thereof, shall, at the
Company's option, be payable in cash or additional Exchange Debentures in
denominations of less than $1,000. After __________, interest shall be paid
only in cash. Holders must surrender Exchange Debentures to a Paying Agent to
collect principal payments on such Exchange Debentures. The Company will pay
principal, premium, if any, and (except as provided above) interest, in money
of the United States that at the time of payment is legal tender for payment
of public and private debts. The Company will pay principal, premium, if any,
and, to the extent paid in cash, interest, by wire transfer of immediately
available funds to the accounts specified by the Holders or, if no such
account is specified, by mailing a check to each such Holder's registered
address; provided that payment by wire transfer of immediately available funds
will be required with respect to principal, premium, if any, and, to the
extent paid in cash, interest, on all Global Exchange Debentures.
3. PAYING AGENT AND REGISTRAR. ____________________ (the "Trustee")
will initially act as the Paying Agent and Registrar. The Company may appoint
additional paying agents or co-registrars, and change the Paying Agent, any
additional paying agent, the Registrar or any co-registrar without prior
notice to any Holder. The Company or any of its Subsidiaries may act in any
such capacity.
4. INDENTURE. The Company issued the Exchange Debentures under an
Indenture, dated as of ___________, 1996 (the "Indenture"), among the Company
and the Trustee. The terms of the Exchange Debentures include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the
Exchange Debenture Issue Date (the "Trust Indenture Act"). The Exchange
Debentures are subject to, and qualified by, all such terms, certain of which
are summarized herein, and Holders are referred to the Indenture and the Trust
Indenture Act for a statement of such terms (all capitalized terms not defined
herein shall have the meanings assigned them in the Indenture). The Exchange
Debentures are unsecured
A-3
<PAGE>
senior obligations of the Company limited in aggregate principal amount to the
aggregate liquidation preference of the Preferred Stock, plus accrued and
unpaid dividends, on the Exchange Debenture Issue Date (plus any additional
Exchange Debentures issued in lieu of cash interest as described in paragraph
2 above).
5. OPTIONAL REDEMPTION. (a) Except as described in paragraph 5(b)
below, the Exchange Debentures may not be redeemed at the option of the
Company prior to ___________, 2001. During the twelve (12) month period
beginning ___________ of the years indicated below, the Exchange Debentures
will be redeemable at the option of the Company, in whole or in part, on at
least 30 but not more than 60 days' notice to each Holder of Exchange
Debentures to be redeemed, at the redemption prices (expressed as percentages
of the principal amount) set forth below, plus any accrued and unpaid interest
to the date of redemption:
Year Percentage
---- ----------
(b) Notwithstanding the foregoing, the Company may (but shall not
have the obligation to), at any time, redeem Exchange Debentures in whole, but
not in part, at a redemption price of ___% of the principal amount thereof,
plus accrued and unpaid interest to the redemption date, with the net proceeds
of a public offering of common stock of the Company; provided that such
redemption shall occur within 60 days of the date of the closing of such
public offering.
6. MANDATORY REDEMPTION. Subject to the Company's obligation to make
an offer to purchase Exchange Debentures under certain circumstances pursuant
to Sections 4.13 and 4.14 of the Indenture (as described in paragraph 7
below), the Company is not required to make any mandatory redemption, purchase
or sinking fund payments with respect to the Exchange Debentures.
7. MANDATORY OFFERS TO PURCHASE EXCHANGE DEBENTURES. (a) Upon the
occurrence of a Change of Control Triggering Event (such date being the
"Change of Control Trigger Date"), each Holder of Exchange Debentures shall
have the right to require the Company to purchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Exchange Debentures
pursuant to an offer (a "Change of Control Offer") at a purchase price in cash
equal to 101% of the aggregate principal amount thereof, plus any accrued and
unpaid interest to the date of purchase.
(b) If the Company or any Restricted Subsidiary consummates one or
more Asset Sales and does not use all of the Net Proceeds from such Asset
Sales as provided in the Indenture, the Company will be required, under
certain circumstances, to utilize the Excess Proceeds from such Asset Sales to
offer (an "Asset Sale Offer") to purchase Exchange Debentures at a purchase
price equal to 100% of the principal amount of the Exchange Debentures, plus
any accrued and unpaid interest to the date of purchase. If the Excess
Proceeds are insufficient to purchase all Exchange Debentures tendered
pursuant to any Asset Sale Offer, the Trustee shall select the Exchange
Debentures to be purchased in accordance with the terms of the Indenture.
(c) Holders may tender all or, subject to paragraph 8 below, any
portion of their Exchange Debentures in a Change of Control Offer or Asset
Sale Offer (collectively, an "Offer") by completing the form below entitled
"OPTION OF HOLDER TO ELECT PURCHASE."
A-4
<PAGE>
(d) The Indenture provides that the Company will comply with any
tender offer rules under the Exchange Act which may then be applicable,
including Rule 14e-1, in connection with an Offer required to be made by the
Company to repurchase the Exchange Debentures as a result of a Change of
Control Trigger Date or an Asset Sale Trigger Date. To the extent that the
provisions of any securities laws or regulations conflict with provisions of
the Indenture, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
the Indenture by virtue thereof.
8. NOTICE OF REDEMPTION OR PURCHASE. Notice of an optional redemption
or an Offer will be mailed to each Holder at its registered address at least
30 days but not more than 60 days before the date of redemption or purchase.
Exchange Debentures may be redeemed or purchased in part, but only in whole
multiples of $1,000 unless all Exchange Debentures held by a Holder are to be
redeemed or purchased. On or after any date on which Exchange Debentures are
redeemed or purchased, interest ceases to accrue on the Exchange Debentures or
portions thereof called for redemption or accepted for purchase on such date.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Exchange Debentures are in
registered form without coupons in denominations of $1,000 and integral
multiples thereof; provided, however, that in connection with the payment of
interest on the Exchange Debentures in additional Exchange Debentures and the
original issuance of Exchange Debentures hereunder in exchange for shares of
the Preferred Stock, the Company may elect to pay any amount remaining after
issuance of Exchange Debentures in denominations of $1,000 and/or integral
multiples thereof, in cash or in additional Exchange Debentures in
denominations of less than $1,000. The transfer of Exchange Debentures may be
registered and Exchange Debentures may be exchanged as provided in the
Indenture. Holders seeking to transfer or exchange their Exchange Debentures
may be required, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted
by the Indenture. The Registrar need not exchange or register the transfer of
any Exchange Debenture or portion of an Exchange Debenture selected for
redemption or tendered pursuant to an Offer. Also, it need not exchange or
register the transfer of any Exchange Debentures for a period of 15 Business
Days before a selection of Exchange Debentures to be redeemed or between a
record date and the next succeeding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of an Exchange
Debenture may be treated as its owner for all purposes.
11. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the
Indenture or the Exchange Debentures may be amended or supplemented with the
written consent of the Holders of at least a majority in principal amount of
the then outstanding Exchange Debentures, and any existing Default or Event of
Default (except a payment Default) may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Exchange
Debentures. Without the consent of any Holder, the Indenture or the Exchange
Debentures may be amended to: cure any ambiguity, defect or inconsistency;
provide for uncertificated Exchange Debentures in addition to or in place of
certificated Exchange Debentures; provide for the assumption by another
corporation of the Company's obligations to Holders in the event of a merger
or consolidation of the Company in which the Company is not the surviving
corporation or a sale of substantially all of the Company's assets to such
other corporation; comply with the Securities and Exchange Commission's
requirements to effect or maintain the qualification of the Indenture under
the Trust Indenture Act; provide for guarantees with respect to the Exchange
Debentures; or, make any change that does not materially adversely affect any
Holder's rights under the Indenture. Notwithstanding the foregoing, the
provisions of the Indenture relating to
A-5
<PAGE>
subordination shall not be amended or modified without the written consent of
the holders of all Senior Indebtedness.
12. DEFAULTS AND REMEDIES. Events of Default include: default for 30
days in payment of interest on the Exchange Debentures; default in payment of
principal of, or premium, if any, on the Exchange Debentures; subject to
certain exceptions, failure by the Company for 30 days after notice to it to
comply with any of its other agreements or covenants in, or provisions of, the
Indenture or the Exchange Debentures; certain defaults under and acceleration
prior to maturity of, or failure to pay at maturity, certain other
Indebtedness; certain final judgments that remain undischarged; and certain
events of bankruptcy or insolvency involving the Company or any Restricted
Subsidiary that is a Significant Subsidiary. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount
of the Exchange Debentures may declare all the Exchange Debentures to be
immediately due and payable in an amount equal to the principal of, premium,
if any, and any accrued and unpaid interest on, such Exchange Debentures;
provided, however, that in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, the principal of, premium, if any,
and any accrued and unpaid interest on, the Exchange Debentures becomes due
and payable immediately without further action or notice. Subject to certain
exceptions, Holders of a majority in principal amount of the then outstanding
Exchange Debentures may direct the Trustee in its exercise of any trust or
power, provided that the Trustee will be under no obligation to exercise any
of its rights or powers under the Indenture at the request of Holders unless
such Holders have offered to the Trustee security and indemnity satisfactory
to it. Holders may not enforce the Indenture or the Exchange Debentures except
as provided in the Indenture. The Trustee may withhold from Holders notice of
any continuing default (except a payment Default) if it determines that
withholding notice is in their interests. The Company must furnish an annual
compliance certificate to the Trustee.
14. SUBORDINATION. Each Holder by accepting an Exchange Debenture
agrees that the Indebtedness evidenced by each Exchange Debenture is
subordinated in right of payment, to the extent and in the manner provided in
the Indenture, to the prior payment in full of the principal of, and premium
if any, and accrued and unpaid interest on, all existing and future Senior
Indebtedness (whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed or guaranteed), and that the subordination is for
the benefit of the holders of Senior Indebtedness.
15. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee, in its individual
or any other capacity, may make loans to, accept deposits from, and perform
services for the Company or any Affiliate, and may otherwise deal with the
Company or any Affiliate, as if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS. No officer, employee, director or
stockholder of the Company shall have any liability for any Obligations of the
Company under the Exchange Debentures or the Indenture, or for any claim based
on, in respect of, or by reason of, such Obligations or the creation of any
such Obligation, except, in the case of a Subsidiary, for an express guarantee
or an express creation of any Lien by such Subsidiary of the Company's
Obligations under the Exchange Debentures. Each Holder by accepting an
Exchange Debenture waives and releases all such liability, and such waiver and
release is part of the consideration for the issuance of the Exchange
Debentures.
17. SUCCESSOR SUBSTITUTED. Upon the consolidation or merger by the
Company with or into another corporation, or upon the sale, lease, conveyance
or other disposition of all or substantially all of its assets to another
corporation, in accordance with the Indenture, the corporation surviving any
such merger or consolidation (if not the Company) or the corporation to which
such assets were sold or transferred to shall succeed to, and be substituted
for, and may exercise every right and power of the
A-6
<PAGE>
Company under the Indenture with the same effect as if such surviving or other
corporation had been named as the Company in the Indenture.
18. GOVERNING LAW. This Exchange Debenture shall be governed by and
construed in accordance with the internal laws of the State of New York
without regard to the conflict of laws provisions thereof.
19. AUTHENTICATION. This Exchange Debenture shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
20. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (=Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Exchange Debenture Identification Procedures, the Company
has caused CUSIP numbers to be printed on the Exchange Debentures and have
directed the Trustee to use CUSIP numbers in notices of redemption as a
convenience to Holders. No representation is made as to the accuracy of such
numbers either as printed on the Exchange Debentures or as contained in any
notice of redemption and reliance may be placed only on the other
identification numbers printed on the Exchange Debentures.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture, which has in it the text of this
Exchange Debenture in larger type. Request may be made to:
AmeriKing, Inc.
2215 Enterprise Drive, Suite 1502
Westchester, Illinois 60154
Attention: Chief Financial Officer
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<PAGE>
ASSIGNMENT FORM
To assign this Exchange Debenture, fill in the form below: (I) or (we) assign
and transfer this Exchange Debenture to:
- ------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ______________________________________________________
________________________________ as agent to transfer this Exchange Debenture
on the books of the Company. The agent may substitute another to act for him.
Date: ___________________________ Your Signature: ____________________________
(Sign exactly as your name
appears on the face of this
Exchange Debenture)
Signature Guarantee:
____________________________
A-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you elect to have this Exchange Debenture purchased by the Company
pursuant to Section 4.13 of the Indenture, check the box: [ ]
If you elect to have this Exchange Debenture purchased by the Company
pursuant to Section 4.14 of the Indenture, check the box: [ ]
If you elect to have only part of this Exchange Debenture purchased
by the Company pursuant to Section 4.13 or 4.14 of the Indenture, state the
amount (multiples of $1000 only):
$____________________________
Date:___________________________ Your Signature:______________________________
(Sign exactly as your name
appears on the face of this
Exchange Debenture)
Signature Guarantee:
______________________________
A-9
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE EXCHANGE DEBENTURES(2)
The following exchanges of a part of this Global Exchange
Debenture for Definitive Exchange Debentures have been made:
<TABLE>
<CAPTION>
Amount of decrease Principal Amount of Signature of
in Principal Amount Amount of increase in this Global Exchange authorized officer of
Date of of this Global Principal Amount of this Debenture following such Trustee or Exchange
Exchange Exchange Debenture Global Exchange Debenture decrease (or increase) Debenture Custodian
- -------- ------------------ ------------------------- ------------------------ --------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------------------------
(2) This should be included only if the Senior Note is issued in global form.
A-10
AMERIKING, INC.
CERTIFICATE OF DESIGNATION OF THE POWERS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF % SENIOR
EXCHANGEABLE PREFERRED STOCK AND QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS THEREOF
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
AmeriKing, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does
hereby certify that, pursuant to authority conferred upon the board of
directors of the Company (the "Board of Directors") by its Amended and
Restated Certificate of Incorporation (hereinafter referred to as the
"Certificate of Incorporation"), and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said Board of
Directors, by unanimous written consent dated _________, 1996, duly approved
and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the
Board of Directors by its Certificate of Incorporation, the Board of
Directors does hereby create, authorize and provide for the issue of
___% Senior Exchangeable Preferred Stock, par value $0.01 per share,
with a liquidation preference of $25.0 per share, consisting of up
to ________ shares, having the designations, preferences, relative,
participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set
forth in the Certificate of Incorporation and in this Resolution as
follows:
(a) Designation. There is hereby created out of the
authorized and unissued shares of preferred stock of the Company a series of
preferred stock designated as the "___% Senior Exchangeable Preferred Stock"
(the "Senior Preferred Stock"). The number of shares constituting such series
shall be _________ shares of Senior Preferred Stock, consisting of an initial
issuance of _________ shares of Senior Preferred Stock plus additional shares
of Senior Preferred Stock which may be issued to pay dividends on the Senior
Preferred Stock if the Company elects to pay dividends in additional shares of
Senior Preferred Stock. The liquidation preference of the Senior Preferred
Stock shall be $25.0 per share.
(b) Rank. The Senior Preferred Stock shall, with respect to
dividend distributions and distributions upon the liquidation, winding-up and
dissolution of the Company, rank senior to all classes of common stock of the
Company and to each other class of capital stock or series of preferred stock
hereafter created by the Board of Directors the terms of which do not
expressly provide that it ranks senior to or on a parity with the Senior
Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up and dissolution of the Company (collectively referred
to with the common stock of the Company as "Junior Securities"). The Senior
Preferred Stock shall, with respect to dividend
<PAGE>
distributions and distributions upon the liquidation, winding up and
dissolution of the Company, rank on a parity with any class of capital stock
or series of preferred stock hereafter created by the Board of Directors, the
terms of which expressly provide that such class or series shall rank on a
parity with the Senior Preferred Stock as to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of the Company
(collectively referred to as "Parity Securities"); provided that any such
Parity Securities that were not approved by the Holders in accordance with
paragraph (f)(ii)(A) hereof shall be deemed to be Junior Securities and not
Parity Securities. The Senior Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding up and
dissolution of the Company, rank junior to each class of capital stock or
series of preferred stock hereafter created which has been approved by the
Holders of the Senior Preferred Stock in accordance with paragraph (f)(ii)(B)
and which expressly provides that it ranks senior to the Senior Preferred
Stock as to dividend distributions or distributions upon the liquidation,
winding up and dissolution of the Company (collectively referred to as "Senior
Securities").
(c) Dividends.
(i) Beginning on the date of issuance of shares of the
Senior Preferred Stock, the Holders of the outstanding shares of
Senior Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available
therefor, distributions on each share of Senior Preferred Stock, at a
rate per annum equal to % of the liquidation preference per share of
the Senior Preferred Stock, payable quarterly. All dividends shall be
cumulative, whether or not earned or declared on a daily basis from
the Senior Preferred Stock Issue Date and shall be payable quarterly in
arrears on each Dividend Payment Date, commencing on the first
Dividend Payment Date after the Senior Preferred Stock Issue Date,
provided that if any dividend payable on any Dividend Payment Date on
or before _________ is not declared and paid in full in cash on such
Dividend Payment Date, the amount payable as dividends on such
Dividend Payment Date that is not paid in cash (including partial
payments in cash) on such Dividend Payment Date shall be paid by the
Company in additional fully paid and non-assessable shares (including
fractional shares, if applicable) of Senior Preferred Stock having an
aggregate liquidation preference equal to the amount of such
dividends (rounded to the nearest whole cent). After ____________,
dividends shall be paid only in cash. If any dividend (or portion
thereof) payable on any Dividend Payment Date after ______________ is
not declared or paid in full in cash on such Dividend Payment Date,
the amount of such dividend that is payable and that is not paid in
cash on such date shall increase at the rate of ___% per annum from
such Dividend Payment Date until declared and paid in full. Each
distribution in the form of a dividend (whether in cash or in
additional shares of Senior Preferred Stock) shall be payable to
Holders of record as they appear on the stock books of the Company on
such record dates, not less than 10 nor more than 60 days preceding
the related Dividend Payment Date, as shall be fixed by the Board of
Directors. Dividends shall cease to accumulate in respect of shares
of the Senior Preferred Stock on the Exchange Date or on the date of
their earlier redemption unless the Company shall have failed to
issue the appropriate aggregate principal amount of Exchange
Debentures (as defined in paragraph (g)(i)(A) hereof) in respect of
the Senior Preferred Stock on the Exchange Date or shall have failed
to pay the relevant redemption price on the date fixed for
redemption.
(ii) All dividends paid with respect to shares of the Senior
Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata
to the Holders entitled thereto.
2
<PAGE>
(iii) Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of
Directors to declare, or the Company to pay or set apart for payment,
any dividends on shares of the Senior Preferred Stock at any time.
(iv) Dividends on account of arrears for any past Dividend
Period and dividends in connection with any optional redemption
pursuant to paragraph (e)(i) may be declared and paid at any time,
without reference to any regular Dividend Payment Date, to Holders of
record on such date, not more than 45 days prior to the payment
thereof, as may be fixed by the Board of Directors.
(v) No full dividends shall be declared by the Board of
Directors or paid or funds set apart for payment of dividends by the
Company on any Parity Securities for any period unless full
cumulative dividends shall have been or contemporaneously are
declared and paid in full, or declared and (in the case of dividends
payable in cash) a sum in cash set apart sufficient for such payment,
on the Senior Preferred Stock for all Dividend Periods terminating on
or prior to the date of payment of such full dividends on such Parity
Securities. If any dividends are not paid in full, as aforesaid, upon
the shares of the Senior Preferred Stock and any other Parity
Securities, all dividends declared upon shares of the Senior
Preferred Stock and any other Parity Securities shall be declared pro
rata so that the amount of dividends declared per share on the Senior
Preferred Stock and such Parity Securities shall in all cases bear to
each other the same ratio that accrued dividends per share on the
Senior Preferred Stock and such Parity Securities bear to each other.
(vi) (A) Holders of shares of the Senior Preferred Stock
shall be entitled to receive the dividends provided for in paragraph
(c)(i) hereof in preference to and in priority over any dividends
upon any of the Junior Securities.
(B) So long as any shares of Senior Preferred Stock are
outstanding, the Company shall not declare, pay or set apart for
payment any dividend on any of the Junior Securities or make any
payment on account of, or set apart for payment money for a sinking
or other similar fund for, the purchase, redemption or other
retirement of, any of the Junior Securities or any warrants, rights,
calls or options exercisable for or convertible into any of the
Junior Securities, or make any distribution in respect thereof,
either directly or indirectly, and whether in cash, obligations or
shares of the Company or other property (other than distributions or
dividends in Junior Securities to the holders of Junior Securities),
and shall not permit any corporation or other entity directly or
indirectly controlled by the Company to purchase or redeem any of the
Junior Securities or any such warrants, rights, calls or options
unless full cumulative dividends determined in accordance herewith
have been paid in full on the Senior Preferred Stock.
(C) So long as any shares of the Senior Preferred Stock are
outstanding, the Company shall not make any payment on account of, or
set apart for payment money for a sinking or other similar fund for,
the purchase, redemption or other retirement of, any of the Parity
Securities or any warrants, rights, calls or options exercisable for
or convertible into any of the Parity Securities, and shall not
permit any corporation or other entity directly or indirectly
controlled by the Company to purchase or redeem any of the Parity
Securities or any such warrants, rights, calls or options unless the
dividends determined in accordance herewith on the Senior Preferred
Stock have been paid in full.
3
<PAGE>
(vii) Dividends payable on shares of the Senior Preferred
Stock for any period less than a year shall be computed on the basis
of a 360-day year of twelve 30-day months and the actual number of
days elapsed in the period for which payable. If any Dividend Payment
Date occurs on a day that is not a Business Day, any accrued
dividends otherwise payable on such Dividend Payment Date shall be
paid on the next succeeding Business Day.
(d) Liquidation Preference.
(i) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, the Holders
of shares of Senior Preferred Stock then outstanding shall be
entitled to be paid, out of the assets of the Company available for
distribution to its stockholders, $25.0 per share of Senior
Preferred Stock, plus an amount in cash equal to all accumulated and
unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding up (including an amount equal to a prorated
dividend for the period from the last Dividend Payment Date to the
date fixed for liquidation, dissolution or winding up), before any
payment shall be made or any assets distributed to the holders of any
of the Junior Securities, including, without limitation, common stock
of the Company. Except as provided in the preceding sentence, Holders
of shares of Senior Preferred Stock shall not be entitled to any
distribution in the event of liquidation, dissolution or winding up
of the affairs of the Company. If the assets of the Company are not
sufficient to pay in full the liquidation preference payable to the
Holders of outstanding shares of the Senior Preferred Stock and all
Parity Securities, then the holders of all such shares shall share
equally and ratably in such distribution of assets of the Company in
accordance with the amounts which would be payable on such
distribution if the amount to which the Holders of outstanding shares
of Senior Preferred Stock and the holders of outstanding shares of
all Parity Securities are entitled were paid in full.
(ii) For the purposes of this paragraph (d), neither the
sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the
property or assets of the Company nor the consolidation or merger of
the Company with or into one or more corporations shall be deemed to
be a liquidation, dissolution or winding up of the affairs of the
Company (unless such sale, conveyance, exchange or transfer is in
connection with a dissolution or winding up of the business of the
Company).
(e) Redemption.
(i) Optional Redemption. (A) The Company may (subject to
contractual and other restrictions with respect thereto and the legal
availability of funds therefor), at the option of the Board of
Directors, redeem at any time on or after , 2001, from
any source of funds legally available therefor, in whole or in part,
in the manner provided in paragraph (e)(iii) hereof, any or all of
the shares of the Senior Preferred Stock, at the redemption prices
(expressed as a percentage of the liquidation preference thereof) set
forth below plus, without duplication, an amount in cash equal to all
accumulated and unpaid dividends per share (including an amount in cash
equal to a prorated dividend for the period from the Dividend Payment
Dateimmediately prior to the Redemption Date to the Redemption Date)
(the "Optional Redemption Price"), if redeemed during the 12-month
period beginning on of each of the years indicated below:
4
<PAGE>
Year Percentage
---- ----------
2001............................................. %
2002............................................. %
2003............................................. %
2004............................................. 100.000%
; provided that no optional redemption pursuant to this paragraph
(e)(i)(A) shall be authorized or made (i) unless prior thereto full
unpaid cumulative dividends for all Dividend Periods terminating on
or prior to the Redemption Date and for an amount equal to a prorated
dividend for the period from the Dividend Payment Date immediately
prior to the Redemption Date to the Redemption Date shall have been
or immediately prior to the Redemption Notice (as defined in
paragraph (e)(iii)(A) hereof) are declared and paid in cash or
declared and a sum set apart sufficient for such cash payment on the
Redemption Date, on the Senior Preferred Stock or (ii) at less than
101% of the liquidation preference of the Senior Preferred Stock at
any time when the Company is making or purchasing shares of Senior
Preferred Stock under an Offer (as defined in paragraph (h)(ii)
hereof) in accordance with the provisions of paragraph (h) hereof.
(B) In addition, at any time, the Company may redeem, in
the manner provided in paragraph (e)(iii) hereof, shares of the
Senior Preferred Stock in whole, but not in part, at a redemption
price equal to % of the liquidation preference thereof, plus an
amount in cash equal to all accumulated and unpaid dividends per
share (including an amount in cash equal to a prorated dividend for
the period from the Dividend Payment Date immediately prior to the
Redemption Date to the Redemption Date) (the "Contingent Redemption
Price"), with the proceeds of an Equity Offering provided that such
redemption occurs within 90 days after consummation of such Equity
Offering; and provided, further, that no optional redemption pursuant
to this paragraph (e)(i)(B) shall be authorized or made (i) unless
prior thereto full unpaid cumulative dividends for all Dividend Periods
terminating on or prior to the Redemption Date and for an amount equal
to a prorated dividend for the period from the Dividend Payment Date
immediately prior to the Redemption Date to the Redemption Date shall
have been or immediately prior to the Redemption Notice are declared
and paid in full or declared and a sum set apart sufficient for such
payment on the Redemption Date, on the outstanding shares of the Senior
Preferred Stock or (ii) at less than 101% of the liquidation
preference of the Senior Preferred Stock at any time when the Company
is making or purchasing shares of Senior Preferred Stock under an
Offer in accordance with the provisions of paragraph (h) hereof.
(C) In the event of a redemption pursuant to paragraph
(e)(i)(A) hereof of only a portion of the then outstanding shares of
the Senior Preferred Stock, the Company shall effect such redemption
as it determines, pro rata according to the number of shares held by
each Holder of the Senior Preferred Stock or by lot, as may be
determined by the Company in its sole discretion.
(ii) Mandatory Redemption. On , 2008, the Company
shall redeem from any source of funds legally available therefor, in
the manner provided in paragraph (e)(iii) hereof, all of the shares of
the Senior Preferred Stock then outstanding at a redemption price
equal to 100% of the liquidation preference per share, plus an amount
in cash equal to all accumulated and unpaid dividends per share
(including an amount equal to a prorated dividend for the period
5
<PAGE>
from the Dividend Payment Date immediately prior to the Redemption
Date to the Redemption Date) (the "Mandatory Redemption Price").
(iii) Procedures for Redemption. (A) At least 30 days and
not more than 60 days prior to the date fixed for any redemption of
the Senior Preferred Stock, written notice (the "Redemption Notice")
shall be given by first-class mail, postage prepaid, to each Holder
of record on the record date fixed for such redemption of the Senior
Preferred Stock at such Holder's address as the same appears on the
stock register of the Company, provided that no failure to give such
notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Senior Preferred Stock
to be redeemed except as to the Holder or Holders to whom the Company
has failed to give said notice or except as to the Holder or Holders
whose notice was defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)(i)(A),
(e)(i)(B) or (e)(ii) hereof;
(2) the Optional Redemption Price, the Contingent Redemption Price
or the Mandatory Redemption Price, as the case may be;
(3) whether all or less than all the outstanding shares of the
Senior Preferred Stock are to be redeemed and the total number
of shares of the Senior Preferred Stock being redeemed;
(4) the number of shares of Senior Preferred Stock held, as of the
appropriate record date, by the Holder that the Company intends
to redeem;
(5) the date fixed for redemption;
(6) that the Holder is to surrender to the Company, at the place or
places where certificates for shares of Senior Preferred Stock
are to be surrendered for redemption, in the manner and at the
price designated, his certificate or certificates representing
the shares of Senior Preferred Stock to be redeemed; and
(7) that dividends on the shares of the Senior Preferred Stock to
be redeemed shall cease to accrue on such Redemption Date
unless the Company defaults in the payment of the Optional
Redemption Price, the Contingent Redemption Price or the
Mandatory Redemption Price, as the case may be.
(B) Each Holder of Senior Preferred Stock shall surrender
the certificate or certificates representing such shares of Senior
Preferred Stock to the Company, duly endorsed, in the manner and at
the place designated in the Redemption Notice, and on the Redemption
Date the full Optional Redemption Price, Contingent Redemption Price
or Mandatory Redemption Price, as the case may be, for such shares
shall be payable in cash to the Person whose name appears on such
certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled and retired. In the event
that less than all of the shares represented by any such certificate
are redeemed, a new certificate shall be issued representing the
unredeemed shares.
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(C) Unless the Company defaults in the payment in full of
the applicable redemption price, dividends on the Senior Preferred
Stock called for redemption shall cease to accumulate on the
Redemption Date, and the Holders of such redemption shares shall
cease to have any further rights with respect thereto on the
Redemption Date, other than the right to receive the Optional
Redemption Price, the Contingent Redemption Price or the Mandatory
Redemption Price, as the case may be, without interest.
(f) Voting Rights.
(i) The Holders of shares of the Senior Preferred Stock,
except as otherwise required under Delaware law or as set forth in
paragraphs (ii) and (iii) below and in paragraph (m) hereof, shall
not be entitled or permitted to vote on any matter required or
permitted to be voted upon by the stockholders of the Company.
(ii) (A) So long as any shares of the Senior Preferred Stock
are outstanding, the Company shall not authorize any class of Parity
Securities without the affirmative vote or consent of Holders of at
least 50% of the outstanding shares of Senior Preferred Stock,
voting or consenting, as the case may be, separately as one class,
given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting, except that without the
approval of Holders of the Senior Preferred Stock, the Company may
issue shares of Parity Securities in exchange for, or the proceeds of
which are used to redeem or repurchase, any or all shares of Senior
Preferred Stock then outstanding, provided that (1) in the case of
Parity Securities issued in exchange for, or the proceeds of which
are used to redeem or repurchase, less than all shares of Senior
Preferred Stock then outstanding, the aggregate liquidation
preference of such Parity Securities shall not exceed the aggregate
liquidation preference of, premium and accrued and unpaid dividends
on, and expenses in connection with the refinancing of, the Senior
Preferred Stock so exchanged, redeemed or repurchased and (2) such
Parity Securities shall not be mandatorily redeemable prior to
____________, 2008.
(B) So long as any shares of the Senior Preferred Stock are
outstanding, the Company shall not authorize any class of Senior
Securities without the affirmative vote or consent of Holders of at
least 50% of the outstanding shares of Senior Preferred Stock,
voting or consenting, as the case may be, separately as one class,
given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting.
(C) So long as any shares of the Senior Preferred Stock are
outstanding, the Company shall not amend this Certificate of
Designation so as to affect adversely the specified rights,
preferences, privileges or voting rights of Holders of shares of
Senior Preferred Stock or to authorize the issuance of any additional
shares of Senior Preferred Stock without the affirmative vote or
consent of Holders of at least 50% of the outstanding shares of
Senior Preferred Stock, voting or consenting, as the case may be,
separately as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting.
(D) Prior to the exchange of Senior Preferred Stock for
Exchange Debentures, the Company shall not amend or modify the
indenture for the Exchange Debentures in the form as executed on the
Senior Preferred Stock Issue Date (the "Exchange Debenture Indenture")
(except as expressly provided therein) without the affirmative vote
or consent of Holders of at least a majority
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of the shares of Senior Preferred Stock then outstanding, voting or
consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or
special meeting.
(E) Except as set forth in paragraphs (f)(ii)(A) and
(f)(ii)(B) above, (1) the creation, authorization or issuance of any
shares of any Junior Securities, Parity Securities or Senior
Securities, or (2) the increase or decrease in the amount of
authorized capital stock of any class, including any preferred stock,
shall not require the consent of Holders of Senior Preferred Stock
and shall not, unless not complying with paragraphs (f)(ii)(A) and
(f)(ii)(B) above, be deemed to affect adversely the rights,
preferences, privileges or voting rights of Holders of shares of
Senior Preferred Stock.
(iii) (A) If (1) dividends on the Senior Preferred Stock are
in arrears and unpaid (and, in the case of dividends payable after
________, 2001, are not paid in cash) for four consecutive quarterly
periods (a "Dividend Default"); (2) the Company fails to discharge any
redemption obligation of the Senior Preferred Stock when required (a
"Redemption Default"), whether or not the Company is permitted to do so
by the terms of the Indenture, the Credit Agreement or any other
obligation of the Company; (3) the Company fails to make an offer to
purchase all outstanding shares of Senior Preferred Stock following a
Change of Control if such offer to purchase is required to be made
pursuant to paragraph (h) hereof (a "Change of Control Default")
whether or not the Company is permitted to do so by the terms of the
Indenture, the Credit Agreement or any other obligation of the Company;
(4) the Company breaches or violates one of the provisions set forth in
paragraph (m) hereof and the breach or violation continues for a period
of 30 days or more (a "Restriction Default"); or (5) a default occurs
on the obligation to pay principal of, interest on or any other
payment obligation when due (a "Payment Default") at final maturity on
one or more classes of Indebtedness of the Company or any Subsidiary of
the Company, whether such Indebtedness exists on the Senior Preferred
Stock Issue Date or is incurred thereafter, having individually or in
the aggregate, an outstanding principal amount of $25,000,000 or more,
or any other Payment Default occurs on one or more such classes of
Indebtedness and such class or classes of Indebtedness are declared due
and payable prior to their respective maturities, then the number of
directors constituting the Board of Directors shall be adjusted as
set forth in the Certificate of Incorporation to permit the Holders
of the majority of the then outstanding Senior Preferred Stock, voting
separately as one class, to elect two directors. Holders of a majority
of the issued and outstanding shares of the Senior Preferred Stock,
voting separately as one class, shall have the exclusive right to elect
two directors at a meeting therefor called upon occurrence of such
Dividend Default, Redemption Default, Change of Control Default,
Restriction Default or Payment Default, as the case may be, and at
every subsequent meeting at which the terms of office of the directors
so elected by the Holders of the Senior Preferred Stock expire (other
than as described in (f)(iii)(B) below). Each such event described in
clauses (1), (2), (3), (4) and (5) is a "Voting Rights Triggering
Event."
(B) The right of the Holders of Senior Preferred Stock
voting separately as one class to elect members of the Board of
Directors as set forth in paragraph (f)(iii)(A) above shall continue
until such time as (1) in the event such right arises due to a
Dividend Default, all accumulated dividends that are in arrears on
the Senior Preferred Stock are paid in full (and, in the case of
Dividends payable after ________, 2001, are paid in cash) and the
Company has paid dividends in full on the two consecutive Dividend
Payment Dates following the payment of such arrearage; and (2) in the
event such right arises
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due to a Redemption Default, a Change of Control Default, a
Restriction Default or a Payment Default, the Company remedies any
such failure, breach or default, at which time the term of any
directors elected pursuant to paragraph (f)(iii)(A) shall terminate,
subject always to the same provisions for the renewal and divestment
of such special voting rights in the case of any future Voting Rights
Triggering Event. At any time after voting power to elect directors
shall have become vested and be continuing in the Holders of shares
of the Senior Preferred Stock pursuant to this paragraph (f)(iii), or
if vacancies shall exist in the offices of directors elected by the
Holders of shares of the Senior Preferred Stock, a proper officer of
the Company may, and upon the written request of the Holders of
record of at least 10% of the shares of Senior Preferred Stock then
outstanding addressed to the Secretary of the Company shall, call a
special meeting of the Holders of Senior Preferred Stock, for the
purpose of electing the directors which such Holders are entitled to
elect. If such meeting shall not be called by the proper officer of
the Company within 20 days after personal service of said written
request upon the Secretary of the Company, or within 20 days after
mailing the same within the United States by certified mail,
addressed to the Secretary of the Company at its principal executive
offices, then the Holders of record of at least 20% of the
outstanding shares of the Senior Preferred Stock may designate in
writing one of their numbers to call such meeting at the expense of
the Company, and such meeting may be called by the Person so
designated upon the notice required for the annual meetings of
stockholders of the Company and shall be held at the place for
holding the annual meetings of stockholders or such other place in
the United States as shall be designated in such notice.
Notwithstanding the provisions of this paragraph (f)(iii)(B), no such
special meeting shall be called if any such request is received less
than 30 days before the date fixed for the next ensuing annual or
special meeting of stockholders of the Company. Any Holder of shares
of the Senior Preferred Stock so designated shall have, and the
Company shall provide, access to the lists of Holders of shares of
the Senior Preferred Stock for purposes of calling a meeting pursuant
to the provisions of this paragraph (f)(iii)(B).
(C) At any meeting held for the purpose of electing
directors at which the Holders of Senior Preferred Stock shall have
the right, voting separately as one class, to elect directors as
aforesaid, the presence in person or by proxy of the Holders of at
least a majority of the outstanding Senior Preferred Stock shall be
required to constitute a quorum of such Senior Preferred Stock.
(D) Any vacancy occurring in the office of a director
elected by the Holders of shares of the Senior Preferred Stock may be
filled by the remaining director elected by the Holders of shares of
the Senior Preferred Stock unless and until such vacancy shall be
filled by the Holders of shares of the Senior Preferred Stock.
(iv) In any case in which the Holders of shares of the
Senior Preferred Stock shall be entitled to vote pursuant to this
paragraph (f) or pursuant to Delaware law, each Holder of shares of
the Senior Preferred Stock shall be entitled to one vote for each
share of Senior Preferred Stock held.
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(g) Exchange.
(i) Requirements. (A) The Company may at its option exchange
all, but not less than all, of the then outstanding shares of Senior
Preferred Stock into the Company's ___% Subordinated Exchange
Debentures due 2008 (the "Exchange Debentures") on any Dividend
Payment Date, provided that on the date of such exchange: (I) there
shall be no contractual impediments to such exchange; (II) there
shall be legally available funds sufficient therefor (including,
without limitation, legally available funds sufficient therefor under
Sections 160 and 170 (or any successor provisions) of the Delaware
General Corporation Law); (III) either (a) a registration statement
relating to the Exchange Debentures shall have been declared
effective under the Securities Act of 1933, as amended (the
"Securities Act"), prior to such exchange and shall continue to be in
effect on the date of such exchange or (b)(i) the Company shall have
obtained a written opinion of counsel that an exemption from the
registration requirements of the Securities Act is available for such
exchange and that upon receipt of such Exchange Debentures pursuant
to such exchange made in accordance with such exemption, the holders
(assuming such holder is not an Affiliate of the Company) thereof
shall not be subject to any restrictions imposed by the Securities
Act upon the resale thereof and (ii) such exemption is relied upon by
the Company for such exchange; (IV) the Exchange Debenture Indenture
and the Trustee shall have been qualified under the Trust Indenture
Act of 1939, as amended; (V) immediately after giving effect to such
exchange, no Default or Event of Default (each as defined in the
Exchange Debenture Indenture) would exist under the Exchange
Debenture Indenture; and (VI) the Company shall have delivered to the
Trustee a written opinion of counsel, dated the date of exchange,
regarding the satisfaction of the conditions set forth in clauses
(I), (II), (III) and (IV). In the event that the issuance of the
Exchange Debentures is not permitted on the date of exchange or any
of the conditions set forth in clauses (I) through (VI) of the
preceding sentence are not satisfied on the date of exchange, the
Company shall use its best efforts to satisfy such conditions and
effect such exchange as soon as practicable.
At least 30 days prior to the date of any exchange, the
Company shall send a written notice (the "Exchange Notice") of
exchange by mail to each Holder, which notice shall state: (v) that
the Company is exercising its option to exchange the Senior Preferred
Stock for Exchange Debentures pursuant to this Certificate of
Designation; (w) the date fixed for exchange (the "Exchange Date"),
which date shall not be less than 30 days nor more than 60 days
following the date on which the Exchange Notice is mailed (except as
provided in the last sentence of this paragraph); (x) that the Holder
is to surrender to the Company, at the place or places where
certificates for shares of Senior Preferred Stock are to be
surrendered for exchange, in the manner designated in the Exchange
Notice, his certificate or certificates representing the shares of
Senior Preferred Stock to be exchanged; (y) that dividends on the
shares of Senior Preferred Stock to be exchanged shall cease to
accrue on the Exchange Date whether or not certificates for shares of
Senior Preferred Stock are surrendered for exchange on the Exchange
Date unless the Company shall default in the delivery of Exchange
Debentures; and (z) that interest on the Exchange Debentures shall
accrue from the Exchange Date whether or not certificates for shares
of Senior Preferred Stock are surrendered for exchange on the
Exchange Date. On the Exchange Date, if the conditions set forth in
clauses (I) through (VI) above are satisfied, the Company shall issue
Exchange Debentures in exchange for the Senior Preferred Stock as
provided in the next paragraph.
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(B) Upon any exchange pursuant to paragraph (g)(i)(A),
Exchange Debentures shall be issued in exchange for Senior Preferred
Stock in an amount equal to the liquidation preference thereof, plus
the amount of all accumulated and unpaid dividends (including a
prorated dividend for the period from the immediately preceding
Dividend Payment Date to the Exchange Date). Exchange Debentures will
be issued in principal amounts of $1,000 and integral multiples
thereof to the extent possible, and will also be issued in principal
amounts less than $1,000 so that each Holder of Senior Preferred
Stock will receive certificates representing the entire amount of
Exchange Debentures to which his shares of Senior Preferred Stock
entitles him, provided that the Company may, at its option, pay cash
in lieu of issuing an Exchange Debenture in a principal amount of less
than $1,000.
(ii) Procedure for Exchange. (A) On or before the date fixed
for exchange, each Holder of Senior Preferred Stock shall surrender
the certificate or certificates representing such shares of Senior
Preferred Stock, in the manner and at the place designated in the
Exchange Notice. The Company shall cause the Exchange Debentures to
be executed on the Exchange Date and, upon surrender in accordance
with the Exchange Notice of the certificates for any shares of Senior
Preferred Stock so exchanged (properly endorsed or assigned for
transfer, if the notice shall so state), such shares shall be
exchanged by the Company into Exchange Debentures. The Company shall
pay interest on the Exchange Debentures at the rate and on the dates
specified therein from the Exchange Date.
(B) If notice has been mailed as aforesaid, and if before
the Exchange Date (1) the Exchange Debenture Indenture shall have
been duly executed and delivered by the Company and the Trustee and
(2) all Exchange Debentures necessary for such exchange shall have
been duly executed by the Company and delivered to the Trustee with
irrevocable instructions to authenticate the Exchange Debentures
necessary for such exchange, then the rights of the Holders of shares
of the Senior Preferred Stock as stockholders of the Company shall
cease (except the right to receive Exchange Debentures), and the
Person or Persons entitled to receive the Exchange Debentures
issuable upon exchange shall be treated for all purposes as the
registered holder or holders of such Exchange Debentures as of the
date of exchange.
(h) Change of Control.
(i) Subject to paragraph (h)(v) hereof, upon the occurrence
of a Change of Control, each Holder of Senior Preferred Stock shall
have the right to require the Company to purchase all or any part
of such Holder's Senior Preferred Stock pursuant to an Offer at a
purchase price equal to 101% of the liquidation preference thereof
plus, without duplication, an amount in cash equal to all accumulated
and unpaid dividends per share (including an amount in cash equal to a
prorated dividend for the period from the Dividend Payment Date
immediately prior to the Change of Control Payment Date (as defined
in paragraph (h)(ii)(B) hereof) to the Change of Control Payment Date)
(the "Change of Control Payment").
(ii) Within 30 days following any Change of Control,
the Company shall mail a notice to each Holder stating: (A) that an
offer ("Offer") is being made pursuant to this Certificate of
Designation and that, to the extent lawful, all shares of Senior
Preferred Stock tendered shall be accepted for payment; (B) the
purchase price and the purchase date, which shall be no earlier
than 30 days nor later than 40 days from the date such notice is
mailed (the
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"Change of Control Payment Date"); (C) that any shares of Senior
Preferred Stock not tendered shall continue to accrue dividends in
accordance with the terms of this Certificate of Designation; (D)
that, unless the Company defaults in the payment of the Change of
Control Payment, all shares of Senior Preferred Stock accepted for
payment pursuant to the Offer shall cease to accrue dividends after
the Change of Control Payment Date; and (E) a description of the
procedures to be followed by such Holder in order to have its shares
of Senior Preferred Stock repurchased.
(iii) On the Change of Control Payment Date, (A) the Company
shall, to the extent lawful, (1) accept for payment shares of Senior
Preferred Stock tendered pursuant to the Offer and (2) promptly mail
to each Holder of shares of Senior Preferred Stock so accepted
payment in an amount equal to the purchase price for such shares and
(B) unless the Company defaults in the payment for the shares of
Senior Preferred Stock tendered pursuant to the Offer, dividends
shall cease to accrue with respect to the shares of Senior Preferred
Stock tendered and all rights of Holders of such tendered shares
shall terminate, except for the right to receive payment therefor, on
the Change of Control Payment Date. The Company shall publicly
announce the results of the Offer on or as soon as practicable after
the Change of Control Payment Date.
(iv) The Company shall comply with Rule 14e-1 under the
Exchange Act and any securities laws and regulations, to the extent
such laws and regulations are applicable to the repurchase of shares
of the Senior Preferred Stock in connection with a Change of Control.
(i) Conversion or Exchange. The Holders of shares of Senior
Preferred Stock shall not have any rights hereunder to convert such shares
into or exchange such shares for shares of any other class or classes or of
any other series of any class or classes of Capital Stock of the Company.
(j) Preemptive Rights. No shares of Senior Preferred Stock
shall have any rights of preemption whatsoever as to any securities of the
Company, or any warrants, rights or options issued or granted with respect
thereto, regardless of how such securities or such warrants, rights or options
may be designated, issued or granted.
(k) Reissuance of Senior Preferred Stock. Shares of Senior
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged, shall (upon compliance with any
applicable provisions of the laws of Delaware) have the status of authorized
but unissued shares of preferred stock of the Company undesignated as to
series and may be designated or redesignated and issued or reissued, as the
case may be, as part of any series of preferred stock of the Company, provided
that any issuance of such shares as Senior Preferred Stock must be in
compliance with the terms hereof.
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(l) Business Day. If any payment, redemption or exchange
shall be required by the terms hereof to be made on a day that is not a
Business Day, such payment, redemption or exchange shall be made on the
immediately succeeding Business Day.
(m) Certain Additional Provisions.
(i) Merger or Consolidation. Without the consent of Holders
of a majority of the outstanding shares of Senior Preferred Stock, voting as a
separate class, the Company shall not consolidate or merge with or into, or
sell, lease, convey or otherwise dispose of all or substantially all of its
assets to, any person (any such consolidation, merger or sale being a
"Disposition") unless: (a) the successor corporation of such Disposition or
the corporation to which such Disposition shall have been made is a
corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia; (b) the Senior Preferred Stock
shall be converted into or exchanged for and shall become shares of the such
successor, transferee or resulting corporation, having in respect of such
successor, transferee or resulting corporation substantially the same powers,
preferences and relative participating, optional or other special rights, and
the qualifications, limitations or restrictions thereon, that the Senior
Preferred Stock had immediately prior to such Disposition; (c) immediately after
such Disposition, no Voting Rights Triggering Event shall have occurred and be
continuing; (d) the corporation formed by or surviving any such Disposition,
or the corporation to which such Disposition shall have been made, shall have
Consolidated Net Worth (immediately after the Disposition but prior to giving
any pro forma effect to purchase accounting adjustments or Restructuring
Charges resulting from the Disposition) equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the Disposition;
and (e) prior to the consummation of any proposed Disposition, the Company
shall have delivered to the transfer agent an officers' certificate and an
opinion of counsel to the effect that such Disposition complies with the terms
of this Certificate of Designation and that all conditions precedent to such
Disposition have been satisfied.
For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one
or more Subsidiaries of the Company, the Capital Stock of which constitutes
all or substantially all of the properties and assets of the Company, shall be
deemed to be the transfer of all or substantially all of the properties and
assets of the Company.
(ii) Junior Payments. The Company shall not, directly or
indirectly, (i) declare or pay any dividend or make any distribution on account
of any Junior Securities (other than dividends or distributions payable in
Junior Securities (other than Disqualified Stock)), (ii) purchase, redeem or
otherwise acquire or retire for value any Junior Securities or (iii) make any
Restricted Investment (all such dividends, distributions, purchases,
redemptions, acquisitions, retirements and Restricted Investments being
collectively referred to as "Junior Payments"), if, at the time of such Junior
Payment:
(a) a Voting Rights Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof; or
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(b) all dividends on the Senior Preferred Stock payable on
Dividend Payment Dates after ____________, have not been
declared and paid in cash.
Notwithstanding the foregoing, this Certificate of
Designation shall not prohibit as Junior Payments:
(A) the payment of any dividend within 60 days after the
date of declaration thereof, if at said date of declaration, such
payment would comply with all of the provisions hereof (including,
but not limited to, this paragraph (m)(ii));
(B) making Restricted Investments at any time, and from time
to time, in an aggregate outstanding amount of $15,000,000 after the
Senior Preferred Stock Issue Date (it being understood that if any
Restricted Investment after the Senior Preferred Stock Issue Date
pursuant to this clause (B) is sold, transferred or otherwise conveyed
to any Person other than the Company or a Subsidiary, the portion
of the net cash proceeds or fair market value of securities or
properties paid or transferred to the Company and its Subsidiaries
in connection with such sale, transfer or conveyance that relates or
corresponds to the repayment or return of the original cost of such
a Restricted Investment will replenish or increase the amount of
Restricted Investments
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permitted to be made pursuant to this clause (B), so that up to
$15,000,000 of Restricted Investments may be outstanding under this
clause (B) at any given time); provided that, without otherwise
limiting this clause (B), any Restricted Investment in a Subsidiary
made pursuant to this clause (B) is made for fair market value (as
determined by the Board of Directors in good faith);
(C) the repurchase, redemption, retirement or acquisition of
the Company's stock from the executives, management, employees or
consultants of the Company or its Subsidiaries pursuant to the terms
of any subscription, stockholder or other agreement or plan, up to an
aggregate amount not to exceed $7,500,000;
(D) any loans, advances, distributions or payments from the
Company to its Subsidiaries, or any loans, advances, distributions or
payments by a Subsidiary to the Company or to another Subsidiary, in
each case pursuant to intercompany Indebtedness, intercompany
management agreements and other intercompany agreements and
obligations;
(E) the payment of (a) consulting, financial and investment
banking fees under the TJC Agreement, provided, that no Voting Rights
Triggering Event shall have occurred and be continuing, and (b)
indemnities, expenses and other amounts under the TJC Agreement;
(F) the redemption, repurchase, retirement or other
acquisition of any Junior Securities in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of other Junior Securities;
(G) Restricted Investments made or received in connection
with the sale, transfer or disposition of any business, properties or
assets of the Company or any Subsidiary;
(H) any Restricted Investment constituting securities or
instruments of a person issued in exchange for trade or other claims
against such person in connection with a financial reorganization or
restructuring of such person;
(I) payments in connection with the application of the net
proceeds of the Offerings as set forth under "Use of Proceeds" in the
Prospectus; and
(J) payments of fees, expenses and indemnities to the
directors of the Company and its Subsidiaries.
(iii) Transactions with Affiliates.
(a) Except as otherwise set forth herein, neither the
Company nor any of its Subsidiaries shall make any loan, advance,
guarantee or capital contribution to, or for the benefit of, or sell, lease,
transfer or dispose of any properties or assets to, or for the benefit of, or
purchase or lease any property or assets from, or enter into or amend any
contract, agreement or understanding with, or for the benefit of, an Affiliate
(each such transaction or series of related transactions that are part of a
common plan are referred to as an "Affiliate Transaction"), except in good
faith and on terms that are no less favorable to the Company or the relevant
Subsidiary than those that would have been obtained in a comparable
transaction on an arm's length basis from an unrelated Person.
(b) The Company shall not, and shall not permit any
Subsidiary to, engage in any Affiliate Transaction involving aggregate payments
or other transfers by the Company and its Subsidiaries in excess of $3,000,000
(including cash and non-cash payments and benefits valued at their fair market
value by the Board of Directors of the Company in good faith) unless: (i) a
majority of the Board of Directors of the Company (including a majority of the
disinterested directors, if any) determines, in good faith, that such Affiliate
Transaction complies with the provisions hereof; and (ii)(A) with respect to any
Affiliate Transaction involving the incurrence of Indebtedness, the Company
receives a written opinion of a nationally recognized investment banking or
accounting firm experienced in the review of similar types of transactions, (B)
with respect to any Affiliate Transaction involving the transfer of real
property, fixed assets or equipment, either directly or by a transfer of 50% or
more of
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the Capital Stock of a Subsidiary which holds any such real property, fixed
assets or equipment, the Company receives a written appraisal from a nationally
recognized appraiser experienced in the review of similar types of transactions
or (C) with respect to any Affiliate Transaction not otherwise described in (A)
or (B) above, the Company receives a written certification from a nationally
recognized professional or firm experienced in evaluating similar types of
transactions, in each case, stating that the terms of such transaction are fair
to the Company or such Subsidiary, as the case may be, from a financial point of
view.
(c) Notwithstanding paragraphs (iii)(a) and (iii)(b) above,
this paragraph (m)(iii) shall not apply to: (i) transactions between the
Company and any Subsidiary or between Subsidiaries; (ii) payments under the TJC
Agreement; (iii) any other payments or transactions permitted pursuant to
paragraph (m)(ii) above; (iv) (A) payments and transactions under the Executive
Employment Agreements and (B) reasonable compensation paid to officers,
employees or consultants of the Company or any Subsidiary as determined in good
faith by the Company's Board of Directors or executives; (v) payments and
transactions under the Jaro Leases; (vi) payments and transactions involving
First National Bank of Boston and its subsidiaries and affiliates in connection
with the BBI Note, the Credit Agreement and any other Indebtedness; and (vii)
payments and transactions in connection with the Offerings and the application
of the net proceeds therefrom as described under "Use of Proceeds" in the
Prospectus.
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(v) Reports. So long as any shares of Senior Preferred Stock
are outstanding, the Company shall file with the Commission the annual
reports, quarterly reports and the information, documents and other reports
required to be filed by the Company with the Commission pursuant to Sections
13 or 15(d) of the Exchange Act, whether or not the Company has or is required
to have a class of securities registered under the Exchange Act, at the time
it is or would be required to file the same with the Commission and within 15
days after it is or would be required to file such reports, information or
documents with the Commission shall mail such reports, information and
documents to the Holders at their addresses set forth in the register of
Senior Preferred Stock maintained by the transfer agent and registrar of the
Senior Preferred Stock.
(n) Definitions. As used in this Certificate of Designations, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Affiliate" means any of the following: (i) any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company, (ii) any spouse, immediate family member or other
relative who has the same principal residence as any Person described in
clause (i) above, (iii) any trust in which any such Persons described in
clause (i) or (ii) above has a beneficial interest, and (iv) any corporation
or other organization of which any such Persons described above collectively
own 50% or more of the equity of such entity.
"Asset Sale" means the sale, lease, conveyance or other disposition
by the Company or a Subsidiary of assets or property whether owned
on the Senior Preferred Stock Issue Date or thereafter acquired, in a single
transaction or in a series of related transactions; provided that Asset Sales
will not include such sales, leases, conveyances or dispositions in connection
with (i) the sale or disposition of any Restricted Investment, (ii) any Equity
Offering by (a) the Company or (b) any Subsidiary if the proceeds
therefrom are used to make mandatory prepayments of Indebtedness of the
Company or the Subsidiaries or redeem Senior Preferred Stock as
described in paragraph (e) hereof, (iii) the surrender or waiver of contract
rights or the settlement, release or surrender of contract, tort or other
claims of any kind, (iv) the sale of inventory in the ordinary course of
business, (v) a sale-leaseback of assets within one year following the
acquisition of such assets, (vi) the grant of any license of patents,
trademarks, registration therefor and other similar intellectual property, (vii)
a transfer of assets by the Company or a Subsidiary to the Company or a
Subsidiary, (viii) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company as permitted under paragraph
(m)(i) hereof, (ix) the sale or disposition of obsolete equipment or other
obsolete assets, (x) Junior Payments permitted by paragraph m(ii) hereof, (xi)
the BKC Designated Transfer, or (xii) the exchange of assets for other non-cash
assets that (a) are useful in the business of the Company and its Subsidiaries
and (b) have a fair market value at least equal to the fair market value of the
assets being exchanged (as determined by the Board of Directors in good faith).
"BBI Note" means the promissory note in the aggregate principal amount
of $600,000 issued by the Company to BancBoston and all related Obligations as
in effect at the Senior Preferred Stock Issue Date.
"BKC" means Burger King Corporation and its successors and assigns.
"BKC Agreements" means the franchise, trademark, royalty, lease,
sublease and other agreements, obligations and liabilities of the Company and
its Subsidiaries with or to BKC.
"BKC Designated Transfer" means the sale by the Company of up to 10
Burger King restaurants to a franchisee to be designated by BKC.
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" means any and all shares, interests, participations
or other equivalents (however designated) of corporate stock, including any
preferred stock.
"Change of Control" means the occurrence of each of the following:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), excluding the Existing Stockholders, is or becomes
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a Person shall be deemed to have "beneficial ownership" of
all securities that such Person has the right to acquire, whether such right
is exercisable immediately or only after the
17
<PAGE>
passage of time), directly or indirectly, of more than 50% of the total Voting
Stock of the Company; and (ii) the Company consolidates with, or merges with
or into, another Person or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any Person, or
any Person consolidates with, or merges with or into, the Company, in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where (A) the outstanding Voting Stock of the
Company is converted into or exchanged for (1) Voting Stock (other than
Redeemable Capital Stock) of the surviving or transferee corporation or (2)
cash, securities and other property in an amount which could be paid by the
Company as a Junior Payment under this Certificate of Designation and (B)
immediately after such transaction no "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), excluding the Existing
Stockholders, is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 50% of the total Voting
Stock of the surviving or transferee corporation; and (iii) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the stockholders of the Company was approved by a vote of a
majority of the directors then still in office who are entitled to vote to
elect such new director and were either directors at the beginning of such
period or Persons whose election as directors or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office.
"Commission" means the Securities and Exchange Commission.
"Consolidated Net Income" means, for any given period and Person, the
aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided,
however, that: (i) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded, and (ii) Consolidated Net Income of any Person will not
include, without duplication, any deduction for: (A) any increased
amortization or depreciation resulting from the write-up of assets pursuant to
Accounting Principles Board Opinion Nos. 16 and 17, as amended or supplemented
from time to time, (B) the amortization of all intangible assets (including
amortization attributable to inventory write-ups, goodwill, debt and financing
costs, and Incentive Arrangements), (C) any non-capitalized transaction costs
incurred in connection with financings, acquisitions or divestitures (including,
but not limited to, financing and refinancing fees), (D) any extraordinary or
nonrecurring charges relating to any premium or penalty paid, write-off or
deferred financing costs or other financial recapitalization charges in
connection with redeeming or retiring any Indebtedness prior to its stated
maturity, and (E) any Restructuring Charges.
"Consolidated Net Worth" with respect to any Person means, as of any
date, the consolidated equity of the common stockholders of such Person
(excluding the cumulated foreign currency translation adjustment), all
determined on a consolidated basis in accordance with GAAP, but without any
reduction in respect of the payment of dividends on any series of such
Person's preferred stock if such dividends are paid in additional shares of
Capital Stock (other than Disqualified Stock); provided, however, that
18
<PAGE>
Consolidated Net Worth shall also include, without duplication: (a) the
amortization of all write-ups of inventory, (b) the amortization of all
intangible assets (including amortization of goodwill, debt and financing
costs, and Incentive Arrangements), (c) any non-capitalized transaction costs
incurred in connection with financings, acquisitions or divestitures (including,
but not limited to, financing and refinancing fees), (d) any increased
amortization or depreciation resulting from the write-up of assets pursuant to
Accounting Principles Board Opinion Nos. 16 and 17, as amended and supplemented
from time to time, (e) any extraordinary or nonrecurring charges or expenses
relating to any premium or penalty paid, write-off or deferred financing costs
or other financial recapitalization charges incurred in connection with
redeeming or retiring any Indebtedness prior to its stated maturity, (f) any
Restructuring Charges, and (g) any extraordinary or non-recurring charge arising
out of the implementation of SFAS 106 or SFAS 109; provided, however, that
Consolidated Net Worth shall be calculated on a Pro Forma Basis.
"Credit Agreement" means the credit agreement, dated February 7, 1996,
among the Company, certain of its Subsidiaries and the lenders party thereto in
their capacities as lenders thereunder and The First National Bank of Boston, as
agent, together with all loan documents and instruments thereunder (including,
without limitation, any guarantee agreements and security documents), in each
case as such agreements may be amended (including any amendment and
restatement thereof), supplemented or otherwise modified from time to time,
including any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including, without limitation, increasing the amount
of available borrowings thereunder, and all Obligations with respect thereto,
or adding Subsidiaries of the Company as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement or any
successor or replacement agreement and whether by the same or any other agent,
lender or group of lenders.
"Disqualified Stock" means any Capital Stock that by its terms (or by
the terms of any security into which it is convertible--or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part on, on or
prior to the redemption of the Senior Preferred Stock or the maturity, or
earlier redemption, of the Exchange Debentures.
"Dividend Payment Date" means __________, ________, _________ and of
each year.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each Quarterly Dividend Period.
"Equity Interests" means Capital Stock or partnership interests or
warrants, options or other rights to acquire Capital Stock or partnership
interests (but excluding (i) any debt security that is convertible into, or
exchangeable for, Capital Stock or partnership interests, and (ii) any other
Indebtedness or Obligation) provided, however, that Equity Interests will not
include any Incentive Arrangements or obligations or payments thereunder.
"Equity Offering" means a public or private offering by the Company
for cash of Capital Stock or other Equity Interests and all warrants, options or
other rights to acquire Capital Stock, other than (i) an offering of
Disqualified Stock or (ii) Incentive Arrangements or obligations or payments
thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
19
<PAGE>
"Exchange Date" means a date on which shares of Senior Preferred
Stock are exchanged by the Company for Exchange Debentures.
"Executive Employment Agreements" means the Employment Agreements,
effective as of September 1, 1994, between the Company, on the one hand, and
Lawrence E. Jaro, William C. Osborn, Gary W. Hubert, Joel D. Aaseby and Scott E.
Vasatka, on the other hand, as in effect at the Senior Preferred Stock Issue
Date.
"Existing Stockholders" means (a) The Jordan Company and
Jordan/Zalaznick Capital Corporation and their respective affiliates,
principals, partners and employees, family members of any of the foregoing and
trusts for the benefit of any of the foregoing, including, without limitation,
MCIT PLC, Leucadia National Corporation and Jordan Industries, Inc., and their
respective Subsidiaries and (b) the officers and directors of the Company on the
Senior Preferred Stock Issue Date and their respective affiliates and family
members and trusts for the benefit of any of the foregoing.
"GAAP" means generally accepted accounting principles, consistently
applied, as of the Senior Preferred Stock Issue Date. All financial and
accounting determinations and calculations under this Certificate of Designation
will be made in accordance with GAAP.
"Hedging Obligations" means, with respect to any Person, the
Obligations of such Persons under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, (ii) foreign exchange
contracts, currency swap agreements or similar agreements, and (iii) other
agreements or arrangements designed to protect such Person against
fluctuations, or otherwise to establish financial hedges in respect of,
exchange rates, currency rates or interest rates.
"Holder" means a holder of shares of Senior Preferred Stock.
"Incentive Arrangements" means any earn-out agreements, stock
appreciation rights, "phantom" stock plans, employment agreements,
non-competition agreements, subscription and stockholders agreements and other
incentive and bonus plans and similar arrangements made in connection with
acquisitions of Persons or businesses by the Company or the Subsidiaries or the
retention of executives, officers or employees by the Company or the
Subsidiaries.
"Indebtedness" means, with respect to any Person, any indebtedness,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing the deferred and
unpaid balance of the purchase price of any property (including pursuant to
capital leases), except any such balance that constitutes an accrued expense
or a trade payable, and any Hedging Obligations, if and to the extent such
indebtedness (other than a Hedging Obligation) would appear as a liability
upon a balance sheet of such Person prepared on a consolidated basis in
accordance with GAAP, and also includes, to the extent not otherwise included,
the guarantee of items that would be included within this definition;
provided, however, that "Indebtedness" will not include any Incentive
Arrangements or obligations or payments thereunder, or (ii) any BKC Agreement,
except for any indebtedness in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or representing the deferred and unpaid
balance of the purchase price of any property (including pursuant to capital
leases).
"Indenture" means the indenture governing the Company's % Senior
Notes due 2006 between the Company and Fleet National Bank, as trustee.
"Initial Dividend Period" means the dividend period commencing on the
Preferred Stock Issue Date and ending on the day before the first Dividend
Payment Date to occur thereafter.
"Investment" means any capital contribution to, or other debt or
equity investment in, any Person.
"issue" means create, issue, assume, guarantee, incur or otherwise
become directly or indirectly liable for any Indebtedness or Capital Stock, as
applicable; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be issued by such
20
<PAGE>
Subsidiary at the time it becomes a Subsidiary. For this definition, the terms
"issuing," "issuer," "issuance" and "issued" have meanings correlative to the
foregoing.
"Jaro Leases" means the leases between the Company's Subsidiaries and
Lawrence E. Jaro relating to two Burger King restaurants as in effect at the
Senior Preferred Stock Issue Date.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized
by law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP, excluding, however, any
gain or loss, together with any related provision for taxes, realized in
connection with any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions).
"Obligations" means, with respect to any Indebtedness, all principal,
interest, premiums, penalties, fees, indemnities, expenses (including legal
fees and expenses), reimbursement obligations and other liabilities payable to
the holder of such Indebtedness under the documentation governing such
Indebtedness, and any other claims of such holder arising in respect of such
Indebtedness.
"Offering" means the offer and sale of Units consisting of $30,000,000
of Senior Preferred Stock and shares of Common Stock of the Company as
contemplated by the Prospectus.
"Offerings" means the Offering together with the offering of
$100,000,000 aggregate principal amount of the Company's % Senior Notes due
2006.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Pro Forma Basis" means, for purposes of determining Consolidated
Net Worth for purposes of paragraph (m)(i) hereof), giving pro forma effect to
(x) any acquisition or sale of a Person, business or asset, related
incurrence, repayment or refinancing of Indebtedness or other related
transactions, including any
21
<PAGE>
Restructuring Charges which would otherwise be accounted for as an adjustment
permitted by Regulation S-X under the Securities Act or on a pro forma basis
under GAAP, or (y) any incurrence, repayment or refinancing of any
Indebtedness and the application of the proceeds therefrom, in each case, as
if such acquisition or sale and related transactions, restructurings,
consolidations, cost savings, reductions, incurrence, repayment or refinancing
were realized on the first day of the relevant period permitted by Regulation
S-X under the Securities Act or on a pro forma basis under GAAP.
"Prospectus" means the Prospectus, dated ____________, 1996, relating
to the Company's offering and placement of units consisting of the Senior
Preferred Stock and Class A Common Stock, par value $0.01 per share, of the
Company to the public.
"Quarterly Dividend Period" shall mean the quarterly period
commencing on each __________, ___________, __________ and __________ and
ending on the day before the following Dividend Payment Date.
"Redemption Date" with respect to any shares of Senior Preferred
Stock, means the date on which such shares of Senior Preferred Stock are
redeemed by the Company.
22
<PAGE>
"Restricted Investment" means any Investment in any Person, provided
that Restricted Investments will not include: (i) Investments in marketable
securities and other negotiable instruments permitted by this Certificate of
Designation; (ii) any Incentive Arrangements; (iii) Investments in the Company;
or (iv) Investments in any Subsidiary (provided that any Investment in a
Subsidiary was made for fair market value (as determined by the Board of
Directors in good faith)). The amount of any Restricted Investment shall be the
amount of cash and the fair market value at the time of transfer of all other
property (as determined by the Board of Directors in good faith) initially
invested or paid for such Restricted Investment, plus all additions thereto,
without any adjustments for increases or decreases in value of or write-ups,
write-downs or write-offs with respect to, such Restricted Investment.
"Restructuring Charges" means any charges or expenses in respect of
restructuring or consolidating any business, operations or facilities, any
compensation or headcount reduction, or any other cost savings, of any Persons
or businesses either alone or together with the Company or any Restricted
Subsidiary, as determined in accordance with GAAP or Regulation S-X under the
Securities Act.
"Senior Preferred Stock Issue Date" means the date on which the Senior
Preferred Stock is originally issued by the Company under this Certificate of
Designation.
"SFAS 106" means Statement of Financial Accounting Standards No. 106.
"SFAS 109" means Statement of Financial Accounting Standards No. 109.
"Subsidiary" of any Person means any entity of which the Equity
Interests entitled to cast at least a majority of the votes that may be cast
by all Equity Interests having ordinary voting power for the election of
directors or other governing body of such entity are owned by such Person
(regardless of whether such Equity Interests are owned directly by such Person
or through one or more Subsidiaries).
"TJC Agreement" means the Management Consulting Agreement, dated
February 7, 1996, between the Company and TJC Management Corporation, as in
effect on the Senior Preferred Stock Issue Date.
"Trustee" means the party named as such in the Exchange Debenture
Indenture until a successor replaces it in accordance with the applicable
provisions of the Exchange Debenture Indenture and thereafter means the
successor serving thereunder.
"Voting Stock" means any class or classes of Capital Stock pursuant
to which the holders thereof have the general voting power under ordinary
circumstances to elect the board of directors.
23
<PAGE>
IN WITNESS WHEREOF, AmeriKing, Inc. has caused this Certificate of
Designation to be signed by ______________, in his capacity as ___________,
and attested to by ____________, in his capacity as Secretary, this day of ,
1996.
AMERIKING, INC.
By:
-------------------
Name:
Title:
Attest:
By:
-----------------------------------
Name:
Title:
[corporate seal]
24
AMENDMENT NO. 1
TO
STOCK OPTION AGREEMENT
THIS AMENDMENT NO. 1 TO STOCK OPTION AGREEMENT (this "Amendment No. 1") is
dated as of November __, 1996, by and among AmeriKing, Inc., a Delaware
corporation (the "Company"), Donald Stahurski ("Stahurski") and Scott Vasatka
("Vasatka").
W I T N E S E T H:
WHEREAS, the Company and Stahurski entered into a Stock Option Agreement,
dated as of September 1, 1994 (the "Stahurski Option Agreement");
WHEREAS, the Company and Vasatka entered into a Stock Option Agreement,
dated as of September 1, 1994 (the "Vasatka Option Agreement"); and
WHEREAS, pursuant to the terms of a Recapitalization Agreement, of even
date herewith, by and among the Company and the stockholders of the Company who
appear on the signature pages thereto, (i) the existing classes of common stock
have been reclassified and (ii) the shares of reclassified common stock are
being split 1,000-to-1; and
WHEREAS, the Company acknowledges it will benefit and desires to amend each
of the Stahurski Option Agreement and the Vasatka Option Agreement in accordance
with the provisions of this Amendment No. 1.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency which are hereby acknowledged, the parties hereto as follows:
A G R E E M E N T
SECTION 1. Amendment. Effective as of the date hereof, Section A. of each
of the Stahurski Option Agreement and the Vasatka Option Agreement shall be
deleted in their entirety and replaced with the following:
A. Award of Options. The Company hereby awards to the Grantee an
option (the "Option") to purchase a total of 5,620 shares of Common
Stock, par value $.01 per share, of the Company (the "Company
Stock"). The price at which a share of Common Stock may be purchased
pursuant to the exercise of the Option (the "Option Price") shall be
$.10 per share.
SECTION 2. Effect of this Amendment No. 1 on the Other Terms of the
Management Consulting Agreement. Except as expressly amended and modified
herein, all other terms of each of the Stahurski Option Agreement and the
Vasatka Option Agreement shall remain in full force and effect as originally
made and entered into by the parties thereto.
SECTION 3. Governing Law. This Amendment No. 1 shall be governed by and
construed in accordance with the laws of the State of Delaware (excluding
provisions relating to choice of law).
SECTION 4. Necessary Documents. The parties hereto agree to execute or
cause to be executed at any time, any and all other documents or instruments
necessary to carry out the terms of this Agreement.
SECTION 5. Counterparts. This Amendment No. 1 may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument, and all
signatures need not appear on any one counterpart.
-2-
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date first written above.
AMERIKING, INC.
By: __________________________________
Name: A. Richard Caputo, Jr.
Title: Vice President
__________________________________
Name: Donald Stahurski
__________________________________
Name: Scott Vasatka
-3-
<PAGE>
AMENDMENT NO. 1
TO
MANAGEMENT SUBSCRIPTION AGREEMENT
THIS AMENDMENT NO. 1 TO MANAGEMENT SUBSCRIPTION AGREEMENT
(this "Amendment No. 1") is dated as of November __, 1996, by and
among AmeriKing, Inc., a Delaware corporation (the "Company") and
the persons whose names appear on the signature pages hereto
(collectively, the "Stockholders").
W I T N E S S E T H
WHEREAS, the Company and the Stockholders entered into a Management
Subscription Agreement, dated as of September 1, 1994 (the "Management
Subscription Agreement"), pursuant to which the Stockholders subscribed for the
purchase of certain securities of the Company, including shares of common stock
of the Company; and
WHEREAS, pursuant to the terms of the Recapitalization Agreement, of
even date herewith, by and among the Company and the stockholders of the
Company who appear on the signature pages thereto, (i) the existing classes of
common stock have been reclassified and (ii) the reclassified common stock has
been split 1,000-to-1; and
WHEREAS, the Company and the Stockholders each acknowledge that they
will benefit and desire to amend the Management Subscription Agreement in
accordance with the terms of this Amendment No. 1.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
A G R E E M E N T
SECTION 1. Amendment. Effective as of the date hereof,
Section 1 of the Management Subscription Agreement shall be
deleted in its entirety and replaced with the following:
1. Stock Subscriptions.
(a) Each Stockholder herewith subscribes for the
number of shares set forth opposite Stockholder's name in Exhibit 1
hereto as (i) the Company's Common Stock, $.01 par
<PAGE>
value per share, (the "Common Stock"), (ii) the Company's Class A2
Preferred Stock, $.01 par value per share, (the "Class A2 Preferred
Stock"), (iii) the Company's Class B Preferred Stock, $.01 par value
per share, (the "Class B Preferred Stock"), (iv) the Company's 12.75%
Notes due 2004 (the "Notes"), (v) stock options, substantially in the
form of Exhibit 2 hereto (the "Options") to purchase shares of Common
Stock, all as more specifically described in Exhibit 1. The purchase
price of the Common Stock is $.10 per share, the purchase price for
the Preferred Stock is $1,000 per share and the purchase price for the
Notes is the initial principal amount thereof. The Options are being
allocated to the persons listed on Exhibit 1 without initial
consideration. For purposes of this Agreement and as specifically set
forth on Exhibit 1, the Common Stock of certain Stockholders shall be
allocated in two sets. Set 1 securities shall consist of certain
shares of Common Stock ("Set 1 Securities"). Set 2 securities shall
consist of the Notes, Class A2 Preferred Stock and remaining shares of
Common Stock acquired by such Stockholders ("Set 2 Securities"), all
as set forth in detail in Exhibit 1. Notwithstanding the foregoing,
the Company acknowledges and accepts that Lawrence Jaro, William
Osborn, Gary Hubert and Joel Aaseby shall purchase the Securities
designated as Set 1 Securities opposite their names for cash in the
amounts set forth on Exhibit 1. The Company also acknowledges and
accepts that the Stockholders acquiring Set 2 Securities shall receive
the Set 2 Securities in exchange for the assets acquired by the
Company pursuant to the Purchase and Sale Agreements, dated as of
September 1, 1994, between the Company and each of the Stockholders
listed on Exhibit 1 who are receiving Set 2 Securities. The Securities
are denoted as Set 1 Securities and Set 2 Securities for purposes of
this section and the repurchase provisions in Section 8. The Options
are neither Set 1 Securities nor Set 2 Securities, and the repurchase
provisions of Section 8 shall not apply to the Options.
SECTION 2. Effect of this Amendment No. 1 on the Other
Terms of the Management Consulting Agreement. Except as
expressly amended and modified herein, all other terms of each of
the Stahurski Option Agreement and the Vasatka Option Agreement
shall remain in full force and effect as originally made and
entered into by the parties thereto.
SECTION 3. Governing Law. This Amendment No. 1 shall be
governed by and construed in accordance with the laws of the
State of Delaware (excluding provisions relating to choice of
law).
-2-
<PAGE>
SECTION 4. Necessary Documents. The parties hereto agree
to execute or cause to be executed at any time, any and all other
documents or instruments necessary to carry out the terms of this
Agreement.
SECTION 5. Counterparts. This Amendment No. 1 may be
executed in any number of counterparts, each of which shall be
deemed to be an original and all of which together shall be
deemed to be one and the same instrument, and all signatures need
not appear on any one counterpart.
-3-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has signed this
Agreement:
NRE HOLDINGS, INC.
By
-------------------------------------
Name:
Title:
STOCKHOLDERS:
Tabor Restaurants Associates, Inc.
By
-------------------------------------
Name:
Title:
Jaro Enterprises, Inc.
By
-------------------------------------
Name:
Title:
Jaro Restaurants, Inc.
By
-------------------------------------
Name:
Title:
JB Restaurants, Inc.
By
-------------------------------------
Name:
Title:
-4-
<PAGE>
Castleking, Inc.
By
-------------------------------------
Name:
Title:
White-Osborn Restaurants, Inc.
By
-------------------------------------
Name:
Title:
Osburger, Inc.
By
-------------------------------------
Name:
Title:
----------------------------------------
Lawrence Jaro
----------------------------------------
William Osborn
----------------------------------------
Gary Hubert
----------------------------------------
Joel Aaseby
----------------------------------------
Donald Stahurski
----------------------------------------
Scott Vasatka
-5-
<PAGE>
<TABLE>
<CAPTION>
Exhibit 1
No. of Shares No. of Shares No. of Shares
of Class D of Class A2 of Class B
Name Common Stock Preferred Stock Preferred StocK
- ---- -------------------------------- -------------------------------- --------------------------------
Set 1 Set 2 Set 1 Set 2 Set 1 Set 2
Securities Securities Securities Securities Securities Securities
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Tabor Restaurants, Inc. - 8,131 - 87.00 - 29.00
Jaro Restaurants, Inc. - 17,128 - 187.50 - 62.50
Jaro Enterprises, Inc. - 44,366 - 90.00 - 30.00
JB Restaurants, Inc. - 123,763 - 550.5 - 183.50
Castleking, Inc. - 26,876 - 187.5 - 62.50
White-Osborn Restaurants - 33,363 - 97.5 - 32.50
Lawrence Jaro 33,710 - - - - -
William Osborn 33,170 - - - - -
Gary Hubert 33,170 - - - - -
Joel Aaseby 11,240 - - - - -
Don Stahurski 5,620 - - - - -
Scott Vasatka 5,620 - - - - -
-------- ------- --- ---- --- ------
Total 123,610 253,627 0 1200 0 400.00
<CAPTION>
Subordinated
Name Notes
- ---- ------------------
<S> <C>
Tabor Restaurants, Inc. -
Jaro Restaurants, Inc. $112,000
Jaro Enterprises, Inc. $1,224,000
JB Restaurants, Inc. $2,019,000
Castleking, Inc. $385,769
White-Osborn Restaurants $659,231
Lawrence Jaro -
William Osborn -
Gary Hubert -
Joel Aaseby -
Don Stahurski -
Scott Vasatka -
----------
Total $4,400,000
</TABLE>
Multiple Loans
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT dated as of November 29, 1995 (as it may
be amended from time to time, this "Agreement") is entered into by and between
AMERIKING COLORADO CORPORATION I, a Delaware corporation (hereinafter called
"Borrower") and FRANCHISE ACCEPTANCE CORPORATION LIMITED (herein, together with
any assignee thereof or successor thereto, called "Lender").
PRELIMINARY STATEMENT
Borrower wishes to borrow funds from Lender to finance various activities
of Borrower in connection with Borrower's Burger King(Registered Trademark)
restaurant or restaurants as more fully set forth herein, and Lender is
willing to lend such funds, on the terms and conditions set forth herein, and
in connection with the Franchisee Loan Program (as defined below) of Lender.
The restaurants subject to the terms of this Agreement are identified by
Burger King Corporation ("BKC") store number and address on Annex I hereto
(the "Restaurants"). Each of the Restaurants is operated by the Borrower
pursuant to a franchise agreement ("Franchise Agreement") issued by BKC. To
induce Lender to lend such funds, Borrower is granting to Lender a security
interest in property and rights of Borrower relating to the Restaurants as set
forth below.
The parties hereto hereby agree as follows:
1. The Loan. Lender agrees, upon compliance by Borrower with the terms
and conditions hereof, to make a loan or loans (collectively the "Loan") to
the Borrower in the principal amounts and during the periods set forth in
Schedule 1 hereto. Borrower agrees to pay the principal amount of the Loan and
interest thereon on the dates and in the amounts set forth in the promissory
note(s) substantially in the form of Exhibit A which the Borrower signs and
delivers to Lender pursuant to Section 7 ("Note").
2. Business Loan; Franchisee Loan Program. Borrower agrees that Borrower
will use the proceeds of the Loan only for the business purpose(s) specified
in Annex I hereto. The proceeds of the Loan will not be used for personal,
family, household or consumer purposes. Borrower acknowledges that: (a) the
Loan is provided under a financing program (the "Franchisee Loan Program") of
Lender under which similar financing may be provided by Lender to other
persons for similar purposes; (b) Lender may finance its lending under the
Franchisee Loan Program by selling or granting interests in Lender's rights
under this Agreement and other similar loan documents to purchasers
("Purchasers") or to an agent, trustee or other representative for Purchasers
("Purchaser Agent"), and the Purchasers intend to finance their purchase and
holding of such interests on an aggregate basis and not on a basis solely
related to this Agreement; (c) Lender and/or Purchasers may grant a security
interest in their rights under this Agreement to a party or parties providing
financing or credit enhancement for the Franchisee Loan Program ("Credit
Enhancers"); (d) the interest rate applicable to the Loan will fluctuate from
time to time based on the costs of funding the Franchisee Loan Program; and
(e) the Purchasers, any Purchaser Agent, the Credit Enhancer(s) and their
respective successors and assigns are intended third-party beneficiaries
1
<PAGE>
of this Agreement and the other documents provided in connection with this
Agreement (each as it may be amended from time to time, together with this
Agreement, the "Loan Documents").
3. Interest. Borrower agrees to pay to Lender interest on the unpaid
balance of each Note outstanding from the date hereof until final maturity at
the rate per annum equal to the sum of (x) applicable margin specified in such
Note (the "Applicable Margin") plus (y) the Program Rate (as hereinafter
defined). Accrued interest shall be payable as provided in such Note. The
"Program Rate" shall be determined on each day by Lender as described in the
Program Rate Rider hereto. Each such determination by Lender shall be
conclusive absent manifest error. The unpaid principal amount of each Note
shall bear interest after final maturity, including maturity by acceleration,
at the rate per annum equal to the sum of (x) 2.0% plus (y) the Applicable
Margin plus (z) the Program Rate, which interest shall be payable upon demand
by Lender. All computations of interest shall be made on the basis of a year
of 360 days for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest is
payable.
In the event that any amounts due hereunder have not been paid to the
Lender within five (5) days after the date due, Borrower shall pay on demand
as a late charge, to the extent legally permitted, an amount equal to the
lesser of five percent (5%) of such overdue amounts or the maximum amount
allowed by law.
Borrower also agrees to pay to Lender or Purchaser Agent, upon its
written request providing reasonable detail, any increase in the cost to
Lender, any Purchaser or any Credit Enhancer in maintaining the Loan or any
reduction in any amount receivable by Lender, such Purchaser or such Credit
Enhancer arising by reason of (x) the introduction of or any change (including
any change by way of imposition or change of reserve requirements or tax laws)
in or in the interpretation of any law or regulation, in each case after June
2, 1994 or (y) compliance by Lender or its assignee with any guideline or
request from any governmental authority.
Notwithstanding anything to the contrary contained herein, interest
payable on the Loan shall at no time exceed the maximum amount permitted by
applicable law.
4. Fees. Borrower agrees to pay each of the fees described in Annex II
hereto, which fees shall be payable in immediately available funds on the date
of funding of the Loan or on such other day as is specified in such Annex.
5. Payments. Borrower shall make all payments hereunder not later than
11 a.m., New York time, on the date when due in U.S. dollars through the
Disbursing Account as provided in Section 11(e) for the account of Lender. All
payments, whenever made, shall apply first toward accrued interest, with the
remainder of any payment applying toward principal and other amounts due.
Lender, any Purchaser and any Purchaser Agent is authorized to record in its
records and/or on the related Note (as defined below) the principal amount of
the portion of the Loan evidenced thereby and each repayment thereof. The
amount so recorded shall be rebuttable presumptive evidence of the principal
amount owing and unpaid on the Loan, but any failure to make such a record or
any error in the record shall not affect Borrower's obligation to repay the
Loan. Borrower agrees to pay to Lender upon Lender's demand any amount
required to compensate Lender for any additional losses, costs or expenses
Lender may incur
2
<PAGE>
(including without limitation by reason of its funding through the Franchisee
Loan Program) as a result of any late payment, including any delay in payments
from the Disbursing Account.
6. Prepayments. Upon 45 days' prior written notice to Lender, Borrower
may prepay all or any part of the principal of, or interest on, any Note on an
interest payment date not more than once in any year. Any partial prepayment
of principal shall be in an amount of at least $25,000 and shall be applied to
the install ments due on such Note in the inverse order of maturity. Any
partial prepayments shall not relieve or diminish any scheduled subsequent
payments of principal or interest until all obligations of Borrower with
respect to this Agreement are paid in full. Upon acceleration or any
prepayment of any portion of the Loan, Borrower shall pay to Lender and its
assignees (i) all losses, costs or expenses reasonably accrued as a result of
such payment, including any loss (including loss of anticipated profits), cost
or expense incurred by reason of liquidation or redeployment of deposits or
other funds acquired to maintain such portion of the Loan, and (ii) all unpaid
Hedge Payments (as defined in the Program Rate Rider hereto and whether due or
to become due in the future) related to the amount prepaid, as determined by
Lender.
7. Conditions Precedent to Loan. The obligation of Lender to make the
Loan pursuant to Section 1 of this Agreement is subject to satisfaction of the
following conditions precedent (unless otherwise waived by Lender) on or
before the date of this Agreement, in each case in form and substance
satisfactory to Lender:
(a) Lender shall have received the Note(s) evidencing the Loan,
duly executed by Borrower, and the guaranty attached hereto shall have been
duly executed by the persons listed on Annex III hereto as guarantors (the
"Guarantors") (the attached guaranty is hereby incorporated into and made a
part of this Agreement).
(b) Lender shall have received the trust deed or mortgage (in
either case, the ("Mortgage"), duly recorded in all applicable filing and
recording offices granting Lender a valid first priority perfected lien on the
real property relating to the applicable Burger King Restaurants, together
with evidence of payment of all filing and recording taxes and fees.
(c) Lender shall have received complete copies of any lease
agreement covering the related real property, and such landlord consents,
issued or committed title insurance policies, surveys, environmental audits
and appraisals with respect to the related real property, as are satisfactory
to Lender and which also are for the benefit of Purchaser Agent.
(d) Lender shall have received lien searches and evidence of filing
of Uniform Commercial Code financing statements in satisfactory form in the
appropriate offices and such other action required by Lender to perfect and
protect the security interest granted under this Agreement and the other Loan
Documents, and evidence of satisfactory insurance covering the Collateral (as
defined below) and the naming of Lender and Purchaser Agent as additional
insured, mortgagee and loss payee thereon.
(e) Lender shall have received a complete copy of the Franchise
Agreement(s).
3
<PAGE>
(f) Lender shall have received the authorization(s) required under
Section 11(e) authorizing Lender to debit the Disbursing Account (as defined
below) for the payments of all amounts due under the Loan Documents in form
and content acceptable to Lender.
(g) Lender shall have received all fees payable pursuant to
Section 4.
(h) Lender shall have received such additional documents,
agreements and certificates as Lender shall reasonably require.
(i) The other conditions set forth in Annex III hereto, if any,
shall have been satisfied or waived by Lender.
8. Additional Conditions Precedent to Loan. The obligation of Lender to
make the Loan (or any portion thereof) pursuant to Section 1 of this Agreement
is subject to satisfaction of the following additional conditions precedent
(unless otherwise waived by Lender) on or before the date of the Loan:
(a) The representations set forth in this Agreement and the other
Loan Documents shall be true and correct on the date of making of the Loan (or
portion thereof) as if made on such date. No Default (as defined below) shall
exist or will result from making the Loan. No material adverse change
affecting Borrower or any Guarantor shall have occurred.
(b) Lender shall have received such additional documents,
agreements and certificates as Lender shall from time to time reasonably
require.
The borrowing of the Loan (or any portion thereof) by Borrower shall be deemed
to constitute a representation by Borrower to Lender that the conditions
precedent to the Loan set forth in clause (a) of this Section 8 are satisfied.
9. Grant of Security Interest in Collateral. (a) To secure the Secured
Obligations (as defined below), Borrower hereby grants to Lender a security
interest in all of Borrower's right, title and interest in the following
described property and rights, whether now existing or hereafter arising and
wherever located, in each case to the extent such property or rights are used
or useful in the operation of a Restaurant, arise out of the operation of a
Restaurant or otherwise relate to a Restaurant (the "Collateral"):
(i) The Franchise Agreement(s); and
(ii) All inventory, raw materials, work in process and
materials sold, used or consumed or to be sold, used or consumed in Borrower's
business; and
(iii) All equipment, including, but not limited to, all
present and future machinery, computer hardware and software, vehicles,
furniture, fixtures, office and record keeping equipment, parts and tools and
all other tangible personal property and all leases and licenses with respect
thereto; and
(iv) Each and every right to the payment of money, whether
such right to payment arises out of a sale, lease or other disposition of
goods or other property, out of a rendering of services,
4
<PAGE>
out of a loan, out of the overpayment of taxes or other liabilities or
otherwise arises under any contract or agreement, whether such right to
payment is or is not already earned by performance, and howsoever such right
to payment may be evidenced, together with all of the rights and interest
(including all liens and security interest) which Borrower may at any time
have by law or agreement against any account debtor or other obligor obligated
to make any such payment or against any of the property of such account debtor
or other obligor; all including but not limited to all present and future debt
instruments, chattel papers, accounts, loans and obligations receivable and
tax refunds; and
(v) All general intangibles of the Borrower, whether now owned
or hereafter acquired, including but not limited to, trademarks, trade
secrets, good will, trade names, customer lists, permits and franchises, and
the right to use Borrower's name; and
(vi) All certificates of title, instruments, documents,
chattel paper, deposits and credits (where necessary to perfect Lender's
security interest, a notation of Lender's security interest shall be made on
each Certificate of Title or other document, instrument or paper, as
appropriate); and
(vii) All other personal property of Borrower of every kind
and description which is now or hereafter comes into the possession of Lender
for any reason, including, but not limited to property delivered to Lender for
safekeeping, or for collection or exchange, and all dividends and
distributions on and other rights in connection with such property; and
(viii) In addition to any property generally described above,
the Collateral described on Annex IV hereto,
together with all parts, accessories, repairs, improvements and accessions
thereto and replacements and substitutions thereof; and proceeds (including,
but not limited to, insurance proceeds), products and issue therefrom now or
hereafter at any time made or acquired; and all books and records with respect
thereto and all equipment containing such books and records.
(b) Until terminated by Lender in writing, the security interest
granted under this Agreement secures all performance and payment obligations
of Borrower under the Loan Documents, all extensions, modifications and
renewals thereof, and all prior, contemporaneous and future debts owed to
Lender by Borrower, whether originally owned or transferred to Lender (the
"Secured Obligations"). The Loan and the other Secured Obligations may be
secured by prior or subsequent security documents notwithstanding that such
security is not indicated hereon.
(c) Borrower hereby irrevocably appoints Lender as Borrower's
attorney-in-fact (with power of substitution), which power of attorney is
coupled with an interest, with full authority in the place and name of
Borrower, Lender or otherwise, from time to time, to take any action and to
execute any instrument which Lender may deem necessary or advisable to
accomplish the purposes of the Loan Documents, including without limitation
with respect to perfection, collection, endorsement, filing claims, sale or
other disposition and insurance. Lender may, but shall not be obligated to,
perform any of Borrower's undertakings under this Agreement. Lender has no
duty to Borrower or any Guarantor as to any Collateral or the preservation of
any rights against other parties other than safe custody of Collateral in its
possession.
5
<PAGE>
(d) The Secured Obligations are also secured by (and the term
"Collateral" shall include any property and rights in which Lender is granted
a security interest in under) the mortgages delivered contemporaneously to
Lender herewith and/or other separate collateral documents (if any) described
in Annex IV hereto.
(e) To induce Lender to extend credit to Borrower hereunder,
Borrower has requested BKC to (i) consent to the creation of liens on the
Franchise Agreements, [and certain leases on which BKC is lessor (the
"Leases")] and (ii) provide to Lender information with respect to the
Franchise Agreements [the Leases], the Restaurants, Borrower and its
affiliates from time to time (including without limitation notice of default
by Borrower and its affiliates in the performance of their obligations under
any franchise agreements, leases or other contracts with BKC). BKC has
expressed its willingness to permit such liens and to provide such
information, subject to certain conditions, including without limitation (i)
Lender's agreement to provide notice to BKC of Defaults and to provide other
information to BKC from time to time with respect to the transactions
contemplated by the Loan Documents and the parties thereto, and (ii)
provisions with respect to Lender's exercise of its rights and remedies with
respect to the Collateral, and the timing of such exercise. Borrower agrees
that (x) BKC and Lender may give such notices, and exchange such information,
(y) BKC and Lender may from time to time confer with respect to each such
party's exercise of its respective rights and remedies, and (z) Lender's
exercise of its rights and remedies will be subject to the terms of the BKC
consent. BKC may rely on such agreement of Borrower as if it were a party
hereto.
10. Representations. To induce Lender to make the Loan, Borrower
represents and warrants to Lender as follows:
(a) Borrower (if a corporation or partnership) is duly organized
and in good standing under the laws of the State of its organization and
possesses all necessary licenses, permits, intellectual property rights,
franchises and qualifications (including without limitation in each
jurisdiction where Borrower does business) necessary to operate its business.
Borrower is an authorized franchisee under the Franchise Agreements and the
term of the Franchise Agreements extends beyond the final maturity of the
Loan. All BKC franchisees who are under common control with Borrower (or which
control Borrower or which are controlled by Borrower) are listed on Annex V
hereto (all such franchisees being collectively called ("Related Persons").
Neither Borrower nor any Related Person is in default of any obligations to
Lender, BKC or any of their respective affiliates.
(b) The entering into and performance by Borrower of the Loan
Documents do not violate or breach any provision of law, any constitutive
document of Borrower or any agreement or other obligation affecting Borrower.
The Loan Documents have been duly authorized and entered into by Borrower and
constitute the legal, valid and binding obligations of Borrower, enforceable
in accordance with their respective terms. The Loan Documents are not subject
to any dispute, offset, counterclaim or defense. Borrower acknowledges and
agrees that no claim or defense which Borrower may at any time have against
BKC or any affiliate of BKC (other than Lender) shall relieve Borrower of its
obligations under the Loan Documents, and Borrower will not assert any offset,
counterclaim or defense to its obligations under the Loan Documents as a
result of any such claim or defense against BKC or its affiliates. No approval
or other action of any governmental authority is required for the entering
into and performance by Borrower of the Loan Documents (including without
limitation the grant of Collateral).
6
<PAGE>
(c) All factual information provided by or on behalf of Borrower to
Lender is true and accurate as of the date on which it is dated or certified
and not incomplete by omitting to state any material facts necessary to make
such information not misleading. The financial statement described on Annex V
hereto delivered by Borrower to Lender is complete and correct, fairly
presents the financial condition of Borrower, and was prepared in accordance
with generally accepted accounting principles. Since the date of such
financial statement no material adverse change affecting the Borrower has
occurred. Borrower is not in default on any payment obligation or any material
contract. Borrower is not subject to any unusual or unduly burdensome
agreement or governmental order materially affecting it. There are no pending
or threatened claims or litigation which could materially adversely affect
Borrower.
(d) Borrower, the Collateral and each Restaurant site are in
compliance in all material respects with all applicable law (including, but
not limited to, environmental, zoning, health, safety, pension and labor
laws). Borrower has no material unfunded pension liability with respect to any
pension or employee benefit plan for employees of Borrower or any affiliate of
Borrower. There are no hazardous waste materials, toxic materials, hazardous
waste dump sites or toxic or chemical waste clean-up requirements currently on
or being conducted on any Collateral or the site of any Restaurant. Borrower
has no knowledge that any Collateral or the site of any Restaurant has ever
been the site of any contamination by any hazardous or toxic waste materials,
or used in a manner making such contamination more likely than not or the
subject of any environmental inquiry by any authority. Borrower has filed all
applicable tax returns that are required to be filed by it, and has paid or
has caused to be paid all taxes to the extent that such taxes have become due.
Such tax returns properly reflect the applicable tax liability of Borrower for
the periods covered thereby.
(e) After giving effect to the Loan, (i) the assets of Borrower, at
fair valuation, exceed its liabilities, (ii) the capital of Borrower is not
unreasonably small to conduct its business, and (iii) Borrower has not
incurred debts, and does not intend to incur debts, beyond its ability to pay
such debts as they mature.
(f) Borrower is the owner of the Collateral free from any security
interest or encumbrance and the Collateral is not covered by any financing
statement, except for (i) liens for current taxes not delinquent, (ii) the
security interest granted herein, and (iii) liens shown on Annex V hereto.
This Agreement creates a valid perfected first priority security interest in
the Collateral, and all actions necessary or desirable to perfect or protect
such security interest have been taken. The chief place of business and chief
executive office of Borrower is described on Annex V hereto. If Borrower is an
individual, Borrower's residence is described on Annex V hereto. The office
where Borrower keeps its records concerning the Collateral, and the
location(s) of the Collateral are listed on Annex V hereto. None of the
Collateral nor any site of any Restaurant is located in an area identified by
the Secretary of Housing and Urban Development or other appropriate authority
as an area having special flood hazards pursuant to the National Flood
Insurance Act of 1968, or the Flood Disaster Protection Act of 1973, as
amended, or any successor law.
(g) Each Restaurant site (and the Collateral, as applicable) is
free of material damage and waste and, to the best of Borrower's knowledge,
there are no material mechanical or structural defects in any Restaurant or
the Collateral. To the best of Borrower's knowledge, there is no proceeding
pending for the total or partial condemnation of or affecting any Restaurant.
Any easement agreement benefitting any Restaurant or the Collateral (i) is in
full force and effect, (ii) has no default thereunder
7
<PAGE>
with respect to any party thereto, (iii) contains no executory obligations
with respect to Borrower other than normal obligations standard in the
industry, and (iv) has priority over, or the recorded consent of, any
mortgagee or holder of any other prior lien on the burdened property.
11. Covenants. So long as any Secured Obligations remain unpaid or
unperformed or Lender has any commitment that could give rise to Secured
Obligations, Borrower agrees as follows:
(a) Borrower will maintain its existence in good standing under
applicable state law and regulations (if not an individual) and all necessary
licenses, permits, franchises and qualifications necessary to operate its
business. Borrower will comply with its organizational documents (if any) and
applicable law in all material respects. Borrower will maintain adequate books
and accounts in accordance with generally accepted accounting principles.
Borrower will pay state and local franchise fees, taxes (including intangible
taxes) and other liabilities when due. Borrower will maintain its status as a
franchisee under, and comply in all material respects with the terms of the
Franchise Agreement(s). Borrower will own or lease sufficient equipment for
the operation of its business. Borrower will maintain its business facilities
in good condition to permit its continuing operations. Borrower will comply
with all applicable environmental law (including without limitation all
reporting and notice requirements) and will remedy any release or spill of
hazardous substances on any Collateral or the site of any Restaurant in
accordance with applicable environmental law to the satisfaction of the
applicable authorities.
(b) Borrower will maintain insurance (including flood plain
insurance, if applicable) of the types and in amounts customarily carried by
businesses similar to Borrower's, and keep the Collateral insured against such
risks, with such limits, and upon such additional terms and conditions as
Lender may reasonably require. Lender shall be named as additional insured,
mortgagee and loss payee under said policies. Unless prohibited by applicable
law, Lender is hereby authorized (but not required or obligated) to act as
attorney in fact for Borrower in making and settling claims under said
policies and endorsing Borrower's name on any drafts or checks paying losses
under said policies. Borrower will not carry separate or additional insurance
concurrent in form or contributing, in the event of loss, with that required
under the Loan Documents unless endorsed in favor of Lender as loss payee,
mortgagee or additional insured, as applicable, and otherwise acceptable to
Lender in all respects. Borrower will deliver to Lender, upon request, proof
of payment and Certificates of Insurance for all Insurance required of
Borrower.
(c) Borrower will defend the Collateral against all claims and
demands at any time claiming the same or any interest therein. Borrower will
not sell or offer to sell or otherwise transfer or encumber the Collateral or
any interest therein without the prior written consent of Lender, unless (i)
said Collateral is the inventory of Borrower, or (ii) said Collateral is
equipment which is sold or traded in and the proceeds of such sale or trade in
are used to acquire replacement equipment of at least comparable value.
Borrower will immediately notify Lender in writing of any change of address
from that shown in this Agreement and also, upon demand, furnish to Lender
such further information and will execute and deliver to Lender such financing
statements, mortgages and other papers and will do all such acts and things as
Lender may at any time or from time
8
<PAGE>
to time reasonably request and/or as may be necessary or appropriate to
comply with or accomplish the covenants and agreements contained in the
Loan Documents, including without limitation establishing and maintaining
a valid perfected first priority security interest in the Collateral as
security for the Secured Obligations. Borrower will not permanently remove
any Collateral from the locations specified herein without prior written
notice to Lender of the location or locations to which Borrower desires to
remove the Collateral and written consent of Lender. Borrower will keep the
Collateral in good order and repair, will not waste or destroy the Collateral
or any part thereof, and will not use or permit anyone else to use the
Collateral in violation of any applicable law or policy of insurance thereon.
Borrower will permit Lender to examine and inspect the Collateral and
Borrower's books and records wherever located at any reasonable time or times.
(d) Borrower will furnish Lender with the financial and tax
information with respect to Borrower and the Guarantors specified in Annex VI
hereto, in each case at the times specified in such annex. Borrower will
notify Lender promptly (but in no event more than five days after the
occurrence of) (i) any Default, (ii) any change in name, address or
organizational structure of Borrower, (iii) any notification from an insurer
of its intention to materially alter or cancel any insurance policy Borrower
is required to maintain, any material alteration, termination or cancellation
of any insurance policy Borrower is required to maintain, and any uninsured or
partially uninsured loss or any threatened or pending litigation claim in
excess of $10,000, any other matter which might materially adversely affect
Borrower's or any Guarantor's financial condition or affairs, (iv) any matured
or unmatured default by Borrower or any Related Person under a BKC franchise
agreement, or receipt by Borrower or any Related Person of a notice of default
from BKC with respect to any BKC franchise agreement, (v) any release or spill
of hazardous substances on any Collateral or the site of any Restaurant and
any report to any authority of any release or spill of hazardous substances on
Collateral or the site of any Restaurant, and (vi) any condition or occurrence
that (A) results in noncompliance with any applicable environmental law, or
(B) could reasonably be expected to result in liability to Borrower under
environmental law, or (C) could reasonably be expected to cause any Collateral
or the site of any Restaurant to become subject to restrictions on ownership,
occupancy, use or transfer under environmental law. Borrower will furnish
Lender any other information reasonably requested by Lender from time to time.
(e) Borrower will maintain (i) an account ("Disbursing Account")
with a commercial bank that shall be a member of the automated clearing house
system (the "ACH System") and (ii) such authorizations as may be necessary to
enable Lender or its designated collecting agent to obtain payments due under
this Agreement from the Disbursing Account through the ACH System. Borrower
shall not terminate the Disbursing Account or such authorizations at any time
during the term of this Agreement without having provided 60 days' prior
written notice thereof to Lender, which notice shall specify the institution
at which a substitute Disbursing Account has been established and the account
number of such substitute Disbursing Account, and certifying that all
authorizations necessary to enable Lender or its collection agent to obtain
payments due under this Agreement from such substitute Disbursing Account
through the ACH System have been given and are then in effect. By not later
than the opening of business on each day that any payment shall be due under
this Agreement, Borrower shall cause an amount, in immediately available
funds, equal to such payment to be present in the Disbursing Account.
(f) Borrower will not create or permit to exist any security
interest in the Collateral except for (i) liens for current taxes not then due
and payable and not then delinquent and the security interest
9
<PAGE>
granted herein and in the other Loan Documents and/or (ii) purchase money
security interests, vehicle leases and loans, and leasehold interests under
capital leases, provided that such encumbrances, liens and security interests
(x) shall only attach to the assets so purchased, mortgaged or leased and (y)
shall not exceed a total aggregate amount of $100,000.00 at any time during the
term of the Loan.
(g) Borrower will maintain Fixed Charge Coverage Ratio(s) of greater
than 1.10:1, for each of (x) the Restaurants, and (y) Borrower's consolidated
restaurant operations. Fixed Charge Coverage Ratio(s) will be measured at the
end of each Borrower's fiscal quarter on a rolling twelve (12) month basis.
"Fixed Charge Coverage Ratio" means, with respect to any period, Cash Flow (as
hereinafter defined) divided by Total Fixed Charges (as hereinafter defined).
"Cash Flow" means, with respect to any period, the sum of: (i) net income from
the Restaurants before taxes for such period; plus, (ii) depreciation and
amortization used in calculating net income for such period; minus (iii)
compensation (advances, dividends, salaries, etc.) paid to Borrower's direct
or indirect owners for such period; minus (iv) principal payments made or
required to be made in respect of Borrower's long term debt obligations and
capital leases during such period; plus (v) Total Fixed Charges for such
period. "Total Fixed Charges" means, with respect to any period and each
Restaurant, the sum of: (i) rent, equipment rent, and Burger King(Registered
Trademark) advertising and royalties fees, paid or payable during such period;
plus (ii) the current portion of Borrower's long term debt and capital leases;
plus (iii) interest paid or payable by Borrower during such period.
(h) Borrower will not become a guarantor or surety of, or otherwise
become responsible in any manner with respect to, any undertaking of any other
person or entity, or make loans or advances to any other person or entity,
except for (i) the endorsement in the ordinary course of collection, of
instruments payable to Borrower's order, (ii) arrangements clearly reflected
in the financial statement described in Section 10(c) hereof, and (iii) other
advances so long as after making such advances Borrower is not in default of
the required minimum Fixed Charge Coverage Ratio under Section 11(g),
calculated on a pro forma basis as of the end of Borrower's last fiscal
quarter and as of the end of Borrower's next fiscal quarter.
(i) Borrower (if not an individual) will not be party to any merger
or consolidation, or acquire all or substantially all of the assets or stock
of, or any partnership or joint venture interest in, any other person or
entity; and Borrower will not sell, lease or otherwise transfer all or
substantially all of its assets.
(j) Borrower will not permit the stated term of any Franchise
Agreement relating to the Restaurants to end prior to the final maturity of
the Loan or agree to any amendment to any Franchisee Agreement that is
materially likely to impair Borrower's ability to repay the Loan; provided
that changes in the operations manual incorporated by reference in such
Franchise Agreement will not be considered an amendment for purposes of this
covenant.
(k) Borrower will pay all costs of preparation of the Loan
Documents as set forth in Annex II and all costs of enforcement or collection,
including but not limited to reasonable attorneys' fees if Lender is the
prevailing party ("prevailing party" shall include a party who receives
substantially the relief desired whether by dismissal, summary judgement,
judgement, or otherwise) at any time paid or incurred by Lender on account of
such preparation, enforcement or collection, whether or not suit is filed with
respect thereto. Borrower will pay all stamp, documentary, recording and other
taxes and fees
10
<PAGE>
payable in connection with the Loan Documents and save Lender harmless
from and against all liabilities with respect to such taxes and any late
payment or nonpayment of such taxes. To the fullest extent permitted by law,
Borrower hereby agrees to indemnify Lender and each Purchaser and Credit
Enhancer on an after-tax basis for any and all taxes arising out of the Loan
and the Collateral and the holding of any rights therein, other than income
taxes and franchise taxes imposed by the jurisdiction under which Lender or
such other entity, as the case may be, is qualified to do business or has an
office or any political subdivision thereof. To the fullest extent permitted
by law, Borrower hereby agrees to indemnify and defend Lender, each Purchaser,
each Credit Enhancer and each of their respective officers, directors,
stockholders, employees, attorneys, agents, trustees and representatives
(each, an "Indemnitee") for any costs, losses, expenses, liabilities or
damages that such party may incur by reason of the financing provided under
this Agreement, any Collateral or any transaction related hereto (including
without limitation any liability imposed under environmental law), other than
those resulting solely from such Indemnitee's gross negligence or willful
misconduct. The provisions of this paragraph shall survive termination of this
Agreement.
12. Default. Borrower shall be in default upon the occurrence of any one
or more of any of the following events (each an "Event of Default"; a
"Default" is any Event of Default or any event, which with the lapse of time
or the giving of notice or both would be an Event of Default):
(a) Borrower shall fail to pay, when due, any amount required
hereunder, and such failure shall continue for five (5) days after notice of
such failure by Lender; or Borrower shall fail to pay, when due (but subject
to any applicable grace period) any other indebtedness of Borrower to Lender
or any third parties; or
(b) Any warranty or representation made by Borrower or any
Guarantor shall prove to be false or misleading in any respect; or
(c) Borrower or any Guarantor shall liquidate, merge, dissolve,
terminate its existence, suspend business operations, die (if an individual),
generally wind up or readjust its debt, have a receiver or similar official
appointed for all or any part of its property, make an assignment for the
benefit of its creditors, admit in writing its inability to pay its debts when
due, generally fail to pay its obligations when due, or have any bankruptcy or
insolvency proceeding with respect to it or a substantial part of its property
instituted by or against it, or take any action to authorize any of the
foregoing; or
(d) Borrower or any Guarantor fails to perform or meet any
covenants or obligations under any Loan Document or any other agreement
intended to secure the repayment of the Secured Obligations, and such failure
shall continue for 30 days after notice from Lender of such failure; or
(e) Any material provision of any Loan Document shall for any reason
cease to be valid and binding on any party thereto and such invalidity continues
for ten days, or any Guarantor revokes or seeks to revoke its guaranty or this
Agreement and the other Loan Documents shall cease or fail to create a valid
perfected first priority security interest in the Collateral; or
(f) Borrower or a Related Person shall fail to perform any
obligation under any BKC franchise agreement, and such failure shall not have
been cured on or before the first date on which BKC may terminate such BKC
franchise agreement by reason of such failure; or any BKC franchise agreement
11
<PAGE>
of Borrower or a Related Person is terminated or canceled; or Borrower or any
Related Person shall default in the performance of its obligations to Lender
under any loan or credit agreement (other than this Agreement), subject to
applicable grace periods; or
(g) Borrower shall fail to perform its obligations under any lease
or other material contract relating to the Restaurants (such as a common area
maintenance agreement), and such failure shall continue for thirty (30) days
after notice from Lender; or
(h) Enforcement shall have commenced of any judgment or final order
for the payment of money in an amount of $25,000 or more against Borrower or
any Guarantor without a stay of enforcement for a period of ten days, unless
contested in good faith by appropriate proceedings with adequate reserves set
aside therefor satisfactory to Lender; or
(i) Borrower or any Guarantor shall at any time suffer a material
adverse change in its business, condition (financial or otherwise),
operations, performance, properties or prospects.
13. Remedies. If any Event of Default occurs under Section 12(c), the
commitment of Lender to make the Loan shall terminate and the entire unpaid
balance of principal and interest on the Loan shall be immediately due and
payable without notice or demand. If any other Event of Default occurs, Lender
may, at its option, declare its commitment to make any Loan terminated and/or
the entire unpaid balance of principal and interest on the Loan immediately
due and payable without notice or demand at any time after such Event of
Default. If any Event of Default exists under this Agreement, Lender shall
also have all the rights under the Uniform Commercial Code to realize on the
Collateral in addition and cumulative with any other rights granted under the
Loan Documents or otherwise. These rights include without limitation the right
to demand payment from any Guarantor, to take possession of Collateral, to
sell Collateral at public or private sales and on such terms as Lender deems
advisable (and to be the purchaser in such sale), and to require Borrower to
make Collateral available to Lender at a place to be designated by Lender
which is reasonably convenient to both parties. Borrower and Lender agree that
as to any reasonable notice requirement under the Uniform Commercial Code,
that such reasonable notice requirements shall consist of five business days'
written notice mailed to the last known address of Borrower known to Lender.
Expenses of retaking, holding, preparing for sale, selling or the like will
first be paid from the proceeds before the balance will be applied toward the
indebtedness.
14. Setoff. Lender may at any time before or after Default exercise its
right to set-off all or any portion of the indebtedness evidenced hereby
against any liability or indebtedness of Lender to Borrower (whether owned by
the Borrower alone or in conjunction with any other person or entity, provided
that Borrower has a beneficial interest therein) without prior notice to
Borrower.
15. Waiver. Borrower's obligation to pay the Secured Obligations is
absolute, unconditional and irrevocable under all circumstances whatsoever.
Presentment, protest, notice of non-payment (except for such notice as
contemplated under section 12(a) above) and dishonor of this Agreement are
hereby waived. Borrower waives any claim or defense based on Lender's choice
of remedies, Lender's failure to perfect or protect its interest in any
Collateral or any requirement that Lender pursue any remedy or party instead
of or before another. Lender may release any party or security, make future
loans to any party or contractually change its relationship to or the
obligation of any party without waiving or affecting the obligation of any
other party to this Agreement. A party to this Agreement is any maker,
12
<PAGE>
surety, endorser or guarantor. Waiver by Lender at any time or any delay
by Lender in the exercise of any right conferred by this Agreement or any
other Loan Document will not affect Lender's future exercise of said right or
any other. Borrower agrees that nothing shall discharge or satisfy the
liability of Borrower hereunder except the full payment and performance of all
Secured Obligations. Lender shall not be deemed to have received a payment under
the Loan if Lender is required to turn over any payment due to the actions or
inactions of Borrower. Any and all obligations of one Borrower or Guarantor to
another Borrower or Guarantor are hereby subordinated to the full payment and
performance of the Secured Obligations.
16. Governing Law; Jurisdiction. This Agreement and the other Loan
Documents will be governed by the internal laws of the State of New York,
except that the law of the jurisdiction in which Collateral is located may
govern the validity, perfection and enforcement of the security interest
granted hereunder in such Collateral. The fact that any part of any Loan
Document may not be enforced will not affect the enforceability of the rest of
such Loan Document. Borrower irrevocably submits to the nonexclusive
jurisdiction of any Federal or state court located in the State of New York or
Florida with respect to any proceedings relating to the Loan Documents, and
irrevocably agrees not to assert any objection to venue in such court or any
claim of inconvenient forum. Borrower irrevocably consents to service of
process by mailing of such process by registered or certified mail, postage
prepaid, at its address set forth below.
17. Assignment. BORROWER CONSENTS TO THE ASSIGNMENT BY LENDER OF ALL OR
ANY PORTION OF ITS RIGHTS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS,
INCLUDING, BUT NOT LIMITED TO, ASSIGNMENT(S) TO PURCHASERS AND CREDIT
ENHANCERS MADE IN CONNECTION WITH THE FRANCHISEE LOAN PROGRAM. BORROWER
ACKNOWLEDGES AND AGREES THAT ANY AND ALL RIGHTS OF LENDER UNDER THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS MAY BE EXERCISED FROM TIME TO TIME BY ANY
ASSIGNEE OR SUCCESSOR OF LENDER, INCLUDING, BUT NOT LIMITED TO, ANY PURCHASER,
ANY PURCHASER AGENT, ANY CREDIT ENHANCER OR ANY AGENT, TRUSTEE OR OTHER
REPRESENTATIVE THEREFOR, INCLUDING CITICORP NORTH AMERICA, INC., AS SERVICING
AGENT. BORROWER FURTHER ACKNOWLEDGES AND AGREES THAT LENDER MAY PROVIDE TO ANY
SUCH ASSIGNEE OR SUCCESSOR ANY AND ALL INFORMATION IN LENDER'S POSSESSION WITH
REGARD TO BORROWER, ANY GUARANTOR OR OWNER OF BORROWER, OR ANY TRANSACTION
CONTEMPLATED BY THE LOAN DOCUMENTS. Borrower may not assign its rights and
obligations under the Loan Documents without Lender's prior written consent.
Lender may grant participations in its rights under the Loan Documents.
18. Successors; Joint and Several Liability; Time is of the Essence;
Independent Parties. This Agreement and the other Loan Documents shall be
binding upon each Borrower and the Borrower's heirs, executors,
administrators, successors and assigns. If there is more than one Borrower,
the liability of each Borrower for the payment and performance of each
obligation under the Loan Documents is joint and several. For the payment of
any Secured Obligations, time is of the essence. Lender and Borrower are not
joint venturers, partners or agents of the other. Lender shall not be liable
for any of the debts or other liabilities contracted by or due from Borrower
and Borrower shall hold Lender free and harmless therefrom.
13
<PAGE>
19. Notices. All notices and other communications relating to this
Agreement shall be made in writing and delivered to Borrower at its chief
executive office (or residence) as represented by Borrower herein and
delivered to Lender c/o Citicorp North America, 2600 Michelson Drive, 12th
Floor, Irvine, California 92715, Attention: Program Manager, Phone
800/784-3378, Facsimile (714) 250- 6990, or to either party at such other
address as it gives written notice of to the other party. Any such notice
shall be deemed effective (i) when delivered, if delivered personally or by
receipted-for telex or facsimile transmission, (ii) two days after delivered
(properly addressed and all fees paid) for overnight delivery service to a
courier which regularly provides such service and regularly obtains executed
receipts evidencing delivery, or (iii) five days after deposited (properly
addressed and stamped for certified mail delivery) in the United States mail.
20. Waiver of Trial by Jury. EXCEPT AS MAY BE PROHIBITED BY LAW,
BORROWER AND LENDER EACH HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND
UNCONDITIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION NOW EXISTING OR HEREAFTER ARISING RELATING TO THIS AGREEMENT, THE LOAN,
THE COLLATERAL, ANY OTHER LOAN DOCUMENT, THE FRANCHISEE LOAN PROGRAM, ANY
DEALINGS OR TRANSACTIONS RELATED THERETO, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. IF
THE SUBJECT MATTER OF ANY SUCH LITIGATION IS ONE IN WHICH THE WAIVER OF A JURY
TRIAL IS PROHIBITED, NEITHER BORROWER NOR LENDER SHALL PRESENT A
NON-COMPULSORY COUNTERCLAIM IN SUCH LITIGATION OR ANY CLAIM ARISING OUT OF OR
IN CONNECTION WITH ANY OF THE FOREGOING. FURTHERMORE, NEITHER LENDER NOR
BORROWER SHALL SEEK TO CONSOLIDATE ANY SUCH ACTION IN WHICH A JURY TRIAL HAS
NOT BEEN WAIVED. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER'S
EXTENSION OF CREDIT TO THE BORROWER.
21. Final Agreement; Amendments; Construction. THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT OF BORROWER AND LENDER AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN BORROWER AND
LENDER. None of the terms and provisions of this Agreement or any other Loan
Document may be amended, waived or otherwise modified except in writing by the
party to be bound thereby. This Agreement may be executed in any number of
counterparts, all of which taken together will constitute one instrument.
Captions used in any Loan Document are for identification only and are not
part of such Loan Document. Accounting terms not specifically defined in any
Loan Document are to be construed in accordance with generally accepted
accounting principles consistently applied.
22. Severability. If the Lender chooses to waive any covenant,
paragraph, or provision of this Agreement, or if any covenant, paragraph, or
provision of this Agreement is construed by a court of competent jurisdiction
to be invalid or unenforceable, it shall not affect the applicability,
validity, or enforceability of the remaining covenants, paragraphs, or
provisions.
23. Additional Provisions. This Agreement is also subject to the
additional provisions, if any, set forth on Annex VII hereto.
14
<PAGE>
24. Filing. A carbon, photographic or other reproduction of this
Agreement may be used and shall be as effective for filing as the original.
Description of Real Estate if above Collateral includes fixtures:
See Annex IV hereto.
15
<PAGE>
BORROWER: WITNESSES:
AMERIKING COLORADO CORPORATION I,
a Delaware corporation
By: ___________________________/SEAL/ By: ___________________________/SEAL/
Name: _______________________________ Name: _______________________________
Title: ______________________________
By: ___________________________/SEAL/ By: ___________________________/SEAL/
Name: _______________________________ Name: _______________________________
Title: ______________________________
Address:
Ameriking Colorado Corporation I
2215 Enterprise Drive
Westchester, Illinois 60154
Attention: Joel Aaseby
ENDORSEMENT
-----------
PAYABLE TO THE ORDER OF CITICORP NORTH AMERICA, INC., AS INVESTOR AGENT,
WITHOUT RECOURSE, EXCEPT AS PROVIDED IN THE FRANCHISE LOAN PURCHASE AND SALE
AGREEMENT BETWEEN LENDER, THE INVESTOR AGENT AND CERTAIN OTHER PARTIES
FRANCHISE ACCEPTANCE CORPORATION LIMITED
By: /s/ Dan McCarthy /SEAL/
----------------------------------
Name: Dan McCarthy
Title: Director
By: /s/ Patrick C. Mannigan /SEAL/
----------------------------------
Name: Patrick Mannigan
Title: Director
4
<PAGE>
If checked, this Agreement is to be filed (for record) in the real estate
records.
BORROWER: WITNESSES:
AMERIKING COLORADO CORPORATION I,
a Delaware corporation
By: /s/ Kim Manna /SEAL/
By: /s/ Lawrence E. Jaro /SEAL/ ---------------------------
------------------------------- Name: Kim Manna
-------------------------
Name: Lawrence E. Jaro
Title: CEO
By: /s/ Joel Aaseby /SEAL/ By: /s/ Donna Faget /SEAL/
------------------------------- ---------------------------
Name: Joel Aaseby Name: Donna Faget
Title: CEO -------------------------
Address:
Ameriking Colorado Corporation I
2215 Enterprise Drive
Westchester, Illinois 60154
Attention: Joel Aaseby
Federal Employer Identification Number: 84-131-7307
FRANCHISE ACCEPTANCE CORPORATION LIMITED
By: _______________________________________________________ /SEAL/
Title: ___________________________________________________________
By: _______________________________________________________ /SEAL/
Title: ___________________________________________________________
Address: Franchise Acceptance Corporation Limited
c/o Grand Metropolitan Finance Ireland
La Touche House
International Financial Services Centre
Dublin 1
Ireland
16
<PAGE>
INDEX OF DEFINED TERMS
ACH System.............................................................9
Agreement..............................................................1
Applicable Margin......................................................2
BKC....................................................................1
Borrower...............................................................1
Cash Flow.............................................................10
Collateral.............................................................4
Credit Enhancers.......................................................1
Default...............................................................11
Disbursing Account.....................................................9
Event of Default......................................................11
Fixed Charge Coverage Ratio...........................................10
Franchise Agreement....................................................1
Franchisee Loan Program................................................1
Guarantors.............................................................3
Indemnitee............................................................11
Lender.................................................................1
Loan...................................................................1
Loan Documents.........................................................2
Mortgage...............................................................3
Note...................................................................1
Program Rate...........................................................2
Purchaser Agent........................................................1
Purchasers.............................................................1
Related Persons........................................................6
Restaurants............................................................1
Secured Obligations....................................................5
Total Fixed Charges...................................................10
17
<PAGE>
SCHEDULE, ANNEXES, RIDERS AND EXHIBITS
Schedule 1 - Loans
Annex I - Restaurants and Business Purpose(s) of Loan(s)
Annex II - Fees
Annex III - Additional Conditions Precedent
Annex IV - Additional Collateral; Separate Collateral Documents;
Description of Real Estate
Annex V - Related Persons; Borrower's Financial Statement; Borrower's
Chief Place of Business and Chief Executive Office; Offices
Where Borrower Keeps Records Concerning Collateral; Locations
of Collateral; Exceptions to Lien Representation
Annex VI - Financial and Tax Reporting Requirements
Annex VII - Additional Provisions
Program Rate Rider
Management and Accounting Agreement Rider
Exhibit A - Form of Note
Exhibit B - [Intentionally Omitted]
Addendum
18
<PAGE>
SCHEDULE 1
to Loan and Security Agreement dated ____________
between Ameriking Colorado Corporation I, a Delaware corporation,
and Franchise Acceptance Corporation Limited
LOANS
Applicable To Be Disbursed Number of
Principal Amount Margin on or before Disbursements
- ---------------- ----------- ---------------------- --------------
$1,865,000.00 See Note(s) See Note(s)) 1
for Applicable for availability
Margin of funding
S-1
<PAGE>
ANNEX I
to Loan and Security Agreement dated _______________
between Ameriking Colorado Corporation I, a Delaware corporation,
and Franchise Acceptance Corporation Limited
RESTAURANTS
BK #2942 2708 11th Avenue, Greeley, Colorado
BK #4361 102 East 29th Street, Loveland, Colorado
BK #4690 1250 South Hover Street, Longmont, Colorado
BK #7885 2000 North Main Street, Longmont, Colorado
BK #9334 2393 West Eisenhower Boulevard, Loveland, Colorado
BUSINESS PURPOSE(S) OF LOAN(S)
The proceeds of the Loans will be used only for the following business
purpose(s) checked below:
____ acquisition of sites for one or more Restaurants approved by BKC,
____ upgrades or remodeling of Restaurants,
__X_ purchase of a Restaurant from BKC or another BKC franchisee,
__X_ in connection with the development of one or more Restaurants,
refinancing of an existing loan made to the Borrower,
AI-1
<PAGE>
ANNEX II
to Loan and Security Agreement dated ______________
between Ameriking Colorado Corporation I, a Delaware corporation,
and Franchise Acceptance Corporation Limited
FEES
Amount Type Payment Date
------ ---- -------------
$ 1,500.00 Documentation Fee at closing
$ 550.00 Environmental Fee at closing
$ 1,500.00 Title, Search and
Recording Fees at closing
$19,254.32 Legal Expenses at closing
AII-1
<PAGE>
ANNEX III
to Loan and Security Agreement dated ______________
between Ameriking Colorado Corporation I, a Delaware corporation,
and Franchise Acceptance Corporation Limited
ADDITIONAL CONDITIONS PRECEDENT
Borrower shall provide Lender, in a form reasonably acceptable to Lender,
evidence of the following documents (as applicable)
(a) [Intentionally Omitted];
(b) [Intentionally Omitted];
(c) [Intentionally Omitted];
(d) [Intentionally Omitted];
(e) [Intentionally Omitted];
(f) [Intentionally Omitted];
(g) [Intentionally Omitted];
(h) [Intentionally Omitted];
(i) Management and Accounting Agreement;
(j) Landlord Consent;
(k) Borrower's Certificate of Good Standing from both the State of
Colorado and the State of Delaware;
(l) FF & E Inventory;
(m) Secretary's Certificate relating to Incumbency and Corporate
Resolutions (Borrower); and
(n) [Intentionally Omitted].
AIII-1
<PAGE>
ANNEX IV
to Loan and Security Agreement dated ______________
between Ameriking Colorado Corporation I, a Delaware corporation,
and Franchise Acceptance Corporation Limited
ADDITIONAL COLLATERAL
None.
SEPARATE COLLATERAL DOCUMENTS
(a) four (4) UCC-1 Financing Statements with attachment, to be filed
with the clerk and recorder of Boulder, Larimer and Weld Counties,
and the Colorado Secretary of State, respectively.
(b) One (1) Conditional Assignment of Franchise Agreements.
(c) One (1) Conditional Assignment of Leases.
(d) Three (3) Leasehold Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Financing Statement to be filed with the clerk
and recorder of Boulder, Larimer and Weld Counties, respectively.
DESCRIPTION OF REAL ESTATE
1. Owner: White II Investments, LLC, a Colorado limited liability company
Property: Lot One, Block One, The Palmer Gardens, County of Larimer,
State of Colorado, known and identified as 102 East 29th Street,
Loveland, Colorado.
2. Owner: White III Investments, LLC, a Colorado limited liability company
Property: Lot 6, Main Street Center Subdivision, Replat C, Lots 6 and 7,
County of Boulder, State of Colorado, known and identified as 2000 North
Main Street, Longmont, Colorado.
3. Owner: White I Investments, LLC, a Colorado limited liability company
Property: Lot 3 Montview Subdivision, City of Loveland, County of
Larimer, State of Colorado, known and identified as 2393 West Eisenhower
Boulevard, Loveland, Colorado.
4. Owner: Longs Peak BK, a Colorado general partnership
Property: Lot 11A, Twin Peaks Mall Subdivision Replat "A", County of
Boulder, State of Colorado, known and identified as 1250 South Hover,
Longmont, Colorado.
5. Owner: The Estate of John R. P. Wheeler
Property: Legal description attached hereto as EXHIBIT A, for the
property commonly referred to as 2708 11th Avenue, Greeley, Colorado
AIV-1
<PAGE>
EXHIBIT A TO ANNEX IV
(Legal Description of 2708 11th Avenue, Greeley, Colorado)
PARCEL A
That part of the Southwest 1/4 of Section 17, Township 5 North, Range 65 West
of the 6th Principal Meridian, Greeley, Weld County, Colorado, more
particularly described as follows:
Commencing at the Southwest corner of Section 17, Township 5 North, Range 65
West of the 6th Principal Meridian, thence North 00'33'00" West, 297.04 feet
along the West line of Section 17, said line also being the center line of 11th
Avenue; thence North 89'27'00" East, 50.00 feet to the True Point of Beginning,
said point being on the Eastern Right-of-Way of 11th Avenue; thence North
00'33'00" West, along said Eastern Right-of-Way of 11th Avenue, 70.00 feet;
thence North 89'27'00" East, 175.00 feet; thence South 00'33'00" East, 70.00
feet; thence South 89'27'00" West, 175.00 feet to the True Point of Beginning.
PARCEL B - An Exclusive Sign Easement over the following:
That part of the Southwest 1/4 of Section 17, Township 5 North, Range 65 West
of the 6th Principal Meridian, Greeley, Weld County, Colorado, more
particularly described as follows:
Commencing at the Southwest corner of Section 17, Township 5 North, Range 65
West of the 6th Principal Meridian; North 00'33'00" West, 117.70 feet along the
West line of Section 17, said line also being the center line of 11th Avenue;
thence North 89'27'00" East, 50.00 feet to the True Point of Beginning, said
point being the intersection of Easterly Right-of-Way line of said 11th Avenue
and the Northerly Right-of-Way Line of U.S. 34 By-Pass; thence along said
Easterly Right-of-Way line of 11th Avenue North 00'33'00" West, 20.00 feet;
thence North 89'27'00' East, 15.00 feet; thence South 00'33'00" East, 21.88
feet to a point on the aforementioned Northerly Right-of-Way line of U.S. 34
By-Pass; thence along said Northerly Right-of-Way line of U.S. 34 By-Pass
North 83'24'10" West, 15.12 feet to the True Point of Beginning.
PARCEL C - An Exclusive Utility Easement over the following:
That part of the Southwest 1/4 of Section 17, Township 5 North, Range 65 West
of the 6th Principal Meridian, Greeley, Weld County, Colorado, more
particularly described as follows:
Commencing at the Southwest corner of Section 17, Township 5 North, Range 65
West of the 6th Principal Meridian; North 00'33'00" West 297.04 feet along the
West line of Section 17, said line also being the center line of 11th Avenue;
thence North 89'27'00" East, 50.00 feet to the True Point of Beginning, said
point being on the Eastern Right-of-Way of 11th Avenue; thence continuing
North 89'27'00" East, 10.00 feet; thence South 00'33'00" East, 159.34 feet;
thence South 89'27'00' West, 10.00 feet to a point on the aforementioned
Easterly Right-of-Way line of 11th Avenue; thence along said Easterly
Right-of-Way line North 00'33'00" West, 159.34 feet to the True Point of
Beginning.
EA-IV-1
<PAGE>
PARCEL D - A non-exclusive easement for ingress, egress, parking and utilities
over the unconstructed portions of the following:
A tract of land located in the Southwest Quarter (SWI/4) of Section 17,
Township 5 North, Range 65 West of the Sixth Principal Meridian, Weld County,
Colorado, and being more particularly described as follows:
Commencing at the Southwest corner of said Section 17, and considering the
West line of said Section 17 to bear North 00'33'00" West and with all other
bearings contained herein being relative thereto, thence North 00'33'00" West,
along the West line of said Section 17 and also the centerline of 11th Avenue,
City of Greeley, 117.70 feet; thence North 89'27'00" East, 50.00 feet to the
intersection of the East right-of-way line of said 11th Avenue and the North
right-of-way line of U.S. Highway No. 34 Bypass, said intersection being the
True Point of Beginning, thence North 00'33'00" West, along the East
right-of-way line of said 11th Avenue, 861.76 feet; thence North 89'57'30"
East, 214.7 feet; thence North 00'33'00" West, 244 feet to the South
right-of-way line of 26th Street, City of Greeley; thence North 89'57'30"
East, along the South right-of-way line of said 26th Street 790.3 feet to a
point on the West right-of-way line of 9th Avenue, City of Greeley; thence
South 00'01'10" East, along the West right-of-way line of said 9th Avenue 699.8
feet; thence South 89'59'30" West, 190.5 feet; thence South 00'01'10" East, 300
feet, thence North 89'57'30" East, 190.5 feet to the West right-of-way line of
said 9th Avenue; thence South 00'01'10" East, along said West right-of-way line,
217.33 feet to the North right-of-way line of U.S. Highway No. 34 Bypass; thence
along the North right-of-way of said U.S. Highway No. 34 Bypass by the following
three (3) courses and distances:
South 89'30'25" West, 305 feet;
North 73'09'30" West, 209.3 feet;
North 82'10'00" West, 482.2 feet to the True Point of Beginning, LESS AND
EXCEPT Parcels A, B and C above.
EA-IV-2
<PAGE>
ANNEX V
to Loan and Security Agreement dated ______________
between Ameriking Colorado Corporation I, a Delaware corporation,
and Franchise Acceptance Corporation Limited
RELATED PERSONS: NRE Holdings, Inc. and National Restaurant Enterprises, Inc.
BORROWER'S FINANCIAL STATEMENT: Proforma Financial Statements as submitted with
the loan application dated July 26, 1995.
BORROWER'S CHIEF EXECUTIVE OFFICE:
Ameriking Colorado Corporation I
2215 Enterprise Drive
Westchester, Illinois 60154
BORROWER'S CHIEF PLACE OF BUSINESS:
Ameriking Colorado Corporation I
2708 11th Avenue
Greeley, Colorado
OFFICE(S) WHERE BORROWER KEEPS RECORDS CONCERNING COLLATERAL:
Ameriking Colorado Corporation I
2215 Enterprise Drive
Westchester, Illinois 60154
LOCATIONS OF COLLATERAL:
BK #2941 2708 11th Avenue, Greeley, Colorado
BK #4361 102 East 29th Street, Loveland, Colorado
BK #4690 1250 South Hover Street, Longmont, Colorado
BK #7885 2000 North Main Street, Longmont, Colorado
BK #9334 2393 West Eisenhower Boulevard, Loveland, Colorado
EXCEPTIONS TO LIEN REPRESENTATION: NONE.
AV-1
<PAGE>
ANNEX VI
to Loan and Security Agreement dated ______________
between Ameriking Colorado Corporation I, a Delaware corporation,
and Franchise Acceptance Corporation Limited
FINANCIAL AND TAX REPORTING REQUIREMENTS
Borrower shall furnish, or cause to be furnished, to Lender each of the
following:
(a) Quarterly Reports. As soon as available and in any event within
thirty-one (31) days after the end of each of the first three quarters of each
fiscal year of Borrower, balance sheets of Borrower as of such quarter and
statements of income and retained earnings of Borrower for the period
commencing at the end of the previous fiscal year and ending with the end of
such quarter, certified by a representative of Borrower acceptable to Lender.
(b) Compliance Certificate. As soon as available and in any event within
thirty-one (31) days after the end of each of the second quarter and the
fourth quarter of each fiscal year of Borrower, a compliance certificate
signed by a representative of Borrower acceptable to Lender indicating that as
of the end of such quarter Borrower was in compliance with each of the
covenants contained in the Loan Documents.
(c) Annual Reports. As soon as available and in any event within 120
days after the end of each fiscal year of Borrower, (i) a copy of the annual
report for such year for Borrower containing financial statements for such
year certified in a manner acceptable to Lender by a representative of
Borrower acceptable to Lender, (ii) personal statements of each Guarantor, if
such Guarantor is an individual, or balance sheets and statements of income
and retained earnings, if such Guarantor is not an individual, for the most
recent fiscal year of such Guarantor certified in a manner acceptable to
Lender by such Guarantor or a representative of such Guarantor acceptable to
Lender, and (iii) annual financial projections for Borrower's following fiscal
year.
(d) Tax Returns. Within 30 days of filing any tax return for Borrower or
any Guarantor with the Internal Revenue Service, copies of such returns.
AVI-1
<PAGE>
ANNEX VII
to Loan and Security Agreement dated ______________
between Ameriking Colorado Corporation I, a Delaware corporation,
and Franchise Acceptance Corporation Limited
ADDITIONAL PROVISIONS
1. [Intentionally Omitted]
2. Borrower hereby agrees that it will, at any time and from time to time
after the closing of the Loan, upon the request of Lender, do, execute,
acknowledge and deliver or will cause to be done, executed, acknowledged and
delivered, all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney and assurances as may be reasonably required for the
effective assigning, transferring, granting, conveying, assuring and
confirming to Lender, its heirs, legal representatives or assigns or for
securing, aiding and assisting in the collection and reducing to possession,
any and all of the assets or property to be assigned to it as provided herein,
at the sole cost and expenses of Borrower.
3. [Intentionally Omitted]
4. The provisions of Section 7(b) shall be amended to read in its
entirety:
"Lender shall have received the Leasehold Deed of Trust, Assignment
of Leases and Rents, Security Agreement and Financing Statement duly
executed by Borrower in order to grant Lender a valid first priority
perfected lien on the leasehold interests to the applicable Burger
King Restaurants as of the date of this Agreement."
5. Lender and Borrower hereby acknowledge and agree that there is no
Guarantor(s), as that term is defined in Section 7(a) of the Agreement.
AVII-1
<PAGE>
PROGRAM RATE RIDER
(To Be Distributed Separately)
to Loan and Security Agreement dated , 1995
(as amended or modified from time to time, the "Agreement")
between AMERIKING COLORADO CORPORATION I, a Delaware corporation ("Borrower"),
and
FRANCHISE ACCEPTANCE CORPORATION LIMITED ("Lender")
Part I of this Rider describes the method by which Lender determines the
Program Rate from time to time. Capitalized terms used but not defined in Part
I have the meanings set forth in the Agreement or in Part II of this Rider.
Part I. Determination of Program Rate
- --------------------------------------
During the term of the Agreement, Lender may use a variety of funding
sources ("Funding Sources") in connection with the Franchisee Loan Program.
These include:
A. Commercial Paper. Lender may sell or grant interests in Franchisee
Loans to a Purchaser that funds itself (wholly or partially) by issuing
commercial paper. Lender may also issue its own commercial paper. Lender or a
Purchaser, in each case to the extent it provides funds (directly or
indirectly) for the Franchisee Loan Program by issuing commercial paper, is
herein called a "CP Issuer". Lender's cost of using Funding Sources described
in this paragraph will be based on the weighted average of the CP Rates of the
applicable CP Issuers.
B. Term Notes. Lender may sell or grant interests in Franchisee Loans to
a Purchaser that funds itself (wholly or partially) by issuing term notes.
Lender may also issue its own term notes. Lender or a Purchaser or any
assignee of either, in each case to the extent it provides funds (directly or
indirectly) for the Franchisee Loan Program by issuing term notes, is herein
called an "MTN Issuer". Lender's cost of using Funding Sources described in
this paragraph will be based on the weighted average of the MTN Fixed Rates
and/or the MTN Floating Rates of the applicable MTN Issuers.
C. Other Funding Sources. Lender may sell or grant interests in
Franchisee Loans to a Purchaser that funds itself (wholly or partially) by
borrowing loans or obtaining other credit from banks, insurance companies or
other credit providers (such banks, insurance companies or other credit
providers or any assignees of the foregoing being herein called "Other Credit
Providers") or by selling assets (including Franchisee Loans or interests
therein) to Other Credit Providers. Lender may also borrow or obtain other
credit directly from Other Credit Providers or sell assets (including
Franchisee Loans or interests therein) to Other Credit Providers. Lender's
cost of using the Funding Sources described in this paragraph will be based on
the weighted average of the Alternate Base Rate and/or the OCP Rates of the
applicable Other Credit Providers.
The initial Funding Sources for the Franchisee Loan Program will be
Corporate Asset Funding Company, Inc. ("CAFCO"), Corporate Receivables
Corporation ("CRC") and Other Credit Providers that provide liquidity and
credit support for the commercial paper programs of CAFCO and CRC. Lender may
change the Funding Sources for the Franchisee Loan Program at any time.
Lender's current
1
<PAGE>
preferred Funding Sources are the issuance of commercial paper and term notes
(rather than obtaining credit, directly or indirectly, from Other Credit
Providers) and Lender will rely on such Funding Sources to the extent
reasonably practicable, taking into account requirements of Lender's
contracts with Purchasers and Other Credit Providers, market conditions,
rating agency concerns and the interests of Lender in connection with the
Franchisee Loan Program as a whole.
In connection with any Funding Source, Lender will be required to pay
certain fees ("Fees") including without limitation program fees to Purchasers,
commercial paper and term note placement agent or dealer fees, and commitment
or non-use fees to Other Credit Providers. In addition, under contracts
relating to Funding Sources, Purchasers and Other Credit Providers may be
entitled to recover certain costs and expenses ("Costs"), including increased
costs due to a change in law (such as changes in tax law and bank or insurance
company regulation) or otherwise, and costs and expenses relating to
redeployment of funds, administrative and enforcement expenses and
indemnities. Consistent with market practice, Lender, Purchasers and Other
Credit Providers reserve the right to renegotiate, from time to time, Fees and
the circumstances under which Costs will be recovered. Lender will pay
Borrower's proportionate share of the Fees currently applicable to the
Franchisee Loan Program from the "Applicable Margin" specified in the Loan
Documents. However, if the amount of Fees required to be paid by Lender in
connection with the Franchisee Loan Program increases, or if Purchasers or
Other Credit Providers are entitled to recover Costs, Borrower's proportionate
share of such increases or Costs may be included in the Program Rate payable
by Borrower by adding an "Increased Cost Factor".
Lender will hedge its interest rate exposure in connection with the Loan
by entering into an interest rate cap or collar or another interest rate
hedging arrangements (the "Hedge"). The term of the Hedge will be at least
half the term of the Loan. The Hedge may also relate to loans made by Lender
to other franchisees in the Franchisee Loan Program. At the election of
Lender, Borrower will either pay its proportionate share of the cost of the
Hedge at the closing of the Loan or pay such share in installments ("Hedge
Payments") over the term of the Loan. If Lender receives payments under the
Hedge, it will elect to either credit Borrower's proportionate share of such
payments to Borrower's obligation to pay interest on the Loan or refund such
proportionate share to Borrower.
Lender will calculate the "Program Rate" on each day by:
(i) determining the interest rate per annum equal to the weighted
average (adjusted to the next higher 1/8 of 1%) for such day of the rates
applicable to each Funding Source used to fund the Franchisee Loan Program on
such day (i.e., the applicable CP Rates, MTN Fixed Rates, MTN Floating Rates,
OCP Rates and Alternate Base Rates); provided that if any such rate is payable
to a Purchaser or Other Credit Provider, Lender may rely on such Purchaser or
Other Credit Provider's calculation of such rate (as communicated to Lender by
the applicable Investor Agent); and provided, further, that the Alternate Base
Rate shall be computed on the basis of a 365 or 366-day year and all such
other rates shall be computed on the basis of a 360-day year (consisting, in
the case of a computation of any MTN Fixed Rate, of twelve 30-day months); and
provided, further, that any such rate may be adjusted to take into account
negative carrying costs that arise as a result of Lender's receipt of funds
under the Franchisee Loan Documents at a time when no amounts are due in
connection with any Funding Source; and
2
<PAGE>
(ii) adding to the rate determined pursuant to clause (i) above any
applicable Increased Cost Factor or Hedge Payments.
Any changes in the Program Rate shall become effective immediately.
Part II. Additional Definitions
- --------------------------------
"Alternate Base Rate" means, for any day and any Other Credit Provider,
the sum of (x) such Other Credit Provider's applicable Spread (if any) plus
(y) the interest rate per annum equal to the highest on such day of:
(a) the rate of interest announced publicly by its Reference Bank in New
York, New York, from time to time as such Reference Bank's base rate; or
(b) 1/2 of 1% per annum above the latest three-week moving average of
secondary market morning offering rates in the United States for three-month
certificates of deposit of major United States money market banks, such
three-week moving average being determined weekly on each Monday (or, if such
day is not a Business Day, on the next succeeding Business Day) for the
three-week period ending on the previous Friday by such Reference Bank on the
basis of such rates reported by certificate of deposit dealers to and
published by the Federal Reserve Bank of New York or, if such publication
shall be suspended or terminated, on the basis of quotations for such rates
received by such Reference Bank from three New York certificate of deposit
dealers of recognized standing selected by such Reference Bank, in either case
adjusted to the nearest 1/4 of 1% or, if there is no nearest 1/4 of 1%, to the
next higher 1/4 of 1%; or
(c) 1/2 of 1% per annum above the fluctuating interest rate per annum
equal for such day to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day for such transactions
received by such Reference Bank from three Federal funds brokers of recognized
standing selected by it.
"Business Day" means any day on which banks are not authorized or
required to close in New York City and, if the applicable Business Day relates
to the LIBO Rate, on which dealings are carried on in the London interbank
market.
"Citibank" means Citibank, N.A., a national banking association.
"Citicorp" means Citicorp North America, Inc., a Delaware corporation.
"CP Rate" means, for any day and any CP Issuer, the interest rate per
annum equal to the rate (or if more than one rate, the weighted average of the
rates adjusted to the next higher 1/8 of 1%) at which all commercial paper
notes of such CP Issuer which are then outstanding or are to be issued on such
day to fund the Franchisee Loan Program were or may be sold by any placement
agent or commercial paper dealer selected by such CP Issuer, as agreed between
each such agent or dealer and
3
<PAGE>
such CP Issuer and notified by such CP Issuer to Lender or the applicable
Investor Agent, which rate or rates shall reflect and give effect to the
actual commission of placement agents and dealers and other costs of issuance
in respect of such commercial paper notes; provided, however, if such rate (or
rates) as agreed between any such agent or dealer and any such CP Issuer with
regard to any such commercial paper notes is a discount rate (or rates), the
"CP Rate" for such commercial paper notes shall be the rate (or if more than
one rate, the weighted average of the rates) resulting from converting such
discount rate (or rates) to an interest-bearing equivalent rate per annum.
"Eurocurrency Liabilities" has the meaning specified in Regulation D of
the Board of Governors of the Federal Reserve System, as in effect from time
to time.
"Eurodollar Rate Reserve Percentage" for any day means the reserve
percentage applicable on such day under regulations issued from time to time
by the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) for a member bank of the
Federal Reserve System in New York City with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities (or with respect to any
other category of liabilities that includes deposits by reference to which the
LIBO Rate is determined).
"Fixed Period" means each period commencing on the date selected by the
applicable Investor Agent or Lender in its discretion and ending the number of
days from such date as selected by such Investor Agent or Lender in its
discretion; provided, however, that:
(i) any such Fixed Period (other than of one day) which would otherwise
end on a day which is not a Business Day shall be extended to the next
succeeding Business Day (provided, however, if the interest rate in respect of
such Fixed Period is computed by reference to the LIBO Rate, and such Fixed
Period would otherwise end on a day which is not a Business Day, and there is
no subsequent Business Day in the same calendar month as such day, such Fixed
Period shall end on the next preceding Business Day); and
(ii) in the case of Fixed Periods of one day, (A) if such Fixed Rate is
an initial Fixed Period, such Fixed Period shall be the day the OCP Rate is
first applicable; (B) any subsequently occurring Fixed Period which is one day
shall, if the immediately preceding Fixed Period is more than one day, be the
last day of such immediately preceding Fixed Period, and, if the immediately
preceding Fixed Period is one day, be the day next following such immediately
preceding Fixed Period; and (C) if such Fixed Period occurs on a day
immediately preceding a day which is not a Business Day, such Fixed Period
shall be extended to the next succeeding Business Day, provided, however, in
the case of fundings at the LIBO Rate, if such extension would cause the last
day of such Fixed Period to occur in the next following calendar month, the
last day of such Fixed Period shall occur on the next preceding Business Day.
"Franchisee Loan Documents" means the Agreement, the Loan Documents and
other similar loan documents pursuant to which Lender extends credit to Burger
King(Registered Trademark) franchisees.
4
<PAGE>
"Franchisee Loans" means loans or other extensions of credit made by
Lender under Franchisee Loan Documents, together with all related rights of
Lender and its assigns (including rights in respect of collateral and
guarantees).
"Investor Agent" means any person or entity acting as agent for any
Purchasers or other Credit Providers, as notified by such Purchasers or Other
Credit Providers to Lender. Citicorp is the Investor Agent for CAFCO and CRC.
"LIBO Rate" has the meaning set forth in the definition of OCP Rate.
"MTN Fixed Rate" means, for any day and any MTN Issuer, an interest rate
per annum equal to the interest rate (or if more than one rate, the weighted
average of the rates adjusted to the next higher 1/8 of 1%) applicable to all
term notes which have been issued, or are to be issued on such day, by such
MTN Issuer at a fixed interest rate to fund the Franchisee Loan Program.
"MTN Floating Rate" means, for any day and any MTN Issuer, the interest
rate per annum equal to the interest rate (or if more than one rate, the
weighted average of the rates adjusted to the next higher 1/8 of 1%)
applicable to all term notes which have been issued, or are to be issued on
such day, by such MTN Issuer at a floating interest rate per annum (determined
by reference to an interest rate formula) in effect from time to time to fund
the Franchisee Loan Program.
"OCP Rate" means, for each day during any Fixed Period and with respect
to any Other Credit Provider, the sum of (x) such Other Credit Provider's
applicable Spread plus (y) an interest rate per annum obtained by dividing (i)
the rate (the "LIBO Rate") per annum at which deposits in U.S. dollars are
offered by the principal office of such Other Credit Provider's Reference Bank
in London, England, to prime banks in the London interbank market at 11:00
A.M. (London time) two Business Days before the first day of such Fixed Period
for an amount of at least $1 million and with a maturity equal to such Fixed
Period by (ii) a percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage for such day; provided, however, that in the case of:
A. any Fixed Period on or prior to the first day of which such Other
Credit Provider shall have notified Lender or the applicable Investor Agent
that, after reasonable efforts by such Other Credit Provider (consistent with
its internal policy and legal and regulatory restrictions) to designate a
lending office that would allow such Other Credit Provider to fund the
Franchisee Loan Program at the LIBO Rate set forth above and which would not,
in the judgment of such Other Credit Provider, be otherwise disadvantageous to
such Other Credit Provider, the introduction of or any change occurring on or
after June 2, 1994 or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts that it
is unlawful, for such Other Credit Provider to fund the Franchisee Loan
Program at the LIBO Rate set forth above (and such Other Credit Provider shall
not have subsequently notified the Lender or applicable Investor Agent that
such circumstances no longer exist), or
B. any Fixed Period of 1 to (and including) 13 days;
the "OCP Rate" for such day shall be an interest rate per annum equal to the
Alternate Base Rate for such Other Credit Provider in effect on such day.
5
<PAGE>
"Payment Date" means, with respect to any Franchisee Loan, each date on
which a payment is required to be made under the related promissory note.
"Reference Bank" means, with respect to any Other Credit Provider, the
financial institution designated by such Other Credit Provider, as notified by
such Other Credit Provider to the related Purchaser (if any) and Lender.
Citibank is the Reference Bank for CAFCO's and CRC's Other Credit Providers.
"Spread" means, at any time, with respect to any Other Credit Provider,
the number of basis points (if any) required to be added (under applicable
contracts) to the rates described in clause (y) of the definition of Alternate
Base Rate or OCP Rate, as the case may be, in order to determine the interest
or yield payable to such Other Credit Provider.
BORROWER WITNESSES
AMERIKING COLORADO CORPORATION I,
a Delaware corporation
By: /s/ Lawrence E. Jaro /SEAL/ By: /s/ Kim Manna
------------------------------- ---------------------------
Print Name: Lawrence E. Jaro Print Name: Kim Manna
Title: CEO
By: /s/ Joel Aaseby /SEAL/ By: /s/ Donna Faget
------------------------------ ----------------------------
Print Name: Joel Aaseby Print Name: Donna Faget
Title: CEO
By: /SEAL/ By:
------------------------------ ---------------------------
Print Name: Print Name:
Title:
6
<PAGE>
MANAGEMENT AND ACCOUNTING AGREEMENT RIDER
to Loan and Security Agreement dated ______________
between Ameriking Colorado Corporation I, a Delaware corporation,
and Franchise Acceptance Corporation Limited
November 29, 1995
Franchise Acceptance Corporation Limited
c/o Citicorp North America, Inc.
2600 Michelson Drive, 12th Floor
Irvine, California 92715
RE: Management and Accounting Support
Gentlemen:
It is our understanding that on the same date hereof, Franchise
Acceptance Corporation Limited (the "Lender") will loan monies to AmeriKing
Colorado Corporation I, our wholly-owned subsidiary (the "Borrower"). This
letter shall confirm our understanding as more fully set forth below, that we
will provide management and accounting support to the Borrower. All
capitalized terms used herein and not otherwise defined are used as
collectively defined in the Loan and Security Agreement between AmeriKing
Colorado Corporation I and Franchise Acceptance Corporation Limited dated
___________, (the "Agreement").
1. National Restaurant Enterprises, Inc. ("NRE") will provide management
and accounting services sufficient for the Borrower to operate the Burger King
restaurants. Also, Lender, upon prior written reasonable notice to NRE, will
have the right to inspect the books and records maintained by NRE relating to
the Borrower.
2. NRE represents, warrants and covenants not to take any action that
at the time of the action a reasonable person believes would (i) cause a
material violation of the Agreement, or (ii) materially diminish the value of
the collateral for the Notes.
3. NRE will not accept any dividends or capital distributions or
other distributions from Borrower relating to its status as a shareholder of
the Borrower that at the time of such dividend or distribution will cause
Borrower to be in violation of Section 11(g) or Section 12(a) of the
Agreement.
4. If an Event of Default occurs under the Agreement and thereafter the
Lender commences to liquidate and realize on the collateral securing the
Notes, NRE will exercise its reasonable best efforts to assist the
Lender in obtaining the maximum proceeds from the liquidation of all
inventory, equipment, real estate or any other collateral under the Loan
Documents. Upon receipt of a written notice ("Notice") from Lender to NRE
advising of the Event of Default and the commencement of liquidation and
requesting that NRE provide an appropriate individual to act as an
-1-
<PAGE>
agent or representative on behalf of Borrower in connection with the
liquidation of assets, NRE shall provide such an appropriate individual to
provide such services, provided that such request is reasonable. NRE shall use
its commercially reasonable best efforts to see that all books and records of
the Borrower are properly maintained during this period.
5. The understandings set forth in this letter are independent of the
Agreement and the Loan Documents.
6. The understandings hereunder are irrespective of and shall not be
dependent upon or affected by:
(i) the validity, legality or enforceability of the Agreement,
Notes or any Loan Document;
(ii) the existence, value or condition of any of the Collateral;
(iii) the validity, perfection or priority of the Security Interest
in any of the Collateral;
(iv) any action or failure to take action by the Lender under, or
with respect to, the Agreement, the Notes, any Loan Document, any
Secured Obligation, any Secured Obligation, any Borrower or any of
the Collateral; or
(v) any other dealings among the Lender, the Borrower or any
Obligor.
7. All notices and other communications provided for hereunder shall be
in writing and mailed, telecopied or delivered, if to NRE, at 2215 Enterprise
Drive, Suite 1502, Westchester, Illinois 60154, and if to Lender, at its
address specified in the Agreement. All such notices and other communications
shall be effective when deposited in the mails, telecopied or delivered,
respectively.
8. Nothing herein contained shall be deemed to impose any liability upon
the Lender to pay NRE for any services performed pursuant to the terms
of this letter. In no event shall any of NRE's employees and other
agents be considered an employee, agent or representative of the Lender.
9. This agreement shall be governed by the internal laws of the State of
New York and the laws of the State of New York shall govern (i) all issues
relating to this letter agreement, including the validity or enforcement of
this letter agreement and (ii) the interpretation and construction of this
agreement.
Very truly yours,
NATIONAL RESTAURANT ENTERPRISES, INC.
By: /s/ Lawrence E. Jaro
----------------------------------------
Lawrence E. Jaro, Chief Executive Officer
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<PAGE>
Non-construction Loan
(Multiple Loans)
EXHIBIT A
TO THE LOAN AND SECURITY AGREEMENT
FORM OF PROMISSORY NOTE
-----------------------
$1,865,000.00 Date: ___________, 19__
FOR VALUE RECEIVED, the undersigned, AMERIKING COLORADO CORPORATION I, a
Delaware corporation (hereinafter referred to as "Borrower"), HEREBY PROMISES
TO PAY to the order of FRANCHISE ACCEPTANCE CORPORATION LIMITED ("Lender") in
lawful money of the United States of America, the principal amount of One
Million Eight Hundred Sixty Five Thousand and No/100ths United States dollars
(U.S. $1,865,000.00), together with interest on the unpaid principal balance
outstanding from time to time at a rate equal to the Program Rate (as defined
in the Loan and Security Agreement dated _______________ between Lender and
Borrower (as amended or supplemented from time to time, the "Loan Agreement"))
as in effect from time to time, plus two and three-fourths (2.75)% (such
percentage being referred to herein as the "Applicable Margin"). Accrued
interest shall be payable in arrears on the unpaid principal balance of this
Note on the fifteenth (15th) day of each month (each, a "Payment Date")
commencing on ______________, 1995 and continuing until this Note is fully
paid, and principal on this Note shall be payable in one hundred twenty (120)
consecutive monthly installments on each Payment Date, commencing on
______________, 1995 until this Note is fully paid; provided, however, that
the final payment under this Note shall be in the amount of the balance of
principal, interest and all other charges remaining unpaid. The amount of each
monthly installment of principal is set forth in ANNEX A attached hereto and
made a part hereof. All advances, if any, shall be set forth on ANNEX B
attached hereto and made a part hereof. Capitalized terms used but not defined
in this Note are defined in the Loan Agreement.
Interest shall be calculated on the basis of a three hundred and sixty
(360) day year and charged on the actual number of days elapsed in each
calendar year by multiplying the actual number of days the debt is outstanding
in each calendar year by the rate of Interest, and dividing the product
thereof by three hundred and sixty (360).
In the event of the acceleration of this Note, and the mortgage by
which it is secured, by reason of any default thereunder, any prepaid and
unearned interest in excess of the highest rate allowable by law to date of
enforcement of payment, shall thereupon be refunded to the maker automatically
by crediting of same against the sums then due, but such credit shall not cure
or waive the occasioning
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<PAGE>
default and acceleration. Under no circumstances shall the total liability
for payment in the nature of interest under this Note and the mortgage by
which it is secured exceed the highest rate allowed by law.
Borrower shall make each payment hereunder not later than 11:00 a.m.
(New York time) on the day when due in U.S. dollars through the Disbursing
Account as provided in the Loan Agreement for the account of the Lender.
In the event of a partial prepayment of principal due and payable
hereunder, no such partial prepayment shall postpone or interrupt payments of
principal and interest, all of which shall continue to be due and payable at
the time and the manner set forth above.
If any payment of principal or interest on this Note shall become due on
a day which is not a business day, such payment shall be made on the next
succeeding business day.
Upon the maturity of any portion of this Note, whether by acceleration
or otherwise, Borrower further promises to pay interest at the rate per annum
equal to the sum of (x) 2.0%, plus (y) the Applicable Margin, plus (z) the
Program Rate in effect from time to time, on the then outstanding past-due
amount of principal, until such amount is paid in full. Such interest shall be
payable upon demand of the Lender.
In the event that any amounts due hereunder have not been paid to the
Lender within five (5) days after the date due, Borrower shall pay on demand
as a late charge, to the extent legally permitted, an amount equal to the
lesser of five percent (5%) of such overdue amounts or the maximum amount
allowed by law.
This Note is one of the Notes referred to in the Loan Agreement and
evidences indebtedness incurred under the Loan Agreement. The Loan Agreement,
among other things, contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events.
Not more than once a year, Borrower may prepay all or a portion of the
principal hereof, interest accrued but unpaid hereon and any other amounts as
may be due and payable hereunder at any time; provided that Borrower shall
give at least 45 days prior written notice to Lender of the intended date of
prepayment, which date shall be a Payment Date and provided further that any
partial prepayment of principal shall be in an amount of at least $25,000 and
shall be applied to the installments due on this Note in the inverse order of
maturity.
Borrower hereby waives presentment, demand for payment (except for such
notice as contemplated under Section 12(a) of the Loan Agreement) and notice of
protest or dishonor in connection with the delivery, acceptance, performance,
default, acceleration or enforcement of this Note and hereby consents to any
extensions of time, renewals, releases of any party to this Note, waivers or
modifications that may be granted or consented to by the holder of this Note in
respect of the time of payment or any other provision of this Note.
Each Borrower, endorser, and/or guarantor jointly and severally agrees to
pay all costs, reasonable attorneys' fees if Lender is the prevailing party
("prevailing party" shall include a party who receives substantially the
relief desired whether by dismissal, summary judgment, judgment or otherwise),
A-2
<PAGE>
paralegal fees, and expenses incurred in the event it becomes necessary for
Lender to protect its security and in the event of collection, whether or not
Lender brings suit; and if suit is brought said parties agree to pay the
Lender's costs and reasonable attorneys' fees, paralegal fees and expenses
incurred therein including costs and reasonable attorneys' fees, paralegal
fees, and costs incurred on appeal, if any.
BORROWER CONSENTS TO THE ASSIGNMENT BY LENDER OF ALL OR ANY PORTION OF
ITS RIGHTS UNDER THIS NOTE AND THE OTHER LOAN DOCUMENTS, INCLUDING, BUT NOT
LIMITED TO, ASSIGNMENT(S) TO PURCHASERS AND CREDIT ENHANCERS MADE IN
CONNECTION WITH THE FRANCHISEE LOAN PROGRAM. BORROWER ACKNOWLEDGES AND AGREES
THAT ANY AND ALL RIGHTS OF LENDER UNDER THIS NOTE AND THE OTHER LOAN DOCUMENTS
MAY BE EXERCISED FROM TIME TO TIME BY ANY ASSIGNEE OR SUCCCESSOR OF LENDER,
INCLUDING, BUT NOT LIMITED TO, ANY PURCHASER, ANY PURCHASER AGENT, ANY CREDIT
ENHANCER OR ANY AGENT, TRUSTEE OR OTHER REPRESENTATIVE THEREFOR, INCLUDING
CITICORP NORTH AMERICA, INC., AS SERVICING AGENT. BORROWER AGREES THAT ANY
ASSIGNEE'S RIGHTS SHALL BE FREE OF ALL DEFENSES, SET-OFFS OR COUNTERCLAIMS
WHICH BORROWER MAY HAVE AGAINST LENDER.
Notwithstanding any other provision set forth in this Note, any holder
of this Note may at any time create a security interest in all or any portion
of its rights under this Note in favor of any Federal Reserve Bank in
connection with Regulation A of the Board of Governors of the Federal Reserve
System.
This Note shall be binding upon Borrower and its successors and assigns.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York, United States.
Except as may be prohibited by law, Lender and Borrower hereby
knowingly, voluntarily, intentionally and unconditionally waive the right
either may have to a jury trial in respect to any litigation based hereon, or
arising out of, under or in connection with this Note, or any agreement or
instrument contemplated to be executed in conjunction herewith, or any course
of conduct, course of dealing, statements (whether oral or written) or actions
of either party. If the subject matter of any such litigation is one in which
the waiver of a jury trial is prohibited, neither the Borrower nor the Lender
shall present a non-compulsory counterclaim in such litigation or any claim
arising out of this Note. Furthermore, neither the Lender nor Borrower shall
seek to consolidate any such action in which a jury trial has not been waived.
This provision is a material inducement for the Lender's extension of credit
to the Borrower.
If Lender chooses to waive any provision of this Note, or if any
provision of this Note is construed by a court of competent jurisdiction to be
invalid or unenforceable, it shall not affect the applicability, validity, or
enforceability of the remaining provisions of this Note.
A-3
<PAGE>
Address:
Ameriking Colorado Corporation I
2215 Enterprise Drive
Westchester, Illinois 60154
Attention: Joel Aaseby
ENDORSEMENT
-----------
PAYABLE TO THE ORDER OF CITICORP NORTH AMERICA, INC., AS INVESTOR AGENT,
WITHOUT RECOURSE, EXCEPT AS PROVIDED IN THE FRANCHISE LOAN PURCHASE AND SALE
AGREEMENT BETWEEN LENDER, THE INVESTOR AGENT AND CERTAIN OTHER PARTIES
FRANCHISE ACCEPTANCE CORPORATION LIMITED
By: _________________________________________/SEAL/
Name: _______________________________________
Title: ______________________________________
By: _________________________________________/SEAL/
Name: _______________________________________
Title: ______________________________________
A-4
<PAGE>
ANNEX A
TO THE PROMISSORY NOTE
AMORTIZATION SCHEDULE
AA-1
<PAGE>
ANNEX B
TO THE PROMISSORY NOTE
ADVANCES OF PRINCIPAL
Date Amount of Advance Balance Notation by
-------------------------------------------------------------
AB-1
<PAGE>
RECAPITALIZATION AGREEMENT
among
AMERIKING, INC.
BANCBOSTON INVESTMENTS INC.
MCIT PLC
PMI MEZZANINE FUND, L.P.
and
THE OTHER STOCKHOLDERS NAMED ON THE SIGNATURE PAGES HERETO
Dated as of November __, 1996
<PAGE>
RECAPITALIZATION AGREEMENT
RECAPITALIZATION AGREEMENT (this "Agreement") dated as of November __,
1996, by and among National Restaurant Enterprises, Inc. ("Enterprises"),
AmeriKing, Inc. (the "Company"), (i) each of MCIT PLC ("MCIT"), BancBoston
Investments, Inc. ("BBI"), PMI Mezzanine Fund, L.P. ("PMI"), Jordan/Zalaznick
Capital Company, Leucadia Investors, Inc., John W. Jordan II Revocable Trust,
Thomas H. Quinn, John M. Camp Profit Sharing Plan, John M. Camp, David W.
Zalaznick, Jonathan F. Boucher, John R. Lowden, Adam E. Max, A. Richard Caputo,
Jr., James E. Jordan, Paul Rodzevick, Lawrence E. Jaro ("Jaro"), William C.
Osborn ("Osborn"), Gary W. Hubert, Joel D. Aaseby, Scott E. Vasatka, Donald
Stahurski, Tabor Restaurant Associates, Inc., Jaro Enterprises, Inc., Jaro
Restaurant Associates, Inc., JB Restaurants, Inc., Osburger, Inc., White-Osborn
Restaurants, Inc., Castleking, Inc., Dennis Hogerty, Gerald Dunn and JII
Partners (collectively, other than PMI, referred to herein as the "Common
Stockholders") and (ii) each of MCIT, BBI, Leucadia Investors, Inc., John W.
Jordan II Revocable Trust, David W. Zalaznick, Jonathan F. Boucher, John R.
Lowden, Adam E. Max, Tabor Restaurant Associates, Inc., Jaro Enterprises, Inc.,
Jaro Restaurant Associates, Inc., JB Restaurants, Inc., Osburger, Inc.,
White-Osborn Restaurants, Inc. and Castleking, Inc. (collectively referred to
herein as the "Preferred Stockholders"). The Common Stockholders, Preferred
Stockholders, together with PMI, the Company and TJC Management Corporation
("TJC") are referred to herein as the "Parties".
R E C I T A L S
WHEREAS, the Parties desire to recapitalize the Company, and in
connection therewith, the Company has filed a Registration Statement on Form
S-1 (File No. 333-04261) (as amended or supplemented, the "Registration
Statement") relating to the proposed public offerings of the Company's $100.0
million aggregate principal amount of ___% Senior Notes due 2006 (the "Senior
Notes") and $30.0 million aggregate principal amount of Units consisting of
Senior Preferred Stock and Common Stock (the "Units") (the "Offerings");
WHEREAS, the proposed recapitalization ("Recapitalization") includes
the following primary components: (a) (i) the reclassification of all of the
issued and outstanding shares of (x) Class A Common Stock, Class C Common Stock
and Class D Common Stock into an equal number of shares of Common Stock and (y)
Class B Common Stock into an equal number of shares of Non-Voting Common Stock
and (ii) the retirement of each of the Class A Common Stock, Class B Common
Stock, Class C Common Stock and Class D Common Stock as classes of capital
stock of the Company (collectively, the "Reclassification"); (b) the 1,000-to-1
stock split (the "Stock Split") of all outstanding shares of Common Stock; (c)
the Offering; (d) the prepayment in full of the Company's $15.0 million
aggregate principal amount of 12.5% Senior Subordinated Notes due 2005 (the
"Senior Subordinated Notes")
<PAGE>
held by PMI as of June 30, 1996, plus prepayment premiums and accrued interest
thereon; (e) the prepayment in full of the Company's $11.0 million aggregate
principal amount of 12.75% Subordinated Notes due 2005 (the "Subordinated
Notes) held by MCIT as of June 30, 1996; (f) the prepayment in full of the
Company's $4.4 million aggregate principal amount of 12.75% Seller Notes due
2005 (the "Seller Notes") held by affiliates of Jaro and Osborn as of June 30,
1996; (g) the repurchase of all of the warrants issued by the Company to PMI;
(h) the payment of $_____ to TJC in payment of accrued fees under the TJC
Consulting Agreement prior to November __, 1996; (i) the amendment of the
Stockholders Agreement; and (j) all other related transactions, agreements and
instruments contemplated by this Agreement and/or described, and based upon the
assumptions described, in the Registration Statement.
WHEREAS, the Company is required to notify BKC and obtain its consent
prior to amending any of the Company's corporate governance documents,
including without limitation, those instruments specified in Section 5.3 of
this Agreement;
WHEREAS, pursuant to the rules and regulations of the Securities and
Exchange Commission, the Company is required to file the Amended Company
Charter prior to the effective date of the Registration Statement; and
WHEREAS, in order to implement the Recapitalization, the Parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
specified below:
"Amended and Restated Company By-Laws" means the Company's Amended and
Restated By-Laws substantially in the form of Exhibit A hereto.
"Amended and Restated Company Charter" means the Company's Amended and
Restated Certificate of Incorporation substantially in the form of Exhibit B
hereto.
"Amended and Restated Stockholders Agreement" means the Amended and
Restated Stockholders Agreement substantially in the form of Exhibit G hereto.
"AmeriKing Investors" means Lawrence Jaro, William Osborn, Gary
Hubert, Joel Aaseby, Scott Vasatka, Tabor Restaurants Associates, Inc., Jaro
Enterprises, Inc., Jaro
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<PAGE>
Restaurants Associates, Inc., JB Restaurants, Inc., Osburger, Inc., Castleking,
Inc. and White-Osborn Restaurants, Inc.
"BKC" means the Burger King Corporation.
"Class A Common Stock" means the Company's Class A Common Stock, par
value $.01 per share.
"Class B Common Stock" means the Company's Class B Common Stock, par
value $.01 per share.
"Class C Common Stock" means the Company's Class C Common Stock, par
value $.01 per share.
"Class D Common Stock" means the Company's Class D Common Stock, par
value $.01 per share.
"Class A1 Preferred Stock" means the Company's Class A Preferred
Stock, par value $.01 per share.
"Class A2 Preferred Stock" means the Company's Class A2 Preferred
Stock, par value $.01 per share.
"Class B Preferred Stock" means the Company's Class B Preferred Stock,
par value $.01 per share.
"Closing" has the meaning specified in Section 4.1 of this Agreement.
"Closing Time" has the meaning specified in Section 4.1 of this
Agreement.
"Common Stock" means the Company's Common Stock, par value $.01 per
share.
"Company" shall have the meaning as set forth in the preamble to this
Agreement.
"Consulting Agreement" means the Management and Consulting Agreement
between the Company and TJC, dated as of September 1, 1994, as amended on
February 7, 1996.
"Directors Indemnification Agreements" means the Indemnification
Agreements substantially in the form of Exhibit C hereto.
"Enterprises" means National Restaurant Enterprises, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Company.
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<PAGE>
"Equity Securities" of the Company means the Class A1 Preferred Stock,
Class A2 Preferred Stock, Class B Preferred Stock, Class A Common Stock, Class
B Common Stock, Class C Common Stock and Class D Common Stock.
"Jaro" has the meaning specified in the preamble.
"Jordan Investors" means Jordan/Zalaznick Capital Company, Leucadia
Investors, Inc., TJC Management Corporation, John W. Jordan II Revocable Trust,
David W. Zalaznick, Thomas H. Quinn, Jonathan F. Boucher, John R. Lowden, Adam
E. Max, John M. Camp Profit Sharing Plan, John M. Camp, A. Richard Caputo, Jr.,
James E. Jordan, Jr. Profit Sharing Plan and Trust, Paul Rodzevick Profit
Sharing Plan and Trust, Dennis Hogerty, Jerald Dunn and JII Partners.
"Jordan Investors' Representative" has the meaning specified in
Section 8.2 of this Agreement.
"Liens" means any security interest, lien, charge, restriction,
encumbrance or other interest of another Person.
"Management Investors" means William Osborn, Gary Hubert, Joel Aaseby,
Scott Vasatka, Donald Stahurski, Osburger, Inc., Castleking, Inc. and
White-Osborn Restaurants, Inc.
"Management Investors' Representative" has the meaning specified in
Section 8.2 of this Agreement.
"Material Adverse Effect" means any circumstances or event that (i)
has, or may be reasonably expected to have, any materially adverse effect upon
the validity or enforceability of this Agreement or any of the other
Recapitalization Documents or (ii) is, or may be reasonably expected to be,
materially adverse to the business or operations of the Company and its
subsidiaries, taken as a whole.
"MCIT" has the meaning specified in the preamble to this Agreement.
"Non-Voting Common Stock" means the Company's non-voting common stock,
par value $.01 per share.
"Offerings" shall mean the concurrent public offering of Senior Notes
in the aggregate principal amount of $100 million and $30 million of Units each
consisting of ___ shares of Preferred Stock and ___ shares of Common Stock,
pursuant to the Registration Statement.
"Osborn" has the meaning specified in the preamble to this Agreement.
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<PAGE>
"Parties" has the meaning specified in the preamble to this Agreement.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof or any other
entity.
"PMI" has the meaning specified in the preamble to this Agreement.
"Pricing Committee" means the Pricing Committee of the Company's Board
of Directors, established in connection with the Offering, and composed of
Messrs. Caputo and Jaro.
"Recapitalization" has the meaning specified in the recitals to this
Agreement.
"Recapitalization Documents" means this Agreement (including all
Schedules and Exhibits hereto) and each of the agreements, instruments,
consents and documents referred to in Sections 5.2 through 5.10, the
Registration Statement, and the Underwriting Agreements.
"Reclassification" has the meaning set forth in recitals to this
Agreement.
"Registration Statement" has the meaning set forth in the recitals to
this Agreement.
"Seller Notes" has the meaning specified in the recitals to this
Agreement.
"Senior Subordinated Notes" has the meaning specified in the recitals
to this Agreement.
"Stock Split" has the meaning specified in the recitals to this
Agreement.
"Stockholder Chart" means the stockholder chart described in Section
2.3 and set forth as Exhibit F hereto.
"Stockholders" has the meaning specified in the preamble to this
Agreement.
"Stockholders Agreement" means the Stockholders Agreement, dated as of
September 1, 1994, as amended by Consent and Amendment No. 1 to the
Stockholders Agreement, dated as of November 30, 1994, as further amended by
Waiver and Amendment No. 2 to the Stockholders Agreement, dated as of February
7, 1996, and as further amended and restated by the Amended and Restated
Stockholders Agreement.
"Subordinated Notes" has the meaning specified in the recitals to this
Agreement.
"Termination Date" means December 31, 1996.
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<PAGE>
"TJC" has the meaning specified in the preamble to this Agreement.
"Underwriting Agreements" means the Underwriting Agreements, [Custody
Agreement,] Power of Attorney and related documentation relating to the
Offering.
"Underwriters" means Donaldson, Lufkin & Jenrette Securities
Corporation and Jeffries & Company Inc., as managing underwriters, on behalf of
themselves and the other underwriters, under the Underwriting Agreements.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the other Parties to
this Agreement, as of the Closing Time, as follows:
Section 2.1. Due Authorization. The Company is a duly organized,
validly existing corporation under the laws of the State of Delaware. Each of
this Agreement and the other Recapitalization Documents have been duly
authorized, executed and delivered by the Company and each of this Agreement
and such other Recapitalization Documents is a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with
its terms, except as enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforceability of creditors' rights generally and by general
principles of equity (whether arising under a proceeding at law or in equity).
The Amended and Restated Company Charter has been duly filed with the Secretary
of State of the State of Delaware.
Section 2.2. Authority; No Conflicts. The Company has the corporate
power and authority and the legal right to make, deliver and perform, and has
taken all necessary corporate action to authorize the transactions contemplated
by this Agreement and the other Recapitalization Documents, and to conduct its
business as described in the Registration Statement. Neither the execution and
delivery of this Agreement or the other Recapitalization Documents nor the
consummation of any of the transactions contemplated herein or therein nor
compliance with the terms and provisions hereof or thereof (a) violates or will
violate any law or regulation or any order or decree of any court or government
instrumentality applicable to the Company or any of its subsidiaries or
properties, except such violations as would not, in the aggregate, have a
Material Adverse Effect, or (b) conflicts with or would result in the breach
of, or constitutes a default under, any contract, lease, indenture, loan
agreement, mortgage, deed of trust or other agreement or instrument to which
the Company or any of its subsidiaries, is a party or by which any of them or
any of their respective assets may be bound, except such conflicts, breaches or
defaults as have been waived or consents therefor have been obtained or such
conflicts,
-6-
<PAGE>
breaches or defaults as would not, in the aggregate, have a Material Adverse
Effect. Except as contemplated herein, no consent, approval, authorization or
order is presently required in connection with the execution and delivery of
this Agreement or the Recapitalization Documents by the Company or the
consummation of the transactions contemplated hereby or thereby that has not
been obtained, except for such consents, approvals, authorizations or orders as
would not, in the aggregate, have a Material Adverse Effect.
Section 2.3. Capital Stock.
(a) At the Closing Time, the Company's authorized capital stock shall
consist of 4,000,000 shares of Common Stock, 300,000 shares of Non-Voting
Common Stock and 100,000 shares of Preferred Stock. At the Closing Time, the
Company shall have 1,030,660 shares of Common Stock outstanding and 37,500
shares of Preferred Stock outstanding.
(b) Set forth on the Stockholder Chart is a true, complete and correct
chart showing, among other things, the record ownership of the Company's Equity
Securities prior to the Recapitalization.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE OTHER PARTIES
Each of the Parties to this Agreement (other than the Company and
Enterprises) represent and warrant, severally as to themselves and not jointly,
to each of the other Parties to this Agreement, as of the Closing Time, as
follows:
Section 3.1. Due Authorization. Each of this Agreement and the other
Recapitalization Documents to which such Party is a party have been duly
authorized, executed and delivered by such Party, as required, and each of this
Agreement and such other Recapitalization Documents is a legal, valid and
binding obligation of such Party, enforceable against such Party, in accordance
with its terms, except as enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforceability of creditors' rights generally and by general
principles of equity (whether arising under a proceeding at law or in equity).
Section 3.2. Authority; No Conflicts. Such Party has the power and
authority and the legal right to make, deliver and perform, and has taken all
necessary corporate action to authorize the transactions contemplated by, this
Agreement and the other Recapitalization Documents to which such Party is a
party. Neither the execution and delivery of this Agreement or such
Recapitalization Documents nor the consummation of any of the transactions
contemplated herein or therein nor compliance with the terms and provisions
hereof or thereof (a) violates or will violate any law or regulation or any
order or decree of
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<PAGE>
any court or government instrumentality applicable to such Party, except such
violations as would not, in the aggregate, have a Material Adverse Effect, or
(b) conflicts with or would result in the breach of, or constitutes a default
under, any contract, lease, indenture, loan agreement, mortgage, deed of trust
or other agreement or instrument to which such Party is a party or by which
they or any of their respective assets may be bound, except such conflicts,
breaches or defaults as have been waived or consents therefor have been
obtained or such conflicts, breaches or defaults as would not, in the
aggregate, have a Material Adverse Effect. No consent, approval, authorization
or order of any governmental authority is presently required in connection with
the execution and delivery of this Agreement or the Recapitalization Documents
by such Party or the consummation of the transactions contemplated hereby or
thereby that has not been obtained.
Section 3.3. Capital Stock. Such Party, if a Stockholder, is the
record and beneficial owner of the Company's Equity Securities ascribed to such
Party in the Stockholder Chart and beneficially owns such Equity Securities
free and clear of any Liens, other than such as may be created under the
Stockholders Agreement.
ARTICLE IV
THE CLOSING
Section 4.1. Closing. Upon satisfaction of the conditions set forth
herein, the transactions contemplated by this Agreement, other than those
contemplated by Sections 5.3(a), 5.3(c), 5.4, 5.8, 5.10 and 5.11 which will be
deemed consummated at the times set forth therein, shall be consummated at the
closing (the "Closing") thereof, which shall occur on the closing date of the
Offering (the "Closing Time") at the offices of Mayer, Brown & Platt, New York,
New York, or at such other place as shall be agreed upon by the Stockholders
and the Company. All of the transactions contemplated by this Agreement shall
be deemed to have been consummated simultaneously and none of such transactions
shall be deemed consummated unless all of such transactions are consummated.
Notwithstanding the foregoing, if the Closing does not occur by the Termination
Date, none of the Parties hereto shall have any obligations under Article V or
otherwise under this Agreement.
ARTICLE V
THE RECAPITALIZATION
Section 5.1. General. Each of the Parties (in whatever capacity,
including as stockholders of the Company) will take all actions, including
executing and delivering all of the Recapitalization Documents to which it is a
party, necessary or reasonably requested by the Company, to authorize, adopt,
approve, implement, consummate and close the
-8-
<PAGE>
Recapitalization Documents and the Recapitalization generally, provided that,
with regard to Parties that are directors of the Company, the foregoing will be
subject to their fiduciary duties as directors.
Section 5.2. Preferred Stock. Upon the Closing, the Company shall pay
from the net proceeds of the Offering dividends accruing after the date of
issuance through the Closing Date.
Section 5.3. Amended Charter Documents.
(a) Prior to the effective date of the Registration Statement, the
Amended and Restated Company Charter will be duly approved and adopted as the
Charter of the Company and filed by the Company with the Secretary of State of
the State of Delaware.
In the event the Closing does not occur by the Termination Date, then
the Stockholders hereby consent, and the Company hereby agrees, without any
further action by the Stockholders, to promptly effect an amendment to the
Amended and Restated Company Charter so that it is identical to the Company's
certificate of incorporation in effect as of the date hereof.
(b) At or prior to the Closing, the Amended and Restated Company
By-Laws will be duly approved and adopted as the By-Laws of the Company.
(c) Prior to the effective date of the Registration Statement, BKC
will consent to the adoption by the Company of those documents referred to in
Sections 5.3(a) and 5.3(b) of this Agreement.
Section 5.4. Reclassification and Stock Split.
(a) Effective simultaneously upon the filing of the Amended and
Restated Company Charter, the Reclassification shall be effected and (i) each
share of Class A Common Stock, Class C Common Stock and Class D Common Stock
currently issued and outstanding shall be converted into a like number of
shares of Common Stock and (ii) each share of Class B Common Stock currently
issued and outstanding shall be converted into a like number of shares of
Non-Voting Common Stock. Upon written notice, holders of the Class A Common
Stock, Class C Common Stock or Class D Common Stock shall deliver their stock
certificates to the Company for cancellation and such certificates which are
not so delivered will thereafter represent the right to receive a new
certificate or certificates representing an equivalent number of shares of
Common Stock or Non-Voting Common Stock, as the case may be, subject to the
effect of the Stock Split.
(b) Effective upon the filing of the Amended and Restated Company
Charter, the Stock Split shall be consummated and each holder of shares of
capital stock of the Company
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<PAGE>
shall be entitled to receive a new certificate or certificates representing the
appropriate number of shares of Common Stock or Non-Voting Common Stock, as the
case may be.
(c) As a result of the Reclassification and the Stock Split, if any
fractional interest in a share of Common Stock or Non-Voting Common Stock, as
the case may be, would be deliverable, the Company, in lieu of delivering the
fractional share, shall pay an amount to the holder thereof equal to the fair
market value of such fractional interest as determined by the Board of
Directors.
Section 5.5. Subordinated Note Repurchase.
(a) At the Closing, the Company will use a portion of the net proceeds
from the Offering to repurchase at a minimum of 105% of the principal amount
the entire outstanding aggregate principal amount of the Senior Subordinated
Notes plus the applicable prepayment premium and will pay accrued interest
thereon through the Closing Time. Upon repurchase by the Company, such notes
shall cease to accrue interest and the Company's obligations thereunder shall
be cancelled. At the Closing, the holders of the Senior Subordinated Notes will
deliver to the Company the note(s) evidencing the principal amount of Senior
Subordinated Notes held by such holder to be repurchased, together with written
instructions to complete such repurchase.
(b) At the Closing, the Company will use a portion of the net proceeds
from the Offering to repurchase at 100% of the principal amount the entire
outstanding aggregate principal amount of the Subordinated Notes and will pay
accrued interest thereon through the Closing Time. Upon repurchase by the
Company, such notes shall cease to accrue interest and the Company's
obligations thereunder shall be cancelled. At the Closing, the holders of the
Subordinated Notes will deliver to the Company the note(s) evidencing the
principal amount of Subordinated Notes held by such holder to be repurchased,
together with written instructions to complete such repurchase.
(c) At the Closing, the Company will use a portion of the net proceeds
from the Offering to repurchase at 100% of the principal amount the entire
outstanding aggregate principal amount of the Seller Notes from the holders
thereof and will pay interest thereon through the Closing Time. Upon repurchase
by the Company, such notes shall cease to accrue interest and the Company's
obligations thereunder shall be cancelled. At the Closing, the holders of the
Seller Notes will deliver to the Company the notes evidencing the principal
amount of Seller Notes held by such holder to be repurchased, together with
written instructions to complete such repurchase.
Section 5.6. Repurchase of Warrants. Upon the Closing, the Company
will repurchase all of the warrants issued to PMI pursuant to the certificate
of Common Stock Purchase Warrants, dated February 7, 1996, issued by the
Company, as amended by enter
-10-
<PAGE>
into Amendment No. 1 in substantially the form of Exhibit H hereto in
accordance with the terms of Section 18 thereof.
Section 5.7. Osborn Employment Agreement. At or prior to the Closing,
Mr. Osborn will enter into a new Employment and Non-Interference Agreement in
substantially the form of Exhibit I hereto.
Section 5.8. Directors Indemnification Agreements. At the Closing, the
Company will enter into the Directors Indemnification Agreements with each of
the signatories to the Registration Statement.
Section 5.9. 1996 Annual Meeting of Stockholders. The Parties hereby
agree to execute and deliver stockholder consents, substantially in the form of
Exhibit K hereto, with regard to (a) the Amended and Restated Company Charter,
(b) the Amended and Restated Company By-Laws, (c) the Reclassification, (d) the
Stock Split, (e) the Recapitalization Agreement and Recapitalization Documents,
(f) the election of directors of the Company as reasonably requested by the
Company, (g) the ratification of the appointment of accountants and (h) such
other matters as the Pricing Committee shall determine to submit for
stockholder approval. [The Parties hereto hereby agree and acknowledge that
such stockholder consents shall serve as and constitute the Company's 1996
Annual Meeting of Stockholders.]
Section 5.10. Amended and Restated Stockholders Agreement. At the
Closing, the Company and the Stockholders will execute, deliver and consummate
the Amended and Restated Stockholders Agreement.
ARTICLE VI
CONDITIONS OF THE PARTIES'
(OTHER THAN THE COMPANY AND ENTERPRISES) OBLIGATIONS
Section 6.1. Conditions of the Stockholders' Obligations. The
obligation of each of the Parties (other than the Company and Enterprises) on
the Closing Time to consummate the transactions contemplated by Article V of
this Agreement will be subject to the prior or concurrent satisfaction on the
Closing Time of the following conditions:
(a) Representations and Warranties; Agreements; No Default.
The representations and warranties of the Company set forth in this
Agreement will be true in all material respects at and as if repeated
on and as of the Closing Time after giving effect to the transactions
contemplated hereby; and the Company will have executed, delivered and
consummated all Recapitalization Documents on its part to be performed
pursuant to this Agreement on or prior to the Closing Time.
-11-
<PAGE>
(b) Certificate as to Representations, Etc. The Parties
(other than the Company and Enterprises) will each have received an
Officers' Certificate signed by the Chief Executive Officer and the
Chief Financial Officer of the Company, addressed to the Parties
(other than the Company and Enterprises) and dated as of the date of
the Closing, certifying the accuracy of the statements set forth in
clause (a) above.
(c) Recapitalization and Recapitalization Documents. Subject
to the proviso at the end of Section 4.1, (a) each of the other
Parties to the Recapitalization Documents will have executed,
delivered and consummated the Recapitalization Documents to which they
are parties, (b) the Offerings will close concurrently with the
Closing hereunder and (c) the Recapitalization will have been
consummated.
(d) Closing Papers. The Parties will have received copies of
the following:
(i) copies of the resolutions adopted by the Board
of Directors and stockholders of the Company authorizing the
execution, delivery and performance of this Agreement and
each of the Recapitalization Documents and the other
transactions contemplated hereby;
(ii) copies of each of the Recapitalization
Documents; and
(iii) an incumbency certificate in respect of
officers of the Company executing the Recapitalization
Documents, a standard good standing certificate from the
Secretary of the State of Delaware in respect of the Company,
and such other customary and standard documents reasonably
requested by any of the Parties.
ARTICLE VII
CONDITIONS OF THE COMPANY'S OBLIGATIONS
Section 7.1. Conditions of the Company's Obligations. The obligation
of the Company on the Closing Time to consummate the transactions contemplated
by this Agreement will be subject to the prior or concurrent satisfaction on
the Closing Time of the following conditions:
(a) Representations and Warranties; Agreements. The
representations and warranties of the other Parties set forth in this
Agreement shall be true in all material respects at and as if repeated
on and as of the Closing Time after giving effect to the transactions
contemplated hereby and the other Parties will have performed all
-12-
<PAGE>
agreements on their part to be performed pursuant to this Agreement on
or prior to the Closing Time.
(b) Recapitalization and Recapitalization Documents. Subject
to the proviso at the end of Section 4.1, (a) each of the other
Parties to the Recapitalization Documents will have executed,
delivered and consummated the Recapitalization Documents to which they
are parties, (b) the Offering and the Amended and Restated Bank Credit
Agreement will be consummated, (c) the Recapitalization will have been
consummated and (d) BKC shall have delivered a written consent to the
Company with respect to the matters set forth in Section 5(c) of this
Agreement.
(c) Consummation of the Company's Public Offerings. The
Offerings shall have been consummated substantially in accordance with
the terms set forth in the Registration Statement filed on November 8,
1996.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Waiver of First Refusal, Anti-Dilution Rights and
Registration Rights. Each of the Parties (i) waives any right of first refusal
it may have from the issuance and sale of the Units in the Offerings,
including, but not limited to, any prior notice or response periods any Party
may be entitled to, (ii) waives any right it may have to anti-dilution
adjustment of its Equity Securities arising from the issuance and sale of the
Units in the Offerings and (iii) agrees not to exercise any "demand
registration right" it may have prior to the consummation of the Offerings and
for the period of time covered by the lock-up agreement and waives any
"piggyback registration rights" it may have and related notice requirements as
a result of the Offerings.
Section 8.2. Power of Attorney.
(a) Each of the Jordan Investors hereby appoint A. Richard
Caputo, Jr., or his designee, to serve as their agent and attorney-in-fact (the
"Jordan Investors' Representative"), with full power and authority (including
power of substitution), in the name of and for an on behalf of each of the
Jordan Investors, or in its own name as the Jordan Investors' Representative,
to take all actions required or permitted under this Agreement and in
connection with the transactions contemplated hereby (including, without
limitation, the execution and delivery of each of the Recapitalization
Documents and to effect all of the transactions set forth in Article V hereof).
The authority conferred hereby shall be an agency coupled with an interest, and
all authority conferred hereby is irrevocable and not subject to termination by
any of the Jordan Investors, or by operation of law, whether by the death or
incapacity of any of the Jordan Investors, or the occurrence of any other
event.
-13-
<PAGE>
Any notice given to the Jordan Investors' Representative shall constitute
effective notice to each of the Jordan Investors, and any other party to this
Agreement or any other Person may rely on any notice, consent, election or
other communication received from the Jordan Investors' Representative as if
such notice, consent, election or other communication had been received from
each of the Jordan Investors.
(b) Each of the Management Investors hereby appoint Lawrence
Jaro, or his designee, to serve as their agent and attorney-in-fact (the
"Management Investors' Representative"), with full power and authority
(including power of substitution), in the name of and for an on behalf of each
of the Management Investors, or in its own name as the Management Investors'
Representative, to take all actions required or permitted under this Agreement
and in connection with the transactions contemplated hereby (including, without
limitation, the execution and delivery of each of the Recapitalization
Documents and to effect all of the transactions set forth in Article V hereof).
The authority conferred hereby shall be an agency coupled with an interest, and
all authority conferred hereby is irrevocable and not subject to termination by
any of the Management Investors, or by operation of law, whether by the death
or incapacity of any of the Management Investors, or the occurrence of any
other event. Any notice given to the Management Investors' Representative shall
constitute effective notice to each of the Management Investors, and any other
party to this Agreement or any other Person may rely on any notice, consent,
election or other communication received from the Management Investors'
Representative as if such notice, consent, election or other communication had
been received from each of the Management Investors.
(c) The Jordan Investors' Representative and the Management
Investors' Representative shall have no duties or responsibilities except those
expressly set forth herein. The Jordan Investors' Representative and the
Management Investors' Representative shall be held harmless by the Jordan
Investors and the Management Investors, as the case may be, from any liability,
loss, claim, demand or expense (including attorney's fees and expenses) arising
out of or in connection with the performance of their obligations in accordance
with this Agreement, except for any of the foregoing arising out of the gross
negligence or willful misconduct of the Jordan Investors' Representative and
the Management Investors' Representative, as the case may be. The foregoing
provision shall survive the resignation or substitution of the Jordan
Investors' Representative or the Management Investors' Representative, as the
case may be, or the termination of this Agreement.
Section 8.3. Notices. Subject to Section 8.2 hereof, all notices and
other communications pertaining to this Agreement shall be in writing and shall
be delivered in person with receipt acknowledged, or telecopied and confirmed
immediately in writing by a copy mailed by registered or certified mail, return
receipt requested, postage prepaid, addressed as hereafter set forth, or mailed
by registered or certified mail, return receipt requested, postage prepaid, to
the address set forth under the respective party's name on the signature pages
to this Agreement, or to such other person or address as shall be furnished to
the other party in compliance with this Section.
-14-
<PAGE>
Section 8.4. Consent to Amendments and Waivers. The provisions of this
Agreement may be amended only if the Company has obtained the written consent
of a majority of the Parties, provided that (a) any adjustments to the
Recapitalization Documents and the Recapitalization generally resulting from
the determination of the price at which the Senior Notes or Units will be sold
to the public in the Offerings will not be considered amendments, and (b)
waivers, supplements and modifications with regard to the representations and
warranties in this Agreement will not be considered amendments.
Section 8.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
Section 8.6. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants and agreements of
the Company contained herein shall bind its successors and assigns. The Company
may not assign or transfer any of its rights or obligations hereunder (by
operation of law or otherwise) without the prior written consent of each of the
Parties.
Section 8.7. Survival. All representations, warranties, covenants and
agreements herein will survive the Closing.
-15-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto as Common Stockholders have
duly executed this Agreement as of the date first above written.
AMERIKING, INC.
By:
----------------------------
Name:
Title:
Address:
NATIONAL RESTAURANT
ENTERPRISES, INC.
By:
----------------------------
Name:
Title:
Address:
MCIT PLC
By:
----------------------------
Name:
Title:
Address:
BANCBOSTON INVESTMENTS INC.
By:
----------------------------
Name:
Title:
Address:
-16-
<PAGE>
PMI MEZZANINE FUND, L.P.,
a Delaware limited partnership
PACIFIC MEZZANINE INVESTORS, L.L.C.
a Delaware limited liability company,
its General Partner
By:
----------------------------
Name:
Title:
Address:
JORDAN INVESTORS:
JORDAN/ZALAZNICK CAPITAL COMPANY
By:
----------------------------
Name:
Title:
LEUCADIA INVESTORS, INC.
By:
----------------------------
Name:
Title:
-17-
<PAGE>
JOHN W. JORDAN, II REVOCABLE TRUST
--------------------------------------------
Name: John W. Jordan, II
Title: Trustee
--------------------------------------------
David W. Zalaznick
--------------------------------------------
Jonathan F. Boucher
--------------------------------------------
John R. Lowden
--------------------------------------------
Adam E. Max
-18-
<PAGE>
JOHN M. CAMP PROFIT SHARING PLAN
By:
-------------------------------------
Name: John M. Camp
Title: Trustee
----------------------------------------
John M. Camp
----------------------------------------
A. Richard Caputo, Jr.
Address: 9 West 57th Street, Suite 4000,
New York, New York 10019
JAMES E. JORDAN, JR. PROFIT SHARING
PLAN AND TRUST
By:
-------------------------------------
Name: James E. Jordan, Jr.
Title: Trustee
-19-
<PAGE>
PAUL RODZEVIK PROFIT SHARING PLAN
AND TRUST
By:
------------------------------------
Name: Paul Rodzevik
Title: Trustee
---------------------------------------
Dennis Hogerty
---------------------------------------
Jerald Dunn
JII PARTNERS
By:
------------------------------------
Name:
Title:
-20-
<PAGE>
MANAGEMENT STOCKHOLDERS:
--------------------------------------------
Lawrence Jaro
Address: c/o AmeriKing, Inc., 2215 Enterprise
Drive, Suite 1502, Westchester, Illinois 60154
--------------------------------------------
William Osborn
--------------------------------------------
Gary Hubert
--------------------------------------------
Joel Aaseby
--------------------------------------------
Scott Vasatka
--------------------------------------------
Donald Stahurski
-21-
<PAGE>
JARO INVESTORS:
TABOR RESTAURANTS ASSOCIATES, INC.
By:
-----------------------------------
Name: Lawrence Jaro
Title: President
JARO ENTERPRISES, INC.
By:
-----------------------------------
Name: Lawrence Jaro
Title: President
JARO RESTAURANTS ASSOCIATES, INC.
By:
-----------------------------------
Name: Lawrence Jaro
Title: President
JB RESTAURANTS, INC.
By:
-----------------------------------
Name: Lawrence Jaro
Title: President
-22-
<PAGE>
OSBORN INVESTORS:
OSBURGER, INC.
By:
-----------------------------------
Name: William Osborn
Title: President
CASTLEKING, INC.
By:
-----------------------------------
Name: William Osborn
Title: President
WHITE-OSBORN RESTAURANTS, INC.
By:
-----------------------------------
Name: William Osborn
Title: President
--------------------------------------
Thomas H. Quinn
TJC MANAGEMENT CORPORATION
By:
-----------------------------------
Name:
Title:
-23-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto as Preferred Stockholders have
duly executed this Agreement as of the date first written above.
MCIT PLC
By:
------------------------------------
Name:
Title:
Address:
BANCBOSTON INVESTMENTS INC.
By:
------------------------------------
Name:
Title:
Address:
LEUCADIA INVESTORS, INC.
By:
------------------------------------
Name:
Title:
JOHN W. JORDAN, II REVOCABLE TRUST
---------------------------------------
Name: John W. Jordan, II
Title: Trustee
---------------------------------------
David W. Zalaznick
-24-
<PAGE>
-----------------------------------
Jonathan F. Boucher
-----------------------------------
John R. Lowden
-----------------------------------
Adam E. Max
JARO INVESTORS:
TABOR RESTAURANTS ASSOCIATES, INC.
By:
---------------------------------
Name: Lawrence Jaro
Title: President
JARO ENTERPRISES, INC.
By:
---------------------------------
Name: Lawrence Jaro
Title: President
JARO RESTAURANTS ASSOCIATES, INC.
By:
---------------------------------
Name: Lawrence Jaro
Title: President
-25-
<PAGE>
JB RESTAURANTS, INC.
By:
----------------------------------
Name: Lawrence Jaro
Title: President
OSBORN INVESTORS:
OSBURGER, INC.
By:
----------------------------------
Name: William Osborn
Title: President
CASTLEKING, INC.
By:
----------------------------------
Name: William Osborn
Title: President
WHITE-OSBORN RESTAURANTS, INC.
By:
----------------------------------
Name: William Osborn
Title: President
-26-
<PAGE>
EXHIBIT A
AMENDED AND RESTATED COMPANY BY-LAWS
<PAGE>
EXHIBIT B
AMENDED AND RESTATED COMPANY CHARTER
<PAGE>
EXHIBIT C
INDEMNIFICATION AGREEMENT
<PAGE>
EXHIBIT D
STOCKHOLDER CHART
<PAGE>
EXHIBIT E
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
<PAGE>
EXHIBIT F
AMENDMENT NO. 1 TO PMI NOTE PURCHASE AGREEMENT
<PAGE>
EXHIBIT G
OSBORN EMPLOYMENT AND NON-DISCLOSURE AGREEMENT
<PAGE>
EXHIBIT H
STOCKHOLDER WRITTEN CONSENT IN LIEU OF 1996 ANNUAL MEETING
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 2.1. Due Authorization............................. 6
Section 2.2. Authority; No Conflicts....................... 6
Section 2.3. Capital Stock................................. 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE OTHER PARTIES
Section 3.1. Due Authorization............................. 7
Section 3.2. Authority; No Conflicts....................... 7
Section 3.3. Capital Stock................................. 8
ARTICLE IV
THE CLOSING
Section 4.1. Closing....................................... 8
ARTICLE V
THE RECAPITALIZATION
Section 5.1. General....................................... 9
Section 5.2. Preferred Stock............................... 9
Section 5.3. Amended Charter Documents..................... 9
Section 5.4. Reclassification and Stock Split.............. 9
Section 5.5. Subordinated Note Repurchase.................. 10
Section 5.6. Repurchase of Warrants........................ 11
Section 5.7. Employment Agreements......................... 11
Section 5.8. Directors Indemnification Agreements.......... 11
Section 5.9. 1996 Annual Meeting of Stockholders........... 11
Section 5.10. Amended and Restated Stockholders Agreement... 11
-i-
<PAGE>
ARTICLE VI
CONDITIONS OF THE PARTIES'
(OTHER THAN THE COMPANY AND ENTERPRISES) OBLIGATIONS
Section 6.1. Conditions of the Stockholders' Obligations... 12
ARTICLE VII
CONDITIONS OF THE COMPANY'S OBLIGATIONS
Section 7.1. Conditions of the Company's Obligations....... 13
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Waiver of First Refusal, Anti-Dilution Rights
and Registration Rights..................... 13
Section 8.2. Power of Attorney............................. 14
Section 8.3. Notices....................................... 15
Section 8.4. Consent to Amendments and Waivers............. 15
Section 8.5. Governing Law................................. 15
Section 8.6. Successors and Assigns........................ 15
Section 8.7. Survival...................................... 15
-ii-
<PAGE>
EXHIBITS
A Amended and Restated Company By-Laws
B Amended and Restated Company Charter
C Indemnification Agreement
D Stockholder Chart
E Amended and Restated Stockholders Agreement
F Amendment No. 1 to PMI Note Purchase Agreement
G Osborn Employment and Non-Disclosure Agreement
H Stockholder Written Consent in Lieu of 1996 Annual Meeting
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Ameriking, Inc.
(formerly NRE Holdings, Inc.) on Form S-1 of our reports dated October 10, 1995,
March 12, 1996 and May 8, 1996, appearing in the Prospectus, which is part of
this Registration Statement and to the reference to us under the headings
"Selected Consolidated Financial Information" and "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
November 8, 1996
Chicago, Illinois
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
----------
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
----------
/ / CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
FLEET NATIONAL BANK
---------------------------------------------------------
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
Not applicable 04-317415
- ------------------------------- -----------------------------
(State of incorporation (I.R.S. Employer
if not a national bank) Identification No.)
One Monarch Place, Springfield, MA 01102
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Pat Beaudry, 777 Main Street, Hartford, CT 06115 (860) 728-2065
--------------------------------------------------------------
(Name, address and telephone number of agent for service)
AmeriKing, Inc.
---------------------------------------------------
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Delaware 36-3970707
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2215 Enterprise Drive, Suite 1502
Westchester, Illinois 60154
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
______% Subordinated Exchange Debentures due 2008
------------------------------------------------------------------
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject,
The Comptroller of the Currency,
Washington, D.C.
Federal Reserve Bank of Boston
Boston, Massachusetts
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise
corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor and underwriter. If the obligor or
any underwriter for the obligor is an affiliate of the trustee,
describe each such affiliation.
None with respect to the trustee.
Item 16. List of exhibits.
List below all exhibits filed as a part of this statement of
eligibility and qualification.
(1) A copy of the Articles of Association of the trustee as
now in effect.
(2) A copy of the Certificate of Authority of the trustee
to do business.
(3) A copy of the Certification of Fiduciary Powers of the
trustee.
(4) A copy of the By-Laws of the trustee as now in effect.
(5) Consent of the trustee required by Section 321(b)
of the Act.
(6) A copy of the latest Consolidated Reports of Condition
and Income of the trustee published pursuant to law or
the requirements of its supervising or examining authority.
NOTES
In as much as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base answers to Item 2, the answers to said Items are
based upon imcomplete information. Said Items may, however, be considered
correct unless amended by an amendment to this Form T-1.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, Fleet National Bank, a national banking association organized and
existing under the laws of the United States, has duly caused this statement of
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Providence, and State of
Rhode Island, on the 8th day of November, 1996.
FLEET NATIONAL BANK,
AS TRUSTEE
By: /s/ Susan M. Calise
-------------------------
Susan M. Calise
Its Vice President
<PAGE>
EXHIBIT 1
ARTICLES OF ASSOCIATION
OF
FLEET NATIONAL BANK
FIRST. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Fleet National Bank."
SECOND. The main office of the Association shall be in Springfield, Hampden
County Commonwealth of Massachusetts. The general business of the Association
shall be conducted at its main office and its branches.
THIRD. The board of directors of this Association shall consist of not less
than five (5) nor more than twenty-five (25) shareholders, the exact number of
directors within such minimum and maximum limits to be fixed and determined
from time to time by resolution of a majority of the full board of directors or
by resolution of the shareholders at any annual or special meeting thereof.
Unless otherwise provided by the laws of the United States, any vacancy in the
board of directors for any reason, including an increase in the number thereof,
may be filled by action of the board of directors.
FOURTH. The annual meeting of the shareholders for the election of directors
and the transaction of whatever other business may be brought before said
meeting shall be held at the main office or such other place as the board of
directors may designate, on the day of each year specified therefore in the
bylaws, but if no election is held on that day, it may be held on any
subsequent day according to the provisions of law; and all elections shall be
held according to such lawful regulations as may be prescribed by the board of
directors.
FIFTH. The authorized amount of capital stock of this Association shall be
eight million five hundred thousand (8,500,000) shares of which three million
five hundred thousand (3,500,000) shares shall be common stock with a
par value of six and 25/100 dollars ($6.25) each, and of which five million
(5,000,000) shares without par value shall be preferred stock. The capital
stock may be increased or decreased from time to time, in accordance with
the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the Association shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued or sold, nor
any right of subscription to any thereof other than such, if any, as the board
of directors, in its discretion, may from time to time determine and at such
price as the board of directors may from time to time fix.
<PAGE>
The board of directors of the Association is authorized, subject to limitations
prescribed by law and the provisions of this Article, to provide for the
issuance from time to time in one or more series of any number of the preferred
shares, and to establish the number of shares be included in each series, and
to fix the designation, relative rights, preferences, qualifications and
limitations of the shares of each such series. The authority of the board of
directors with respect to each series shall include, but not be limited to,
determination of the following:
a. The number of shares constituting that series and the distinctive
designation of that series;
b. The dividend rate on the shares of that series, whether dividends shall be
cumulative, and, if so, from which date or dates, and whether they shall be
payable in preference to, or in another relation to, the dividends payable
to any other class or classes or series of stock;
c. Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
d. Whether that series shall have conversion or exchange privileges, and,
if so, the terms and conditions of such conversion or exchange, including
provision for the adjustment of the conversion or exchange rate in such
events as the board of directors shall determine;
e. Whether or not the shares of that series shall be redeemable, and, if so,
the terms and conditions of such redemption, including the manner of
selecting shares for redemption if less than all shares are to be redeemed,
the date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
f. Whether that series shall be entitled to the benefit of a sinking fund to
be applied to the purchase or redemption of shares of that series, and, if
so, the terms and amounts of such sinking fund;
g. The right of the shares of that series to the benefit of conditions and
restrictions upon the creation of indebtedness of the Association or any
subsidiary, upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of
dividends or the making of other distributions on, and the purchase,
redemption or other acquisition by the Association or any subsidiary of
any outstanding stock of the Association;
h. The right of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Association and
whether such rights shall be in preference to, or in another relation to,
the comparable rights of any other class or classes or series of stock; and
i. Any other relative, participating, optional or other special rights,
qualifications, limitations or restrictions of that series.
Shares of any series of preferred stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if convertible
or exchangeable, have been converted into or exchanged for shares of stock of
any other class or classes shall have the status of authorized and unissued
shares of preferred stock of the same series and may be reissued as a part of
the series of which they were originally a part or may be reclassified and
reissued as part of a new series of preferred stock to be created by resolution
or resolutions of the board of directors or as part of any other series or
preferred stock, all subject to the conditions and the restrictions adopted by
the board of directors providing for the issue of any series of preferred
stock and by the provisions of any applicable law.
Subject to the provisions of any applicable law, or except as otherwise
provided by the resolution or resolutions providing for the issue of any series
of preferred stock, the holders of outstanding shares of common stock shall
exclusively possess voting power for the election of directors and for all
purposes, each holder of record of shares of common stock being entitled to one
vote for each share of common stock standing in his name on the books of the
Association.
Except as otherwise provided by the resolution or resolutions providing for the
issue of any series of preferred stock, after payment shall have been made to
the holders of preferred stock of the full amount of dividends to which they
shall be entitled pursuant to the resolution or resolutions providing for the
issue of any other series of preferred stock, the holders of common stock shall
be entitled, to the exclusion of the holders of preferred stock of any and all
series, to receive such dividends as from time to time may be declared by the
board of directors.
Except as otherwise provided by the resolution or resolutions for the issue
of any series of preferred stock, in the event of any liquidation, dissolution
or winding up of the Association, whether voluntary or involuntary, after
payment shall have been made to the holders of preferred stock of the full
amount to which they shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of preferred stock the
holders of common stock shall be entitled, to the exclusion of the holders of
preferred stock of any and all series, to share, ratable according to the
number of shares of common stock held by them, in all remaining assets of the
Association available for distribution to its shareholders.
The number of authorized shares of any class may be increased or decreased by
the affirmative vote of the holders of a majority of the stock of the
Association entitled to vote.
<PAGE>
SIXTH. The board of directors shall appoint one of its members president of
this Association, who shall be chairman of the board, unless the board appoints
another director to be the chairman. The board of directors shall have the
power to appoint one or more vice presidents; and to appoint a secretary and
such other officers and employees as may be required to transact the business
of this Association.
The board of directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all bylaws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a board of
directors to do and perform.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other place within the limits of the City of Hartford,
Connecticut, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of the Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The board of directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten percent (10%) of the
stock of this Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place and purpose of every annual and special meeting of the
shareholders shall be given by first class mail, postage prepaid, mailed at
least ten (10) days prior to the date of such meeting to each shareholder of
record at his address as shown upon the books of this Association.
TENTH. (a) Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to any threatened, pending or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director, officer or employee of the Association or is or was
serving at the request of the Association as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, limited
liability company, trust, or other enterprise, including service with respect
to an employee benefit plan, shall be indemnified and held harmless by the
Association to the fullest extent authorized by the law of the state in which
the Association's ultimate parent company is incorporated, except as provided
in subsection (b). The aforesaid indemnity shall protect the indemnified
person against all expense, liability and loss (including attorney's fees,
judgements, fines ERISA excise taxes or penalties, and amounts paid in
settlement) reasonably incurred by such person in connection with such a
proceeding. Such indemnification shall continue as to a person who has ceased
to be a director, officer or employee and shall inure to the benefit of his or
her heirs, executors, and administrators, but shall only cover such person's
period of service with the Association. The Association may, by action of its
Board of Directors, grant rights to indemnification to agents of the
Association and to any director, officer, employee or agent of any of its
subsidiaries with the same scope and effect as the foregoing indemnification
of directors and officers.
(b) Restrictions on Indemnification. Notwithstanding the foregoing, (i) no
person shall be indemnified hereunder by the Association against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by a federal bank regulatory agency which proceeding or action
results in a final order assessing civil money penalties against that person,
requiring affirmative action by that person in the form of payments to the
Association, or removing or prohibiting that person from service with the
Association, and any advancement of expenses to that person in that proceeding
must be repaid; and (ii) no person shall be indemnified hereunder by the
Association and no advancement of expenses shall be made to any person
hereunder to the extent such indemnification or advancement of expenses would
violate or conflict with any applicable federal statute now or hereafter in
force or any applicable final regulation or interpretation now or hereafter
adopted by the Office of the Comptroller of the Currency ("OCC") or the Federal
Deposit Insurance Corporation ("FDIC"). The Association shall comply with any
requirements imposed on it by any such statue or regulation in connection with
any indemnification or advancement of expenses hereunder by the Association.
With respect to proceedings to enforce a claimant's rights to indemnification,
the Association shall indemnify any such claimant in connection with such a
proceeding only as provided in subsection (d) hereof.
(c) Advancement of Expenses. The conditional right to indemnification
conferred in this section shall be a contract right and shall include the
right to be paid by the Association the reasonable expenses (including
attorney's fees) incurred in defending a proceeding in advance of its final
disposition (an "advancement of expenses"); provided, however, that an
advancement of expenses shall be made only upon (i) delivery to the Association
of a binding written undertaking by or on behalf of the person receiving the
advancement to repay all amounts so advanced if it is ultimately determined
that such person is not entitled to be indemnified in such proceeding,
including if such proceeding results in a final order assessing civil money
penalties against that person, requiring affirmative action by that person
in the form of payments to the Association, or removing or prohibiting that
person from service with the Association, and (ii) compliance with any other
actions or determinations required by applicable law, regulation or OCC or FDIC
interpretation to be taken or made by the Board of Directors of the Association
or other persons prior to an advancement of expenses. The Association shall
cease advancing expenses at any time its Board of Directors believes that any
of the prerequisites for advancement of expenses are no longer being met.
(d) Right of Claimant to Bring Suit. If a claim under subsection (a) of the
section is not paid in full by the Association within thirty (30) days after
written claim has been received by the Association, the claimant may at any time
thereafter bring suit against the Association to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Association to recover an advancement of expenses pursuant
to the terms of an undertaking, the claimant shall be entitled to be paid also
the expense of prosecuting or defending such claim. It shall be a defense to
any such action brought by the claimant to enforce a right to indemnification
hereunder (other than an action brought to enforce a claim for an advancement
of expenses where the required undertaking, if any, has been tendered to the
Association) that the claimant has not met any applicable standard for
indemnification under the law of the state in which the Association's ultimate
parent company is incorporated. In any suit brought by the Association to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Association shall be entitled to recover such expenses upon a final
adjudication that the claimant has not met any applicable standard for
indemnification standard for indemnification under the law of the state in
which the Association's ultimate parent company is incorporated.
(e) Non-Exclusivity of Rights. The rights to indemnification and the
advancement of expenses conferred in this section shall not be exclusive of any
other right which any person may have or hereafter acquired under any statute,
agreement, vote of stockholders or disinterested directors or otherwise.
(f) Insurance. The Association may purchase, maintain, and make payment or
reimbursement for reasonable premiums on, insurance to protect itself and any
director, officer, employee or agent of the Association or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Association would have the power to
indemnify such person against such expense, liability or loss under the law of
the state in which the Association's ultimate parent company is incorporated;
provided however, that such insurance shall explicitly exclude insurance
coverage for a final order of a federal bank regulatory agency assessing civil
money penalties against an Association director, officer, employee or agent.
ELEVENTH. These articles of association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount. The notice of any shareholders' meeting at
which an amendment to the articles of association of this Association is to be
considered shall be given as hereinabove set forth.
I hereby certify that the articles of association of this Association, in their
entirety, are listed above in items first through eleventh.
Secretary/Assistant Secretary
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Dated at , as of .
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Revision of February 15, 1996
<PAGE>
EXHIBIT 2
[LOGO]
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COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
that:
(1) The Comptroller of the Currency, pursuant to Revised Statutes
324, et seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession,
custody and control of all records pertaining to the chartering, regulation and
supervision of all National Banking Associations.
(2) "Fleet National Bank", Springfield, Massachusetts
(Charter No. 1338), is a National Banking Association formed under the
laws of the United States and is authorized thereunder to transact the
business of banking on the date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
office to be affixed to these presents at
the Treasury Department, in the City of
Washington and District of Columbia, this
14th day of August, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 3
[LOGO]
- --------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
Certification of Fiduciary Powers
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
the records in this Office evidence "Fleet National Bank",
Springfield, Massachusetts, (Charter No. 1338), was granted, under the hand
and seal of the Comptroller, the right to act in all fiduciary capacities
authorized under the provisions of The Act of Congress approved
September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a. I further certify the
authority so granted remains in full force and effect.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
Office of the Comptroller of the Currency
to be affixed to these presents at the
Treasury Department, in the City of
Washington and District of Columbia, this
4th day of April, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 4
AMENDED AND RESTATED BY-LAWS OF
FLEET NATIONAL BANK
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The regular annual meeting of the shareholders for
the election of Directors and the transaction of any other business that may
properly come before the meeting shall be held at the Main Office of the
Association, or such other place as the Board of Directors may designate, on
the fourth Thursday of April in each year at 1:15 o'clock in the afternoon
unless some other hour of such day is fixed by the Board of Directors.
If, from any cause, an election of Directors is not made on such day, the Board
of Directors shall order the election to be held on some subsequent day, of
which special notice shall be given in accordance with the provisions of law,
and of these bylaws.
Section 2. Special Meetings. Special meetings of the shareholders may be called
at any time by the Board of Directors, the President, or any shareholders
owning not less than twenty-five percent (25%) of the stock of the Association.
Section 3. Notice of Meetings of Shareholders. Except as otherwise provided
by law, notice of the time and place of annual or special meetings of the
shareholders shall be mailed, postage prepaid, at least ten (10) days before
the date of the meeting to each shareholder of record entitled to vote thereat
at his address as shown upon the books of the Association; but any failure to
mail such notice to any shareholder or any irregularity therein, shall not
affect the validity of such meeting or of any of the proceedings thereat.
Notice of a special meeting shall also state the purpose of the meeting.
Section 4. Quorum; Adjourned Meetings. Unless otherwise provided by law, a
quorum for the transaction of business at every meeting of the shareholders
shall consist of not less than two-fifths (2/5) of the outstanding capital
stock represented in person or by proxy; less than such quorum may adjourn the
meeting to a future time. No notice need be given of an adjourned annual or
special meeting of the shareholders if the adjournment be to a definite place
and time.
Section 5. Votes and Proxies. At every meeting of the shareholders, each
share of the capital stock shall be entitled to one vote except as otherwise
provided by law. A majority of the votes cast shall decide every question
or matter submitted to the shareholder at any meeting, unless otherwise
provided by law or by the Articles of Association or these By-laws. Share-
holders may vote by proxies duly authorized in writing and filed with the
Cashier, but no officer, clerk, teller or bookeeper of the Association may act
as a proxy.
<PAGE>
Section 6. Nominations to Board of Directors. At any meeting of shareholders
held for the election of Directors, nominations for election to the Board of
Directors may be made, subject to the provisions of this section, by any share-
holder of record of any outstanding class of stock of the Association entitled
to vote for the election of Directors. No person other than those whose names
are stated as proposed nominees in the proxy statement accompanying the notice
of the meeting may be nominated as such meeting unless a shareholder shall have
given to the President of the Association and to the Comptroller of the
Currency, Washington, DC written notice of intention to nominate such other
person mailed by certified mail or delivered not less than fourteen (14) days
nor more than fifty (50) days prior to the meeting of shareholders at which
such nomination is to be made; provided, however, that if less than twenty-one
(21) days' notice of such meeting is given to shareholders, such notice of
intention to nominate shall be mailed by certified mail or delivered to said
President and said Comptroller on or before the seventh day following the day
on which the notice of such meeting was mailed. Such notice of intention to
nominate shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the Association that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the Association owned by the
notifying shareholder. In the event such notice is given, the proposed nominee
may be nominated either by the shareholder giving such notice or by any other
shareholder present at the meeting at which such nomination is to be made.
Such notice may contain the names of more than one proposed nominee, and if
more than one is named, any one or more of those named may be nominated.
Section 7. Action Taken Without a Shareholder Meeting. Any action requiring
shareholder approval or consent may be taken without a meeting and without
notice of such meeting by written consent of the shareholders.
ARTICLE II
DIRECTORS
Section 1. Number. The Board of Directors shall consist of such number of
shareholders, not less than five (5) nor more than twenty-five (25), as from
time to time shall be determined by a majority of the votes to which all of its
shareholders are at the time entitled, or by the Board of Directors as
hereinafter provided.
Section 2. Mandatory Retirement for Directors. No person shall be elected a
director who has attained the age of 68 and no person shall continue to serve
as a director after the date of the first meeting of the stockholders of the
Association held on or after the date on which such person attains the age of
68; provided, however, that any director serving on the Board as of December
15, 1995 who has attanined the age of 65 on or prior to such date shall be
permitted to continue to serve as a director until the date of the first
meeting of the stockholders of the Association held on or after the date on
which such person attains the age of 70.
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<PAGE>
Section 3. General Powers. The Board of Directors shall exercise all the
coporate powers of the Association, except as expressly limited by law, and
shall have the control, management, direction and dispositon of all its
property and affairs.
Section 4. Annual Meeting. Immediately following a meeting of shareholders
held for the election of Directors, the Cashier shall notify the directors-
elect who may be present of their election and they shall then hold a meeting
at the Main Office of the Association, or such other place as the Board of
Directors may designate, for the purpose of taking their oaths, organizing the
new Board, electing officers and transacting any other business that may come
before such meeting.
Section 5. Regular Meeting. Regular meetings of the Board of Directors shall
be held without notice at the Main Office of the Association, or such other
place as the Board of Directors may designate, at such dates and times as the
Board shall determine. If the day designated for a regular meeting falls on a
legal holiday, the meeting shall be held on the next business day.
Section 6. Special Meetings. A special meeting of the Board of Directors may
be called at anytime upon the written request of the Chairman of the Board, the
President, or of two Directors, stating the purpose of the meeting. Notice of
the time and place shall be given not later than the day before the date of the
meeting, by mailing a notice to each Director at his last known address, by
delivering such notice to him personally, or by telephoning.
Section 7. Quorum; Votes. A majority of the Board of Directors at the time
holding office shall constitute a quorum for the transaction of all business,
except when otherwise provided by law, but less than a quorum may adjourn
a meeting from time to time, and the meeting may be held, as adjourned, without
further notice. If a quorum is present when a vote is taken, the affirmative
vote of a majority of Directors present is the act of the Board of Directors.
Section 8. Action by Directors Without a Meeting. Any action requiring
Director approval or consent may be taken without a meeting and without notice
of such meeting by written consent of all the Directors.
Section 9. Telephonic Participation in Directors' Meetings. A Director or
member of a Committee of the Board of Directors may participate in a meeting of
the Board or of such Committee may participate in a meeting of the Board or of
such Committee by means of a conference telephone or similar communications
equipment enabling all Directors participating in the meeting to hear one
another, and participation in such a meeting shall constitute presence in person
at such a meeting.
Section 10. Vacancies. Vacancies in the Board of Directors may be filled by
the remaining members of the Board at any regular or special meeting of the
Board.
Section 11. Interim Appointments. The Board of Directors shall, if the share-
holders at any meeting for the election of Directors have determined a number
of Directors less than twenty-five (25), have the power, by affirmative vote of
the majority of all the Directors, to increase such number of Directors to not
more than twenty-five (25) and to elect Directors to fill the resulting
vacancies and to serve until the next annual meeting of shareholders or the
next election of Directors; provided, however, that the number of Directors
shall not be so increased by more than two (2) if the number last determined
by shareholders was fifteen (15) or less, or increased by more than four (4) if
the number last determined by shareholders was sixteen (16) or more.
Section 12. Fees. The Board of Directors shall fix the amount and direct the
payment of fees which shall be paid to each Director for attendance at any
meeting of the Board of Directors or of any Committees of the Board.
ARTICLE III
COMMITTEES OF THE BOARD
Section 1. Executive Committee. The Board of Directors shall appoint from its
members an Executive Committee which shall consist of such number of persons as
the Board of Directors shall determine; the Chairman of the Board and the
President shall be members ex-officio of the Executive Committee with full
voting power. The Chairman of the Board or the President may from time to time
appoint from the Board of Directors as temporary additional members of the
Executive Committee, with full voting powers, not more than two members to serve
for such periods as the Chairman of the Board or the President may determine.
The Board of Directors shall designate a member of the Executive Committee to
serve as Chairman thereof. A meeting of the Executive Committee may be called
at any time upon the written request of the Chairman of the Board, the President
or the Chairman of the Executive Committee, stating the purpose of the meeting.
Not less than twenty four hours' notice of said meeting shall be given to each
member of the Committee personally, by telephoning, or by mail. The Chairman of
the Executive Committee or, in his absence, a member of the Committee chosen by
a majority of the members present shall preside at meetings of the Executive
Committee.
-3-
<PAGE>
The Executive Committee shall possess and may exercise all the powers of the
Board when the Board is not in session except such as the Board, only, by law,
is authorized to exercise; it shall keep minutes of its acts and proceedings
and cause same to be presented and reported at every regular meeting and at any
special meeting of the Board including specifically, all its actions relating
to loans and discounts.
All acts done and powers and authority conferred by the Executive Committee,
from time to time, within the scope of its authority, shall be deemed to be,
and may be certified as being, the acts of and under the authority of the
Board.
Section 2. Risk Management Committee. The Board shall appoint from its
members a Risk Management Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Risk
Management Committee to serve as Chairman thereof. It shall be the duty of the
Risk Management Committee to (a) serve as the channel of communication with
management and the Board of Directors of Fleet Financial Group, Inc. to assure
that formal processes supported by management information systems are in place
for the identification, evaluation and management of significant risks inherent
in or associated with lending activities, the loan portfolio, asset-liablity
management, the investment portfolio, trust and investment advisory activities,
the sale of nondeposit investment products and new products and services and
such additional activities or functions as the Board may determine from time
to time; (b) assure the formulation and adoption of policies approved by the
Risk Management Committee or Board governing lending activities, management of
the loan portfolio, the maintenance of an adequate allowance for loan and lease
losses, asset-liability management, the investment portfolio, the retail
sale of non-deposit investment products, new products and services and such
additional activities or functions as the Board may determine from time to time
(c) assure that a comprehensive independent loan review program is in place for
the early detection of problem loans and review significant reports of the loan
review department, management's responses to those reports and the risk
attributed to unresolved issues; (d) subject to control of the Board, exercise
general supervision over trust activities, the investment of trust funds, the
disposition of trust investments and the acceptance of new trusts and the terms
of such acceptance, and (e) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 3. Audit Committee. The Board shall appoint from its members and
Audit Committee which shall consist of such number as the Board shall determine
no one of whom shall be an active officer or employee of the Association or
Fleet Financial Group, Inc. or any of its affiliates. In addition, members of
the Audit Committee must not (i) have served as an officer or employee of the
Association or any of its affiliates at any time during the year prior to their
appointment; or (ii) own, control, or have owned or controlled at any time
during the year prior to appointment, ten percent (10%) or more of any
outstanding class of voting securities of the Association. At least two (2)
members of the Audit Committee must have significant executive, professional,
educational or regulatory experience in financial, auditing, accounting,
or banking matters. No member of the Audit Commitee may have significant
direct or indirect credit or other relationships with the Association, the
termination of which would materially adversely affect the Association's
financial condition or results of operations.
The Board shall designate a member of the Audit Committee to serve as Chairman
thereof. It shall be the duty of the Audit Committee to (a) cause a continuous
audit and examination to be made on its behalf into the affairs of the
Association and to review the results of such examination; (b) review
significant reports of the internal auditing department, management's responses
to those reports and the risk attributed to unresolved issues; (c) review the
basis for the reports issued under Section 112 of The Federal Deposit Insurance
Corporation Improvement Act of 1991; (d) consider, in consultation with the
independent auditor and an internal auditing executive, the adequacy of the
Association's internal controls, including the resolution of identified material
weakness and reportable conditions; (e) review regulatory communications
received from any federal or state agency with supervisory jurisdiction or
other examining authority and monitor any needed corrective action by
management; (f) ensure that a formal system of internal controls is in place
for maintaining compliance with laws and regulations; (g) cause an audit of the
Trust Department at least once during each calendar year and within 15 months
of the last such audit or, in liew thereof, adopt a continuous audit system and
report to the Board each calendar year and within 15 months of the previous
report on the performance of such audit function; and (h) perform such
additional duties and exercise such additional powers of the Board as the Board
may determine from time to time.
The Audit Committee may consult with internal counsel and retain its own
outside counsel without approval (prior or otherwise) from the Board or
management and obligate the Association to pay the fees of such counsel.
-4-
<PAGE>
Section 4. Community Affairs Committee. The Board shall appoint from its
members a Community Affairs Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Community
Affairs Committee to serve as Chairman thereof. It shall be the duty of the
Commmunity Affairs Committee to (a) oversee compliance by the Association with
the Community Reinvestment Act of 1977, as amended, and the regulations
promulgated thereunder; and (b) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 5. Regular Meetings. Except for the Executive Committee which shall
meet on an ad hoc basis as set forth in Section 1 of this Article, regular
meetings of the Committees of the Board of Directors shall be held, without
notice, at such time and place as the Committee or the Board of Directors may
appoint and as often as the business of the Association may require.
Section 6. Special Meetings. A Special Meeting of any of the Committees of
the Board of Directors may be called upon the written request of the Chairman
of the Board or the President, or of any two members of the respective
Committee, stating the purpose of the meeting. Not less than twenty-four
hours' notice of such special meeting shall be given to each member of the
Committee personally, by telephoning, or by mail.
Section 7. Emergency Meetings. An Emergency Meeting of any of the Committees
of the Board of Directors may be called at the request of the Chairman of the
Board or the President, who shall state that an emergency exists, upon not
less than one hour's notice to each member of the Committee personally or by
telephoning.
Section 8. Action Taken Without a Committee Meeting. Any Committee of the
Board of Directors may take action without a meeting and without notice of such
meeting by resolution assented to in writing by all members of such Committee.
Section 9. Quorum. A majority of a Committee of the Board of Directors shall
constitute a quorum for the transaction of any business at any meeting of such
Committee. If a quorum is not available, the Chairman of the Board or the
President shall have power to make temporary appointments to a Committee of-
members of the Board of Directors, to act in the place and stead of members who
temporarily cannot attend any such meeting; provided, however, that any
temporary appointment to the Audit Committee must meet the requirements for
members of that Committee set forth in Section 3 of this Article.
Section 10. Record. The committes of the Board of Directors shall keep a
record of their respective meetings and proceedings which shall be presented
at the regular meeting of the Board of Directors held in the calendar month
next following the meetings of the Committees. If there is no regular Board
of Directors meeting held in the calendar month next following the meeting of
a Committee, then such Committee's records shall be presented at the next
regular Board of Directors meeting held in a month subsequent to such Committee
meeting.
Section 11. Changes and Vacancies. The Board of Directors shall have power
to change the members of any Committee at any time and to fill vacancies on any
Committee; provided, however, that any newly appointed member of the Audit
Committee must meet the requirements for members of that Committee set forth in
Section 3 of this Article.
Section 12. Other Committees. The Board of Directors may appoint, from time
to time, other committees of one or more persons, for such purposes and with
such powers as the Board may determine.
ARTICLE IV
WAIVER OF NOTICE OF MEETINGS
Section 1. Waiver. Whenever notice is required to be given to any shareholder,
Director, or member of a Committee of the Board of Directors, such notice may
be waived in writing either before or after such meeting by any shareholder,
Director or Committee member respectively, as the case may be, who may be
entitled to such notice; and such notice will be deemed to be waived by
attendance at any such meeting.
-5-
<PAGE>
ARTICLE V
OFFICERS AND AGENTS
Section 1. Officers. The Board shall appoint a Chairman of the Board and a
President, and shall have the power to appoint one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Cashier, a Secretary, an Auditor, a Controller, one or more Trust Officers and-
such other officers as are deemed necessary or desirable for the proper
transaction of business of the Association. The Chairman of the Board and the
President shall be appointed from members of the Board of Directors. Any two
or more offices, except those of President and Cashier, or Secretary, may be
held by the same person. The Board may, from time to time, by resolution
passed by a majority of the entire Board, designate one or more officers of the
Association or of an affiliate or of Fleet Financial Group, Inc. with power to
appoint one or more Vice Presidents and such other officers of the Association
below the level of Vice President as the officer or officers designated in such
resolution deem necessary or desirable for the proper transaction of the
business of the Association.
Section 2. Chairman of the Board. The chairman of the Board shall preside at
all meetings of the Board of Directors. Subject to definition by the Board of
Directors, he shall have general executive powers and such specific powers and
duties as from time to time may be conferred upon or assigned to him by the
Board of Directors.
Section 3. President. The President shall preside at all meetings of the
Board of Directors if there be no Chairman or if the Chairman be absent.
Subject to definition by the Board of Directors, he shall have general
executive powers and such specific powers and duties as from time to time may
be conferred upon or assigned to him by the Board of Directors.
-6-
<PAGE>
Section 4. Cashier and Secretary. The Cashier shall be the Secretary of the
Board and of the Executive Committee, and shall keep accurate minutes of their
meetings and of all meetings of the shareholders. He shall attend to the
giving of all notices required by these By-laws. He shall be custodian of the
corporate seal, records, documents and papers of the Association. He shall
have such powers and perform such duties as pertain by law or regulation to the
office of Cashier, or as are imposed by these By-laws, or as may be delegated
to him from time to time by the Board of Directors, the Chairman of the Board
or the President.
Section 5. Auditor. The Auditor shall be the chief auditing officer of the
Association. He shall continuously examine the affairs of the Association and
from time to time shall report to the Board of Directors. He shall have such
powers and perform such duties as are conferred upon, or assigned to him by
these By-laws, or as may be delegated to him from time to time by the Board
of Directors.
Section 6. Officers Seriatim. The Board of Directors shall designate from
time to time not less than two officers who shall in the absence or disability
of the Chairman or President or both, succeed seriatim to the duties and
responsibilities of the Chairman and President respectively.
Section 7. Clerks and Agents. The Board of Directors may appoint, from time
to time, such clerks, agents and employees as it may deem advisable for the
prompt and orderly transaction of the business of the Association, define
their duties, fix the salaries to be paid them and dismiss them. Subject to
the authority of the Board of Directors, the Chairman of the Board or the
President, or any other officer of the Association authorized by either of them
may appoint and dismiss all or any clerks, agents and employees and prescribe
their duties and the conditions of their employment, and from time to time
fix their compensation.
Section 8. Tenure. The Chairman of the Board of Directors and the President
shall, except in the case of death, resignation, retirement or disqualification
under these By-laws, or unless removed by the affirmative vote of at least two-
thirds of all of the members of the Board of Directors, hold office for the
term of one year or until their respective successors are appointed. Either
of such officers appointed to fill a vacancy occurring in an unexpired term
shall serve for such unexpired term of such vacancy. All other officers,
clerks, agents, attorneys-in-fact and employees of the Association shall hold
office during the pleasure of the Board of Directors or of the officer or
committee appointing them respectively.
ARTICLE VI
TRUST DEPARTMENT
Section 1. General Powers and Duties. All fiduciary powers of the Association
shall be exercised through the Trust Department, subject to such regulations as
the Comptroller of the Currency shall from time to time establish. The Trust
Department shall be to placed under the management and immediate supervision
of an officer or officers appointed by the Board of Directors. The duties of
all officers of the Trust Department shall be to cause the policies and
instructions of the Board and the Risk Management Committee with respect to the
trusts under their supervision to be carried out, and to supervise the due
performance of the trusts and agencies entrusted to the Association and under
their supervision, in accordance with law and in accordance with the terms of
such trusts and agencies.
-7-
<PAGE>
ARTICLE VII
BRANCH OFFICES
Section 1. Establishment. The Board of Directors shall have full power to
establish, to discontinue, or, from time to time, to change the location of any
branch office, subject to such limitations as may be provided by law.
Section 2. Supervision and Control. Subject to the general supervision and
control of the Board of Directors, the affairs of branch offices shall be
under the immediate supervision and control of the President or of such other
officer or officers, employee or employees, or other individuals as the Board
of Directors may from time to time determine, with such powers and duties as
the Board of Directors may confer upon or assign to him or them.
ARTICLE VIII
SIGNATURE POWERS
Section 1. Authorization. The power of officers, employees, agents and
attorneys to sign on behalf of and to affix the seal of the Association shall
be prescribed by the Board of Directors or by the Executive Committee or by
both; provided that the President is authorized to restrict such power of any
officer, employee, agent or attorney to the business of a specific department
or departments, or to a specific branch office or branch offices. Facsimile
signatures may be authorized.
-8-
<PAGE>
ARTICLE IX
STOCK CERTIFICATES AND TRANSFERS
Section 1. Stock Records. The Trust Department shall have custody of the
stock certificate books and stock ledgers of the Association, and shall make
all transfers of stock, issue certificates thereof and disburse dividends
declared thereon.
Section 2. Form of Certificate. Every shareholder shall be entitled to a
certificate conforming to the requirements of law and otherwise in such form
as the Board of Directors may approve. The certificates shall state on the
face thereof that the stock is transferable only on the books of the
Association and shall be signed by such officers as may be prescribed from time
to time by the Board of Directors or Executive Committee. Facsimile signatures
may be authorized.
Section 3. Transfers of Stock. Transfers of stock shall be made only on the
books of the Association by the holder in person, or by attorney duly
authorized in writing, upon surrender of the certificate therefor properly
endorsed, or upon the surrender of such certificate accompanied by a properly
executed written assignment of the same, or a written power of attorney to
sell, assign or transfer the same or the shares represented thereby.
Section 4. Lost Certificate. The Board of Directors or Executive Committee
may order a new certificate to be issued in place of a certificate lost or
destroyed, upon proof of such loss or destruction and upon tender to the
Association by the shareholder, of a bond in such amount and with or without
surety, as may be ordered, indemnifying the Association against all liability,
loss, cost and damage by reason of such loss or destruction and the issuance
of a new certificate.
Section 5. Closing Transfer Books. The Board of Directors may close the
transfer books for a period not exceeding thirty days preceding any regular
or special meeting of the shareholders, or the day designated for the payment
of a dividend or the allotment of rights. In lieu of closing the transfer
books the Board of Directors may fix a day and hour not more than thirty days
prior to the day of holding any meeting of the shareholders, or the day
designated for the payment of a dividend, or the day designated for the
allotment of rights, or the day when any change of conversion or exchange of
capital stock is to go into effect, as the day as of which shareholders
entitled to notice of and to vote at such meetings or entitled to such dividend
or to such allotment of rights or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, shall be determined, and
only such shareholders as shall be shareholders of record on the day and hour
so fixed shall be entitled to notice of and to vote at such meeting or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such rights, as the case may be.
ARTICLE X
THE CORPORATE SEAL
Section 1. Seal. The following is an impression of the seal of the
Association adopted by the Board of Directors.
ARTICLE XI
BUSINESS HOURS
Section 1. Business Hours. The main office of this Association and each
branch office thereof shall be open for business on such days, and for such
hours as the Chairman, or the President, or any Executive Vice President, or
such other officer as the Board of Directors shall from time to time
designate, may determine as to each office to conform to local custom and
convenience, provided that any one or more of the main and branch offices or
certain departments thereof may be open for such hours as the President, or
such other officer as the Board of Directors shall from time to time designate,
may determine as to each office or department on any legal holiday on which
work is not prohibited by law, and provided further that any one or more of
the main and branch offices or certain departments thereof may be ordered
closed or open on any day for such hours as to each office or department as
the President, or such other officer as the Board of Directors shall from time
to time designate, subject to applicable laws regulations, may determine when
such action may be required by reason of disaster or other emergency condition.
ARTICLE IX
CHANGES IN BY-LAWS
Section 1. Amendments. These By-laws may be amended upon vote of a majority
of the entire Board of Directors at any meeting of the Board, provided ten (10)
day's notice of the proposed amendment has been given to each member of the
Board of Directors. No amendment may be made unless the By-law, as amended, is
consistent with the requirements of law and of the Articles of Association.
These By-laws may also be amended by the Association's shareholders.
A true copy
Attest:
Secretary/Assistant Secretary
- ---------------------------------------
Dated at , as of .
--------------------------------------- ----------------------
Revision of January 11, 1993
-9-
<PAGE>
EXHIBIT 5
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under the Indenture to be entered into between
AmeriKing, Inc. and Fleet National Bank, as Trustee,
does hereby consent that, pursuant to Section 321(b) of the Trust Indenture
Act of 1939, reports of examinations with respect to the undersigned by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
FLEET NATIONAL BANK,
AS TRUSTEE
By /s/ Susan M. Calise
-------------------------------
Susan M. Calise
Its: Vice President
Dated:
<PAGE>
EXHIBIT 6
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 1999
Federal Financial Institutions Examination Council
- --------------------------------------------------------------------------------
[FEDERAL FINANCIAL Please refer to page i, [1]
INSTITUTIONS EXAMINATION Table of Contents, for
COUNCIL LOGO] the required disclosure
of estimated burden.
- --------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
(960630)
REPORT AT THE CLOSE OF BUSINESS JUNE 30, 1996 -----------
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State member banks);
12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Giro S. DeRosa, Vice President
-----------------------------------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and
Income (including the supporting schedules) have been prepared in conformance
with the instructions issued by the appropriate Federal regulatory authority
and are true to the best of my knowledge and belief.
/s/ Giro DeRosa
- --------------------------------------------------------------------------------
Signature of Officer Authorized to Sign Report
July 25, 1996
- --------------------------------------------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
For Banks Submitting Hard Copy Report Forms:
State Member Banks: Return the original and one copy to the appropriate Federal
Reserve District Bank.
State Nonmember Banks: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
National Banks: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- --------------------------------------------------------------------------------
FDIC Certificate Number | 0 | 2 | 4 | 9 | 9 | Banks should affix
--------------------- the address label
(RCRI 90150) in this space.
CALL NO. 196 31 06-30-96
STAR: 25-0590 00327 STCERT: 25-02490
FLEET NATIONAL BANK
ONE MONARCH PLACE
SPRINGFIELD, MA 01102
Board of Governors of the Federal Reserve System, Federal Deposit
Insurance Corporation, Office of the Comptroller of the Currency
<PAGE>
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
___ ___
FDIC Certificate Number | 0 | 2 | 4 | 9 | 9 | | Banks should affix the address label in this space. |
______________________
(RCRI 9050) CALL NO. 196 31 06-30-96
STBK: 25-0590 00327 STCERT: 25-02499
FLEET NATIONAL BANK
ONE MONARCH PLACE
SPRINGFIELD, MA 01102
|___ ___|
</TABLE>
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>
FFIEC 031
Page i
/2/
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices
________________________________________________________________________________
TABLE OF CONTENTS
SIGNATURE PAGE Cover
REPORT OF INCOME
Schedule RI--Income Statement...........................................RI-1,2,3
Schedule RI-A--Changes in Equity Capital....................................RI-4
Schedule RI-B--Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease
Losses..................................................................RI-4,5
Schedule RI-C--Applicable Income Taxes by
Taxing Authority..........................................................RI-5
Schedule RI-D--Income from
International Operations..................................................RI-6
Schedule RI-E--Explanations...............................................RI-7,8
REPORT OF CONDITION
Schedule RC--Balance Sheet................................................RC-1,2
Schedule RC-A--Cash and Balances Due
From Depository Institutions..............................................RC-3
Schedule RC-B--Securities...............................................RC-3,4,5
Schedule RC-C--Loans and Lease Financing
Receivables:
Part I. Loans and Leases..............................................RC-6,7
Part II. Loans to Small Businesses and
Small Farms (included in the forms for
June 30 only).....................................................RC-7a,7b
Schedule RC-D--Trading Assets and Liabilities
(to be completed only by selected banks)..................................RC-8
Schedule RC-E--Deposit Liabilities....................................RC-9,10,11
Schedule RC-F--Other Assets................................................RC-11
Schedule RC-G--Other Liabilities...........................................RC-11
Schedule RC-H--Selected Balance Sheet Items for
Domestic Offices.........................................................RC-12
Schedule RC-I--Selected Assets and Liabilities
of IBFs..................................................................RC-13
Schedule RC-K--Quarterly Averages..........................................RC-13
Schedule RC-L--Off-Balance Sheet Items...............................RC-14,15,16
Schedule RC-M--Memoranda................................................RC-17,18
Schedule RC-N--Past Due and Nonaccrual Loans,
Leases, and Other Assets..............................................RC-19,20
Schedule RC-O--Other Data for Deposit
Insurance Assessments.................................................RC-21,22
Schedule RC-R--Regulatory Capital.......................................RC-23,24
Optional Narrative Statement Concerning the
Amounts Reported in the Reports of
Condition and Income.....................................................RC-25
Special Report (TO BE COMPLETED BY ALL BANKS)
Schedule RC-J--Repricing Opportunities (sent only to
and to be completed only by savings banks)
DISCLOSURE OF ESTIMATED BURDEN
The estimated average burden associated with this information collection is
32.2 hours per respondent and is estimated to vary from 15 to 230 hours per
response, depending on individual circumstances. Burden estimates include the
time for reviewing instructions, gathering and maintaining data in the required
form, and completing the information collection, but exclude the time for
compiling and maintaining business records in the normal course of a
respondent's activities. Comments concerning the accuracy of this burden
estimate and suggestions for reducing this burden should be directed to the
Office of Information and Regulatory Affairs, Office of Management and Budget,
Washington, D.C. 20503, and to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
For information or assistance, National and State nonmember banks should
contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington,
D.C. 20429, toll free on (800) 688-FDIC (3342), Monday through Friday between
8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-1
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Consolidated Report of Income
for the period January 1, 1996 - June 30, 1996
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
<TABLE>
<CAPTION>
Schedule RI--Income Statement _________
| I480 |
______________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________|_____________________|
<S> <C> <C>
1. Interest income: | ////////////////// |
a. Interest and fee income on loans: | ////////////////// |
(1) In domestic offices: | ////////////////// |
(a) Loans secured by real estate .................................................. | 4011 616,395 | 1.a.(1)(a)
(b) Loans to depository institutions .............................................. | 4019 588 | 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers ........... | 4024 286 | 1.a.(1)(c)
(d) Commercial and industrial loans ............................................... | 4012 562,807 | 1.a.(1)(d)
(e) Acceptances of other banks .................................................... | 4026 261 | 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: | ////////////////// |
(1) Credit cards and related plans ............................................ | 4054 9,643 | 1.a.(1)(f)(1)
(2) Other ..................................................................... | 4055 97,346 | 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions ........................ | 4056 0 | 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political | ////////////////// |
subdivisions in the U.S.: | ////////////////// |
(1) Taxable obligations ....................................................... | 4503 0 | 1.a.(1)(h)(1)
(2) Tax-exempt obligations .................................................... | 4504 5,232 | 1.a.(1)(h)(2)
(i) All other loans in domestic offices ........................................... | 4058 84,576 | 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 4059 1,981 | 1.a.(2)
b. Income from lease financing receivables: | ////////////////// |
(1) Taxable leases .................................................................... | 4505 75,341 | 1.b.(1)
(2) Tax-exempt leases ................................................................. | 4307 791 | 1.b.(2)
c. Interest income on balances due from depository institutions:(1) | ////////////////// |
(1) In domestic offices ............................................................... | 4105 914 | 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 4106 142 | 1.c.(2)
d. Interest and dividend income on securities: | ////////////////// |
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations ... | 4027 209,142 | 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: | ////////////////// |
(a) Taxable securities ............................................................ | 4506 0 | 1.d.(2)(a)
(b) Tax-exempt securities ......................................................... | 4507 2,953 | 1.d.(2)(b)
(3) Other domestic debt securities .................................................... | 3657 12,164 | 1.d.(3)
(4) Foreign debt securities ........................................................... | 3658 3,348 | 1.d.(4)
(5) Equity securities (including investments in mutual funds) ......................... | 3659 10,212 | 1.d.(5)
e. Interest income from trading assets.................................................... | 4069 360 | 1.e.
______________________
</TABLE>
____________
(1) Includes interest income on time certificates of deposit not held for
trading.
3
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI--Continued
________________
Dollar Amounts in Thousands | Year-to-date |
___________________________________________________________________________________ ______________
<S> <C> <C>
1. Interest income (continued) | RIAD Bil Mil Thou |
f. Interest income on federal funds sold and securities purchased | ////////////////// |
under agreements to resell in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4020 24,925 | 1.f.
g. Total interest income (sum of items 1.a through 1.f) ................ | 4107 1,719,407 | 1.g.
2. Interest expense: | ////////////////// |
a. Interest on deposits: | ////////////////// |
(1) Interest on deposits in domestic offices: | ////////////////// |
(a) Transaction accounts (NOW accounts, ATS accounts, and | ////////////////// |
telephone and preauthorized transfer accounts) .............. | 4508 8,583 | 2.a.(1)(a)
(b) Nontransaction accounts: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................... | 4509 133,915 | 2.a.(1)(b)(1)
(2) Other savings deposits .................................. | 4511 26,678 | 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more ........ | 4174 88,690 | 2.a.(1)(b)(3)
(4) All other time deposits ................................. | 4512 214,225 | 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement | ////////////////// |
subsidiaries, and IBFs .......................................... | 4172 50,022 | 2.a.(2)
b. Expense of federal funds purchased and securities sold under | ////////////////// |
agreements to repurchase in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4180 152,094 | 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading | ////////////////// |
liabilities, and other borrowed money ............................... | 4185 121,525 | 2.c.
d. Interest on mortgage indebtedness and obligations under | ////////////////// |
capitalized leases .................................................. | 4072 361 | 2.d.
e. Interest on subordinated notes and debentures ....................... | 4200 26,110 | 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ............... | 4073 822,203 | 2.f.
___________________________
3. Net interest income (item 1.g minus 2.f) ............................... | ////////////////// | RIAD 4074 | 897,204 | 3.
___________________________
4. Provisions: | ////////////////// |
___________________________
a. Provision for loan and lease losses ................................. | ////////////////// | RIAD 4230 | 21,672 | 4.a.
b. Provision for allocated transfer risk ............................... | ////////////////// | RIAD 4243 | 0 | 4.b.
___________________________
5. Noninterest income: | ////////////////// |
a. Income from fiduciary activities .................................... | 4070 144,614 | 5.a.
b. Service charges on deposit accounts in domestic offices ............. | 4080 111,736 | 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum | ////////////////// |
items 8.a through 8.d)............................................... A220 10,646 5.c.
d. Other foreign transaction gains (losses) ............................ | 4076 247 | 5.d.
e. Not applicable | ////////////////// |
f. Other noninterest income: | ////////////////// |
(1) Other fee income ................................................ | 5407 372,950 | 5.f.(1)
(2) All other noninterest income* ................................... | 5408 211,593 | 5.f.(2)
___________________________
g. Total noninterest income (sum of items 5.a through 5.f) ............. | ////////////////// | RIAD 4079 | 851,786 | 5.g.
6. a. Realized gains (losses) on held-to-maturity securities .............. | ////////////////// | RIAD 3521 | 1 | 6.a.
b. Realized gains (losses) on available-for-sale securities ............ | ////////////////// | RIAD 3196 | 16,126 | 6.b.
___________________________
7. Noninterest expense: | ////////////////// |
a. Salaries and employee benefits ...................................... | 4135 322,146 | 7.a.
b. Expenses of premises and fixed assets (net of rental income) | ////////////////// |
(excluding salaries and employee benefits and mortgage interest) .... | 4217 114,912 | 7.b.
c. Other noninterest expense* .......................................... | 4092 631,554 | 7.c.
___________________________
d. Total noninterest expense (sum of items 7.a through 7.c) ............ | ////////////////// | RIAD 4093 | 1,068,612 | 7.d.
___________________________
8. Income (loss) before income taxes and extraordinary items and other | ////////////////// |
___________________________
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d)| ////////////////// | RIAD 4301 | 674,833 | 8.
9. Applicable income taxes (on item 8) .................................... | ////////////////// | RIAD 4302 | 280,303 | 9.
___________________________
10. Income (loss) before extraordinary items and other adjustments | ////////////////// |
___________________________
(item 8 minus 9) ....................................................... | ////////////////// | RIAD 4300 | 394,530 | 10.
_________________________________________________
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
4
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI--Continued
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________ ______________
<S> <C> <C>
11. Extraordinary items and other adjustments: | ////////////////// |
a. Extraordinary items and other adjustments, gross of income taxes* . | 4310 0 | 11.a.
b. Applicable income taxes (on item 11.a)* ........................... | 4315 0 | 11.b.
c. Extraordinary items and other adjustments, net of income taxes | ////////////////// |__________________________
(item 11.a minus 11.b) ............................................ | ////////////////// | RIAD 4320 | 0 | 11.c.
12. Net income (loss) (sum of items 10 and 11.c) ......................... | ////////////////// | RIAD 4340 | 394,530 | 12.
_________________________________________________
</TABLE>
<TABLE>
<CAPTION>
__________
| I481 |
_______________
Memoranda | Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after | ////////////////// |
August 7, 1986, that is not deductible for federal income tax purposes .......................... | 4513 1,798 | M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices | ////////////////// |
(included in Schedule RI, item 8) ............................................................... | 8431 20,910 | M.2.
3.-4. Not applicable | ////////////////// |
5. Number of full-time equivalent employees on payroll at end of current period (round to | //// Number |
nearest whole number) ........................................................................... | 4150 9,852 | M.5.
6. Not applicable | ////////////////// |
7. If the reporting bank has restated its balance sheet as a result of applying push down | //// MM DD YY |
accounting this calendar year, report the date of the bank's acquisition ........................ | 9106 00/00/00 | M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) | ////////////////// |
(sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): | //// Bil Mil Thou |
a. Interest rate exposures ...................................................................... | 8757 1,428 | M.8.a.
b. Foreign exchange exposures ................................................................... | 8758 9,218 | M.8.b.
c. Equity security and index exposures .......................................................... | 8759 0 | M.8.c.
d. Commodity and other exposures ................................................................ | 8760 0 | M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: | ////////////////// |
a. Net increase (decrease) to interest income.....................................................| 8761 (5,575)| M.9.a.
b. Net (increase) decrease to interest expense ...................................................| 8762 (5,752)| M.9.b.
c. Other (noninterest) allocations ...............................................................| 8763 (172)| M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions).................................| A251 0 | M.10.
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
5
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses. _________
| I483 |
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Total equity capital originally reported in the December 31, 1995, Reports of Condition | ////////////////// |
and Income ...................................................................................... | 3215 1,342,473 | 1.
2. Equity capital adjustments from amended Reports of Income, net* ................................. | 3216 0 | 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) ............................ | 3217 1,342,473 | 3.
4. Net income (loss) (must equal Schedule RI, item 12) ............................................. | 4340 394,530 | 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net .............................. | 4346 0 | 5.
6. Changes incident to business combinations, net .................................................. | 4356 4,161,079 | 6.
7. LESS: Cash dividends declared on preferred stock ................................................ | 4470 0 | 7.
8. LESS: Cash dividends declared on common stock ................................................... | 4460 490,634 | 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions | ////////////////// |
for this schedule) .............................................................................. | 4411 0 | 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) | 4412 0 | 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities ................ | 8433 (46,607)| 11.
12. Foreign currency translation adjustments ........................................................ | 4414 0 | 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) ........ | 4415 (1,003,722)| 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC, | ////////////////// |
item 28) ........................................................................................ | 3210 4,357,119 | 14.
______________________
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
<TABLE>
<CAPTION>
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
__________
| I486 |
__________________________________________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
____________________ ____________________
| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4651 35,701 | 4661 8,412 | 1.a.
b. To non-U.S. addressees (domicile) ..................................... | 4652 0 | 4662 0 | 1.b.
2. Loans to depository institutions and acceptances of other banks: | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository institutions .................. | 4653 0 | 4663 0 | 2.a.
b. To foreign banks ...................................................... | 4654 0 | 4664 0 | 2.b.
3. Loans to finance agricultural production and other loans to farmers ...... | 4655 2 | 4665 22 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4645 38,139 | 4617 19,005 | 4.a.
b. To non-U.S. addressees (domicile) ..................................... | 4646 0 | 4618 102 | 4.b.
5. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures: | ////////////////// | ////////////////// |
a. Credit cards and related plans ........................................ | 4656 1,137 | 4666 733 | 5.a.
b. Other (includes single payment, installment, and all student loans) ... | 4657 7,864 | 4667 2,681 | 5.b.
6. Loans to foreign governments and official institutions ................... | 4643 0 | 4627 0 | 6.
7. All other loans .......................................................... | 4644 826 | 4628 541 | 7.
8. Lease financing receivables: | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ......................................... | 4658 3,729 | 4668 3,241 | 8.a.
b. Of non-U.S. addressees (domicile) ..................................... | 4659 0 | 4669 0 | 8.b.
9. Total (sum of items 1 through 8) ......................................... | 4635 87,398 | 4605 34,737 | 9.
___________________________________________
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-B--Continued
Part I. Continued
Memoranda
__________________________________________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
____________________ ____________________
| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1-3. Not applicable | ////////////////// | ////////////////// |
4. Loans to finance commercial real estate, construction, and land | ////////////////// | ////////////////// |
development activities (not secured by real estate) included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, items 4 and 7, above .............................. | 5409 383 | 5410 1,374 | M.4.
5. Loans secured by real estate in domestic offices (included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, item 1, above): | ////////////////// | ////////////////// |
a. Construction and land development ..................................... | 3582 189 | 3583 253 | M.5.a.
b. Secured by farmland ................................................... | 3584 145 | 3585 131 | M.5.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ..................... | 5411 2,650 | 5412 108 | M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties ...... | 5413 13,892 | 5414 1,231 | M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties ............. | 3588 837 | 3589 395 | M.5.d.
e. Secured by nonfarm nonresidential properties .......................... | 3590 17,988 | 3591 6,294 | M.5.e.
|_________________________________________|
</TABLE>
Part II. Changes in Allowance for Loan and Lease Losses
<TABLE>
<CAPTION>
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Balance originally reported in the December 31, 1995, Reports of Condition and Income.......... | 3124 266,943 | 1.
2. Recoveries (must equal part I, item 9, column B above) ........................................ | 4605 34,737 | 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above) ................................. | 4635 87,398 | 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)......................... | 4230 21,672 | 4.
5. Adjustments* (see instructions for this schedule) ................................ ............ | 4815 636,497 | 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, | ////////////////// |
item 4.b) ..................................................................................... | 3123 872,451 | 6.
|____________________|
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of Income.
<TABLE>
<CAPTION>
| I489 | <-
____________ ________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Federal ....................................................................................... | 4780 N/A | 1.
2. State and local................................................................................ | 4790 N/A | 2.
3. Foreign ....................................................................................... | 4795 N/A | 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b) ............ | 4770 N/A | 4.
____________________________| |
5. Deferred portion of item 4 ........................................ | RIAD 4772 | N/A | ////////////////// | 5.
__________________________________________________
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-6
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-D--Income from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs where international operations
account for more than 10 percent of total revenues, total assets, or net income.
Part I. Estimated Income from International Operations
__________
| I492 | <-
______ ________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, | ////////////////// |
and IBFs: | ////////////////// |
a. Interest income booked ................................................................... | 4837 N/A | 1.a.
b. Interest expense booked .................................................................. | 4838 N/A | 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs | ////////////////// |
(item 1.a minus 1.b) ..................................................................... | 4839 N/A | 1.c.
2. Adjustments for booking location of international operations: | ////////////////// |
a. Net interest income attributable to international operations booked at domestic offices .. | 4840 N/A | 2.a.
b. Net interest income attributable to domestic business booked at foreign offices .......... | 4841 N/A | 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) ..................................... | 4842 N/A | 2.c.
3. Noninterest income and expense attributable to international operations: | ////////////////// |
a. Noninterest income attributable to international operations .............................. | 4097 N/A | 3.a.
b. Provision for loan and lease losses attributable to international operations ............. | 4235 N/A | 3.b.
c. Other noninterest expense attributable to international operations ....................... | 4239 N/A | 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a | ////////////////// |
minus 3.b and 3.c) ....................................................................... | 4843 N/A | 3.d.
4. Estimated pretax income attributable to international operations before capital allocation | ////////////////// |
adjustment (sum of items 1.c, 2.c, and 3.d) ................................................. | 4844 N/A | 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect | ////////////////// |
the effects of equity capital on overall bank funding costs ................................. | 4845 N/A | 5.
6. Estimated pretax income attributable to international operations after capital allocation | ////////////////// |
adjustment (sum of items 4 and 5) ........................................................... | 4846 N/A | 6.
7. Income taxes attributable to income from international operations as estimated in item 6 .... | 4797 N/A | 7.
8. Estimated net income attributable to international operations (item 6 minus 7) .............. | 4341 N/A | 8.
______________________
<CAPTION>
Memoranda ______________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Intracompany interest income included in item 1.a above ..................................... | 4847 N/A | M.1.
2. Intracompany interest expense included in item 1.b above .................................... | 4848 N/A | M.2.
______________________
</TABLE>
<TABLE>
<CAPTION>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income booked at IBFs .............................................................. | 4849 N/A | 1.
2. Interest expense booked at IBFs ............................................................. | 4850 N/A | 2.
3. Noninterest income attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs): | ////////////////// |
a. Gains (losses) and extraordinary items ................................................... | 5491 N/A | 3.a.
b. Fees and other noninterest income ........................................................ | 5492 N/A | 3.b.
4. Provision for loan and lease losses attributable to international operations booked at | ////////////////// |
domestic offices (excluding IBFs) ........................................................... | 4852 N/A | 4.
5. Other noninterest expense attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs) ............................................................................ | 4853 N/A | 5.
______________________
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-7
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and other adjustments in Schedule RI, and all
significant items of other noninterest income and other noninterest expense in Schedule RI. (See instructions for details.)
__________
| I495 | <-
______ ________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) | ////////////////// |
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): | ////////////////// |
a. Net gains on other real estate owned ..................................................... | 5415 0 | 1.a.
b. Net gains on sales of loans .............................................................. | 5416 0 | 1.b.
c. Net gains on sales of premises and fixed assets .......................................... | 5417 0 | 1.c.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 5.f.(2): | ////////////////// |
_____________
d. | TEXT 4461 | Income on Mortgages Held for Resale | 4461 81,194 | 1.d.
e. | TEXT 4462 | Gain From Branch Divestitures | 4462 77,976 | 1.e.
___________
f. | TEXT 4463 |______________________________________________________________________________| 4463 | 1.f.
_____________
2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// |
a. Amortization expense of intangible assets ................................................ | 4531 135,939 | 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: | ////////////////// |
b. Net losses on other real estate owned .................................................... | 5418 0 | 2.b.
c. Net losses on sales of loans ............................................................. | 5419 0 | 2.c.
d. Net losses on sales of premises and fixed assets ......................................... | 5420 0 | 2.d.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 7.c: | ////////////////// |
_____________
e. | TEXT 4464 | Intercompany Corporate Support Function Charges | 4464 143,184 | 2.e.
___________
f. | TEXT 4467 | Intercompany Data Processing & Programming Charges | 4467 158,034 | 2.f.
___________
g. | TEXT 4468 |______________________________________________________________________________| 4468 | 2.g.
_____________
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and | ////////////////// |
applicable income tax effect (from Schedule RI, item 11.b) (itemize and describe | ////////////////// |
all extraordinary items and other adjustments): | ////////////////// |
_____________
a. (1) | TEXT 4469 |__________________________________________________________________________| 4469 | 3.a.(1)
_____________
(2) Applicable income tax effect | RIAD 4486 | | ////////////////// | 3.a.(2)
_____________ ____________________________
b. (1) | TEXT 4487 |__________________________________________________________________________| 4487 | 3.b.(1)
_____________
(2) Applicable income tax effect | RIAD 4488 | | ////////////////// | 3.b.(2)
_____________ ____________________________
c. (1) | TEXT 4489 |__________________________________________________________________________| 4489 | 3.c.(1)
_____________
(2) Applicable income tax effect | RIAD 4491 | | ////////////////// | 3.c.(2)
____________________________
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, | ////////////////// |
item 2) (itemize and describe all adjustments): | ////////////////// |
_____________
a. | TEXT 4492 |______________________________________________________________________________| 4492 | 4.a.
___________
b. | TEXT 4493 |______________________________________________________________________________| 4493 | 4.b.
_____________
5. Cumulative effect of changes in accounting principles from prior years (from | ////////////////// |
Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): | ////////////////// |
_____________
a. | TEXT 4494 |______________________________________________________________________________| 4494 | 5.a.
___________
b. | TEXT 4495 |______________________________________________________________________________| 4495 | 5.b.
_____________
6. Corrections of material accounting errors from prior years (from Schedule RI-A, | ////////////////// |
item 10) (itemize and describe all corrections): | ////////////////// |
_____________
a. | TEXT 4496 | 4496 | 6.a.
___________|______________________________________________________________________________
b. | TEXT 4497 4497 | 6.b.
____________|____________________________________________________________________________________________________
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-8
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-E--Continued
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) | ////////////////// |
(itemize and describe all such transactions): | ////////////////// |
_____________
a. | TEXT 4498 | Fleet National Bank Surplus Distribution to FFG | 4498 (1,003,722) | 7.a.
__________________________________________________________________________________________| |
b. | TEXT 4499 | | 4499 | 7.b.
___________________________________________________________________________________________
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, | ////////////////// |
item 5) (itemize and describe all adjustments): | ////////////////// |
_____________ | |
a. | TEXT 4521 | 12/31/95 Ending Balance of Pooled Entities | 4521 | 8.a.
___________________________________________________________________________________________| |
b. | TEXT 4522 | | 4522 | 8.b.
___________________________________________________________________________________________| |
____________________
9. Other explanations (the space below is provided for the bank to briefly describe, | I498 | I499 | <-
______________________
at its option, any other significant items affecting the Report of Income):
___
No comment |X| (RIAD 4769)
___
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-1
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise indicated,
report the amount outstanding as of the last business day of the quarter.
Schedule RC--Balance Sheet
__________
| C400 | <-
____________ ________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
ASSETS | ////////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ////////////////// |
a. Noninterest-bearing balances and currency and coin(1) ................................... | 0081 4,130,928 | 1.a.
b. Interest-bearing balances(2) ............................................................ | 0071 46,521 | 1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A) .............................. | 1754 257,441 | 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ............................ | 1773 7,250,067 | 2.b.
3. Federal funds sold and securities purchased under agreements to resell in domestic offices | ////////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | ////////////////// |
a. Federal funds sold ...................................................................... | 0276 17,428 | 3.a.
b. Securities purchased under agreements to resell ......................................... | 0277 0 | 3.b.
4. Loans and lease financing receivables: ____________________________| ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) | RCFD 2122 | 31,278,251 | ////////////////// | 4.a.
b. LESS: Allowance for loan and lease losses ................... | RCFD 3123 | 872,451 | ////////////////// | 4.b.
c. LESS: Allocated transfer risk reserve ....................... | RCFD 3128 | 0 | ////////////////// | 4.c.
____________________________
d. Loans and leases, net of unearned income, | ////////////////// |
allowance, and reserve (item 4.a minus 4.b and 4.c) ..................................... | 2125 30,405,800 | 4.d.
5. Trading assets (from schedule RC-D )........................................................ | 3545 71,354 | 5.
6. Premises and fixed assets (including capitalized leases) ................................... | 2145 534,844 | 6.
7. Other real estate owned (from Schedule RC-M) ............................................... | 2150 34,546 | 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) ... | 2130 0 | 8.
9. Customers' liability to this bank on acceptances outstanding ............................... | 2155 16,634 | 9.
10. Intangible assets (from Schedule RC-M) ..................................................... | 2143 2,283,414 | 10.
11. Other assets (from Schedule RC-F) .......................................................... | 2160 3,978,638 | 11.
12. Total assets (sum of items 1 through 11) ................................................... | 2170 49,027,615 | 12.
______________________
</TABLE>
____________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
11
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC--Continued
___________________________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
<S> <C> <C>
LIABILITIES | /////////////////////// |
13. Deposits: | /////////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, | /////////////////////// |
part I) ............................................................................... | RCON 2200 34,110,580 | 13.a.
____________________________
(1) Noninterest-bearing(1) ................................ | RCON 6631 10,202,036 | /////////////////////// | 13.a.(1)
(2) Interest-bearing ...................................... | RCON 6636 23,908,544 | /////////////////////// | 13.a.(2)
____________________________
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, | /////////////////////// |
part II) .............................................................................. | RCFN 2200 1,745,663 | 13.b.
____________________________
(1) Noninterest-bearing ................................... | RCFN 6631 400 | /////////////////////// | 13.b.(1)
(2) Interest-bearing ...................................... | RCFN 6636 1,745,263 | /////////////////////// | 13.b.(2)
____________________________
14. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | /////////////////////// |
a. Federal funds purchased ............................................................... | RCFD 0278 4,302,800 | 14.a.
b. Securities sold under agreements to repurchase ........................................ | RCFD 0279 566,036 | 14.b.
15. a. Demand notes issued to the U.S. Treasury .............................................. | RCON 2840 14,411 | 15.a.
b. Trading liabilities (from Schedule RC-D) .............................................. | RCFD 3548 57,446 | 15.b.
16. Other borrowed money: | /////////////////////// |
a. With a remaining maturity of one year or less.......................................... | RCFD 2332 487,435 | 16.a.
b. With a remaining maturity of more than one year........................................ | RCFD 2333 893,259 | 16.b.
17. Mortgage indebtedness and obligations under capitalized leases ........................... | RCFD 2910 11,561 | 17.
18. Bank's liability on acceptances executed and outstanding ................................. | RCFD 2920 16,634 | 18.
19. Subordinated notes and debentures ........................................................ | RCFD 3200 1,213,219 | 19.
20. Other liabilities (from Schedule RC-G) ................................................... | RCFD 2930 1,251,452 | 20.
21. Total liabilities (sum of items 13 through 20) ........................................... | RCFD 2948 44,670,496 | 21.
| /////////////////////// |
22. Limited-life preferred stock and related surplus ......................................... | RCFD 3282 0 | 22.
EQUITY CAPITAL | /////////////////////// |
23. Perpetual preferred stock and related surplus ............................................ | RCFD 3838 125,000 | 23.
24. Common stock ............................................................................. | RCFD 3230 19,487 | 24.
25. Surplus (exclude all surplus related to preferred stock).................................. | RCFD 3839 2,551,927 | 25.
26. a. Undivided profits and capital reserves ................................................ | RCFD 3632 1,693,408 | 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ................ | RCFD 8434 (32,703)| 26.b.
27. Cumulative foreign currency translation adjustments ...................................... | RCFD 3284 0 | 27.
28. Total equity capital (sum of items 23 through 27) ........................................ | RCFD 3210 4,357,119 | 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, | /////////////////////// |
and 28) .................................................................................. | RCFD 3300 49,027,615 | 29.
___________________________
</TABLE>
<TABLE>
<CAPTION>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the Number
most comprehensive level of auditing work performed for the bank by independent external __________________
auditors as of any date during 1995 ............................................................... | RCFD 6724 N/A | M.1.
__________________
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>
____________
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
12
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
__________
| C405 | <-
_________________________________ ________
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and | ////////////////// | ////////////////// |
coin .................................................................... | 0022 3,402,522 | ////////////////// | 1.
a. Cash items in process of collection and unposted debits .............. | ////////////////// | 0020 2,655,163 | 1.a.
b. Currency and coin .................................................... | ////////////////// | 0080 747,539 | 1.b.
2. Balances due from depository institutions in the U.S. ................... | ////////////////// | 0082 500,301 | 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) ... | 0083 0 | ////////////////// | 2.a.
b. Other commercial banks in the U.S. and other depository institutions | ////////////////// | ////////////////// |
in the U.S. (including their IBFs) ................................... | 0085 500,373 | ////////////////// | 2.b.
3. Balances due from banks in foreign countries and foreign central banks .. | ////////////////// | 0070 7,902 | 3.
a. Foreign branches of other U.S. banks ................................. | 0073 690 | ////////////////// | 3.a.
b. Other banks in foreign countries and foreign central banks ........... | 0074 7,948 | ////////////////// | 3.b.
4. Balances due from Federal Reserve Banks ................................. | 0090 265,916 | 0090 0 | 4.
5. Total (sum of items 1 through 4) (total of column A must equal | ////////////////// | ////////////////// |
Schedule RC, sum of items 1.a and 1.b) .................................. | 0010 4,177,449 | 0010 4,176,641 | 5.
___________________________________________
<CAPTION>
______________________
Memorandum Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, | ////////////////// |
column B above) .............................................................................. | 0050 453,780 | M.1.
______________________
</TABLE>
Schedule RC-B--Securities
Exclude assets held for trading.
<TABLE>
<CAPTION>
_______
| C410 | <-
___________________________________________________________________________ ________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C> <C>
1. U.S. Treasury securities ......... | 0211 250 | 0213 250 | 1286 1,274,624 | 1287 1,252,546 | 1.
2. U.S. Government agency | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and corporation obligations | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(exclude mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Issued by U.S. Govern- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
ment agencies(2) .............. | 1289 0 | 1290 0 | 1291 0 | 1293 0 | 2.a.
b. Issued by U.S. | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Government-sponsored | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
agencies(3) ................... | 1294 0 | 1295 0 | 1297 498 | 1298 505 | 2.b.
_____________________________________________________________________________________
</TABLE>
_____________
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Import Bank
participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
13
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B--Continued
_____________________________________________________________________________________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
3. Securities issued by states | ////////////////// |/ //////////////// | ////////////////// | ///////////////// |
and political subdivisions | ////////////////// |////////////////// | ////////////////// | ///////////////// |
in the U.S.: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. General obligations ......... | 1676 150,357 |1677 150,242 | 1678 0 | 1679 0 | 3.a.
b. Revenue obligations ......... | 1681 8,887 |1686 8,889 | 1690 0 | 1691 0 | 3.b.
c. Industrial development | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and similiar obligations .....| 1694 0 |1695 0 | 1696 0 | 1697 0 | 3.c.
4. Mortgage-backed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Pass-through securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Guaranteed by | ////////////////// |////////////////// | ////////////////// | ///////////////// |
GNMA ....................... | 1698 0 |1699 0 | 1701 861,176 | 1702 852,929 | 4.a.(1)
(2) Issued by FNMA | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and FHLMC ................. | 1703 908 |1705 908 | 1706 4,854,605 | 1707 4,831,023 | 4.a.(2)
(3) Other pass-through | ////////////////// |////////////////// | ///////////////////| ///////////////// |
secruities ................. | 1709 4 |1710 4 | 1711 0 | 1713 0 | 4.a.(3)
b. Other mortgage-backed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (include CMO's, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
REMICs, and stripped | ////////////////// |////////////////// | ////////////////// | ///////////////// |
MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Issued or guaranteed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by FNMA, FHLMC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
or GNMA ............... | 1714 0 |1715 0 | 1716 0 | 1717 0 | 4.b.(1)
(2) Collateralized | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by MBS issued or | ////////////////// |////////////////// | ////////////////// | ///////////////// |
guaranteed by FNMA, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
FHLMC, or GNMA ........ | 1718 0 |1719 0 | 1731 0 | 1732 0 | 4.b.(2)
(3) All other mortgage- | ////////////////// |////////////////// | ////////////////// | //////////////// |
backed securities ..... | 1733 0 |1734 0 | 1735 518 | 1736 518 | 4.b.(3)
5. Other debt securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Other domestic debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities.................. | 1737 0 |1738 0 | 1739 817 | 1741 812 | 5.a.
b. Foreign debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities ................. | 1742 97,035 |1743 78,878 | 1744 0 | 1746 0 | 5.b.
6. Equity securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Investments in mutual | ////////////////// |////////////////// | ////////////////// | ///////////////// |
funds ...................... | ////////////////// |////////////////// | 1747 0 | 1748 0 | 6.a.
b. Other equity securities | ////////////////// |////////////////// | ////////////////// | ///////////////// |
with readily determin- | ////////////////// |////////////////// | ////////////////// | ///////////////// |
able fair values ........... | ////////////////// |////////////////// | 1749 0 | 1751 0 | 6.b.
c. All other equity | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (1) ............. | ////////////////// |////////////////// | 1752 311,734 | 1753 311,734 | 6.c.
7. Total (sum of items 1 | ////////////////// |////////////////// | ////////////////// | ///////////////// |
through 6) (total of | ////////////////// |////////////////// | ////////////////// | ///////////////// |
column A must equal | ////////////////// |////////////////// | ////////////////// | ///////////////// |
Schedule RC, item 2.a) | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(total of column D must | ////////////////// |////////////////// | ////////////////// | ///////////////// |
equal Schedule RC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
item 2.b) ..................... | 1754 257,441 | 1771 239,171 | 1772 7,303,972 | 1773 7,250,067 | 7.
|__________________________________________________________________________________|
</TABLE>
____________
1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
14
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B--Continued
<CAPTION>
___________
Memoranda | C412 | <-
___________ _________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Pledged securities(2) ......................................................................... | 0416 2,308,912 | M.1.
2. Maturity and repricing data for debt securities(2),(3),(4) (excluding those in | ////////////////// |
nonaccrual status): | ////////////////// |
a. Fixed rate debt securities with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | 0343 72,490 | M.2.a.(1)
(2) Over three months through 12 months .................................................... | 0344 77,125 | M.2.a.(2)
(3) Over one year through five years ....................................................... | 0345 2,734,577 | M.2.a.(3)
(4) Over five years ........................................................................ | 0346 2,925,207 | M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4)) ..... | 0347 5,809,399 | M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | 4544 531,365 | M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | 4545 855,010 | M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | 4551 0 | M.2.b.(3)
(4) Less frequently than every five years .................................................. | 4552 0 | M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4)) .. | 4553 1,386,375 | M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total debt | ////////////////// |
securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus nonaccrual | ////////////////// |
debt securities included in Schedule RC-N, item 9, column C) ............................... | 0393 7,195,774 | M.2.c.
3. Not applicable | ////////////////// |
4. Held-to-maturity debt securities restructured and in compliance with modified terms (included | ////////////////// |
in Schedule RC-B, items 3 through 5, column A, above) ......................................... | 5365 0 | M.4.
5. Not applicable | ////////////////// |
6. Floating rate debt securities with a remaining maturity of one year or less(2),(4) (included in | ////////////////// |
Memorandum items 2.b(1) through 2.b.(4) above)................................................. | 5519 3,700 | M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or | ////////////////// |
trading securities during the calendar year-to-date (report the amortized cost at date of sale | ////////////////// |
or transfer ................................................................................... | 1778 0 | m.7.
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale | ////////////////// |
accounts in Schedule RC-B, item 4.b): | ////////////////// |
a. Amortized cost ............................................................................. | 8780 0 | M.8.a.
b. Fair Value ................................................................................. | 8781 0 | M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in | ////////////////// |
Schedule RC-B, items 2, 3, and 5): | ////////////////// |
a. Amortized cost ............................................................................. | 8782 0 | M.9.a.
b. Fair Value ................................................................................. | 8783 0 | M.9.b.
----------------------
</TABLE>
____________
(2) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
15
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-6
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
_________
Do not deduct the allowance for loan and lease losses from amounts | C415 | <-
reported in this schedule. Report total loans and leases, net of unearned _________________________________|________|
income. Exclude assets held for trading. | (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate ........................................... | 1410 11,754,916 | ////////////////// | 1.
a. Construction and land development ................................... | ////////////////// | 1415 433,880 | 1.a.
b. Secured by farmland (including farm residential and other | ////////////////// | ////////////////// |
improvements) ....................................................... | ////////////////// | 1420 2,172 | 1.b
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ................... | ////////////////// | 1797 2,022,596 | 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(a) Secured by first liens ...................................... | ////////////////// | 5367 4,418,239 | 1.c.(2)(a)
(b) Secured by junior liens ..................................... | ////////////////// | 5368 492,952 | 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties ........... | ////////////////// | 1460 559,373 | 1.d.
e. Secured by nonfarm nonresidential properties ........................ | ////////////////// | 1480 3,825,704 | 1.e.
2. Loans to depository institutions: | ////////////////// | ////////////////// |
a. To commercial banks in the U.S. ..................................... | ////////////////// | 1505 143,682 | 2.a.
(1) To U.S. branches and agencies of foreign banks .................. | 1506 0 | ////////////////// | 2.a.(1)
(2) To other commercial banks in the U.S. ........................... | 1507 143,682 | ////////////////// | 2.a.(2)
b. To other depository institutions in the U.S. ........................ | 1517 0 | 1517 12,345 | 2.b.
c. To banks in foreign countries ....................................... | ////////////////// | 1510 672 | 2.c.
(1) To foreign branches of other U.S. banks ......................... | 1513 149 | ////////////////// | 2.c.(1)
(2) To other banks in foreign countries ............................. | 1516 523 | ////////////////// | 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers .... | 1590 5,889 | 1590 5,889 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ....................................... | 1763 12,446,547 | 1763 12,402,858 | 4.a.
b. To non-U.S. addressees (domicile) ................................... | 1764 83,521 | 1764 54,074 | 4.b.
5. Acceptances of other banks: | ////////////////// | ////////////////// |
a. Of U.S. banks ....................................................... | 1756 0 | 1756 0 | 5.a.
b. Of foreign banks .................................................... | 1757 0 | 1757 0 | 5.b.
6. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures (i.e., consumer loans) (includes purchased paper) ......... | ////////////////// | 1975 2,217,352 | 6.
a. Credit cards and related plans (includes check credit and other | ////////////////// | ////////////////// |
revolving credit plans) ............................................. | 2008 161,652 | ////////////////// | 6.a.
b. Other (includes single payment, installment, and all student loans).. | 2011 2,055,700 | ////////////////// | 6.b.
7. Loans to foreign governments and official institutions (including | ////////////////// | ////////////////// |
foreign central banks) ................................................. | 2081 0 | 2081 0 | 7.
8. Obligations (other than securities and leases) of states and political | ////////////////// | ////////////////// |
subdivisions in the U.S. (includes nonrated industrial development | ////////////////// | ////////////////// |
obligations) ........................................................... | 2107 167,100 | 2107 167,100 | 8.
9. Other loans ............................................................ | 1563 2,146,172 | ////////////////// | 9.
a. Loans for purchasing or carrying securities (secured and unsecured).. | ////////////////// | 1545 156,275 | 9.a.
b. All other loans (exclude consumer loans) ............................ | ////////////////// | 1564 1,989,897 | 9.b.
10. Lease financing receivables (net of unearned income) ................... | ////////////////// | 2165 2,300,055 | 10.
a. Of U.S. addressees (domicile) ....................................... | 2182 2,300,055 | ////////////////// | 10.a.
b. Of non-U.S. addressees (domicile) ................................... | 2183 0 | ////////////////// | 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above ........ | 2123 0 | 2123 0 | 11.
12. Total loans and leases, net of unearned income (sum of items 1 through | ////////////////// | ////////////////// |
10 minus item 11) (total of column A must equal Schedule RC, item 4.a).. | 2122 31,278,251 | 2122 31,205,115 | 12.
___________________________________________
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page: RC-7
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-C--Continued
Part I. Continued
___________________________________________
| (Column A) | (Column B) |
| Consolidated | Domestic |
Memoranda | Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above .............. | 1496 0 | 1496 0 | M.1.
2. Loans and leases restructured and in compliance with modified terms | ////////////////// | ////////////////// |
(included in Schedule RC-C, part I, above and not reported as past due | ////////////////// | ////////////////// |
or nonaccrual in Schedule RC-N, Memorandum item 1): | ////////////////// | ////////////////// |
a. Loans secured by real estate: | ////////////////// | ////////////////// |
(1) To U.S. addressees (domicile) ................................... | 1687 511 | M.2.a.(1)
(2) To non-U.S. addressees (domicile) ............................... | 1689 0 | M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans | ////////////////// |
to individuals for household, family, and other personal expenditures)| 8691 0 | M.2.b.
c. Commercial and industrial loans to and lease financing receivables | ////////////////// |
of non-U.S. addressees (domicile) included in Memorandum item 2.b | ////////////////// |
above ............................................................... | 8692 0 | M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those | ////////////////// |
in nonaccrual status): | ////////////////// |
a. Fixed rate loans and leases with a remaining maturity of: | ////////////////// |
(1) Three months or less ............................................ | 0348 10,215,575 | M.3.a.(1)
(2) Over three months through 12 months ............................. | 0349 369,421 | M.3.a.(2)
(3) Over one year through five years ................................ | 0356 3,479,742 | M.3.a.(3)
(4) Over five years ................................................. | 0357 5,791,166 | M.3.a.(4)
(5) Total fixed rate loans and leases (sum of | ////////////////// |
Memorandum items 3.a.(1) through 3.a.(4)) ....................... | 0358 19,855,904 | M.3.a.(5)
b. Floating rate loans with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently .................................... | 4554 8,960,876 | M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . | 4555 1,848,295 | M.3.b.(2)
(3) Every five years or more frequently, but less frequently than | ////////////////// |
annually ........................................................ | 4561 250,031 | M.3.b.(3)
(4) Less frequently than every five years ........................... | 4564 12,721 | M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) | ////////////////// |
through 3.b.(4)) ................................................ | 4567 11,071,923 | M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) | ////////////////// |
(must equal the sum of total loans and leases, net, from | ////////////////// |
Schedule RC-C, part I, item 12, plus unearned income from | ////////////////// |
Schedule RC-C, part I, item 11, minus total nonaccrual loans and | ////////////////// |
leases from Schedule RC-N, sum of items 1 through 8, column C) ...... | 1479 30,927,827 | M.3.c.
d. FLOATING RATE LOANS WITH A REMAINING MATURITY OF ONE YEAR OR LESS | ////////////////// |
(INCLUDED IN MEMORANDUM ITEMS 3.b.(1) THROUGH 3.b.(4) ABOVE)......... | A246 1,543,411 | M.3.d.
4. Loans to finance commercial real estate, construction, and land | ////////////////// |
development activities (NOT SECURED BY REAL ESTATE) included in | ////////////////// |
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2) ........... | 2746 271,706 | M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, | ////////////////// |
above .................................................................. | 5369 0 | M.5.
| ////////////////// |_____________________
6. Adjustable rate closed-end loans secured by first liens on 1-4 family | ////////////////// | RCON Bil Mil Thou |
residential properties (included in Schedule RC-C, part I, item | ////////////////// | ___________________|
1.c.(2)(a), column B, page RC-6) ....................................... | ////////////////// | 5370 1.655.898 | M.6.
|_________________________________________|
</TABLE>
_____________________________
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplememtal Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, item 1, column A.
17
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-7a
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<S> <C>
Schedule RC-C--Continued
Part II. Loans to Small Businesses and Small Farms
Schedule RC-C, Part II is to be reported only with the June Report of Condition.
Report the number and amount currently outstanding as of June 30 of business loans with "original amounts" of $1,000,000 or less
and farm loans with "original amounts" of $500,000 or less. The following guidelines should be used to determine the "original
amount" of a loan: (1) For loans drawn down under lines of credit or loan commitments, the "original amount" of the loan is the
size of the line of credit or loan commitment when the line of credit or loan commitment was most recently approved, extended, or
renewed prior to the report date. However, if the amount currently outstanding as of the report date exceeds this size, the
"original amount" is the amount currently outstanding on the report date. (2) For loan participations and syndications, the
"original amount" of the loan participation or syndication is the entire amount of the credit originated by the lead lender.
(3) For all other loans, the "original amount" is the total amount of the loan at origination or the amount currently
outstanding as of the report date, whichever is larger.
Loans to Small Businesses
</TABLE>
<TABLE>
<S> <C>
1. Indicate in the appropriate box at the right whether all or substantially all of the dollar volume of your
bank's "Loans secured by nonfarm nonresidential properties" in domestic offices reported in Schedule RC-C,
part I, item 1.e, column B, and all or substantially all of the dollar volume of your bank's
"Commercial and industrial loans to U.S. addressees" in domestic offices reported in Schedule RC-C, __________
part I, item 4.a, column B, have original amounts of $100,000 or less (If your bank has no loans ________| C415 | <-
outstanding in both of these two loan categories, place an "X" in the box marked "NO" and go to | RCON YES NO|
Item 5; otherwise, see instructions for further information.).................................. | 6999 | |///| x | 1.
___________________
If YES, complete items 2.a and 2.b below, skip items 3 and 4, and go to item 5.
If NO and your bank has loans outstanding in either loan category, skip items 2.a and 2.b,
complete items 3 and 4 below, and go to item 5. _____________________
| Number of Loans |
2. Report the total number of loans currently outstanding for each of the |____________________|
following Schedule RC-C, part I, loan categories: | RCON |/////////// |
a. "Loans secured by nonfarm nonresidential properties" in domestic | ////////////////// |
offices reported in Schedule RC-C, part I, item 1.e, column B....... | 5562 N/A | 2.a.
b. "Commercial and industrial loans to U.S. addressees" in domestic | ////////////////// |
offices reported in Schedule RC-C, part I, item 4.a, column B ...... | 5563 N/A | 2.b.
______________________
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
____________________ ____________________
Dollar Amounts in Thousands | RCON | ///////////| RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
3. Number and amount currently outstanding of "Loans secured by nonfarm | /////////////////////////////////////// | 1.
nonresidential properties" in domestic offices reported in Schedule RC-C | /////////////////////////////////////// | 1.a.
part I item 1.e, column B (sum of items 3.a through 3.c must be less | /////////////////////////////////////// |
or equal to Schedule RC-C, part I, item 1.e, column B): | /////////////////////////////////////// | 1.b
a. With original amounts of $100,000 or less ........................... | 5564 1,988 | 5565 76,370 | 3.a.
b. With original amounts of more than $100,000 through $250,000 ........ | 5566 2,805 | 5567 332,639 | 3.b.
c. With original amounts of more than $250,000 through $1,000,000 ...... | 5568 2,736 | 5569 952,476 | 3.c.
4. Number and amount currently outstanding of "Commercial and industrial | /////////////////////////////////////// |
loans to U.S. addressees" in domestic offices reported in Schedule RC-C, | /////////////////////////////////////// |
part I, item 4.a, column B (sum of items 4.a through 4.c must be less | /////////////////////////////////////// |
than or equal to Schedule RC-C, part I, item 4.a, column B): | /////////////////////////////////////// |
a. With original amounts of $100,000 or less ........................... | 5570 11,433 | 5571 337,759 | 4.a.
b. With original amounts of more than $100,000 through $250,000 ........ | 5572 2,127 | 5573 228,713 | 4.b.
c. With original amounts of more than $250,000 through $1,000,000 ...... | 5574 1,968 | 5575 601,126 | 4.c.
___________________________________________
</TABLE>
17a
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-7b
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-C -- Continued
Part II. Continued
Agricultural Loans to Small Farms
<TABLE>
<S> <C> <C>
5. Indicate in the appropriate box at the right whether all or substantially all of the
dollar volume of your bank's "Loans secured by farmland (including farm residential
and other improvements)" in domestic offices reported in Schedule RC-C, part I, item
1.b, column B, and all or substantially all of the dollar volume of your bank's
"Loans to finance agricultural production and other loans to farmers" in domestic
offices reported in Schedule RC-C, part I, item 3, column B, have original amounts
of $100,000 or less (If your bank has no loans outstanding in both of these two YES NO
loan categories, place an "X" in the box marked "NO" and do not complete items 7 _______________________
and 8; otherwise, see instructions for further information.)................................... | 6860 | | /// | X | 5.
|_____________________|
If YES, complete items 6.a and 6.b below and do not complete items 7 and 8.
If NO and your bank has loans outstanding in either loan category, skip items 6.a and 6.b
and complete items 7 and 8 below.
</TABLE>
<TABLE>
<S> <C>
______________________
| Number of Loans |
6. Report the total number of loans currently outstanding for each of the |____________________|
following Schedule RC-C, part I, loan categories: | RCON |//////////// |
a. "Loans secured by farmland (including farm residential and other |______| |
improvements)" in domestic offices reported in Schedule RC-C, part I, | ////////////////// |
item 1.b, column B........................................................ | 5576 N/A | 6.a.
b. "Loans to finance agricultural production and other loans to farmers" in | ////////////////// |
domestic offices reported in Schedule RC-C, part I, item 3, column B...... | 5577 N/A | 6.b.
|____________________|
</TABLE>
<TABLE>
<S> <C> <C>
_____________________________________________
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
|_____________________|______________________|
Dollar Amounts in Thousands | RCON |/////////////| RCON Bil Mil Thou |
________________________________________________________________________________| ______| |_____________________ |
7. Number and amount currently outstanding of "Loans secured by farmland | ////////////////////////////////////////// |
(including farm residential and other improvements)" in domestic offices | ////////////////////////////////////////// |
reported in Schedule RC-C, part I, item 1.b, column B (sum of items 7.a | ////////////////////////////////////////// |
through 7.c must be less than or equal to Schedule RC-C, part I, item 1.b, | ////////////////////////////////////////// |
column B): | ////////////////////////////////////////// |
a. With original amounts of $100,000 or less............................... | 5578 18 | 5579 292 | 7.a.
b. With original amounts of more than $100,000 through $250,000............ | 5580 8 | 5581 850 | 7.b.
c. With original amounts of more than $250,000 through $500,000............ | 5582 4 | 5583 1,030 | 7.c.
8. Number and amount currently outstanding of "Loans to finance agricultural | ////////////////////////////////////////// |
production and other loans to farmers" in domestic offices reported in | ////////////////////////////////////////// |
Schedule RC-C, part I, item 3, column B (sum of items 8.a through 8.c | ////////////////////////////////////////// |
must be less than or equal to Schedule RC-C, part I, item 3, column B): | ////////////////////////////////////////// |
a. With original amounts of $100,000 or less............................... | 5584 46 | 5585 992 | 8.a.
b. With original amounts of more than $100,000 through $250,000............ | 5586 17 | 5587 1,877 | 8.b.
c. With original amounts of more than $250,000 through $500,000............ | 5588 4 | 5589 1,054 | 8.c.
|_____________________|______________________|
</TABLE>
17b
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-8
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in total assets or with $2 billion or more in par/notional
amount of off-balance sheet derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e, columns A through D).
__________
| C420 |
__________________________
Dollar Amounts in Thousands | ////////// Bil Mil Thou|
__________________________________________________________________________________________________| ________________________|
<S> <C> <C>
ASSETS | /////////////////////// |
1. U.S. Treasury securities in domestic offices ................................................ | RCON 3531 0 | 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude mortgage- | /////////////////////// |
backed securities) .......................................................................... | RCON 3532 0 | 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices ...... | RCON 3533 0 | 3.
4. Mortgage-backed securities (MBS) in domestic offices: | /////////////////////// |
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA ..................... | RCON 3534 0 | 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA | /////////////////////// |
(include CMOs, REMICs, and stripped MBS) ................................................. | RCON 3535 0 | 4.b.
c. All other mortgage-backed securities ......................................................| RCON 3536 0 | 4.c.
5. Other debt securities in domestic offices ................................................... | RCON 3537 0 | 5.
6. Certificates of deposit in domestic offices ................................................. | RCON 3538 0 | 6.
7. Commercial paper in domestic offices ........................................................ | RCON 3539 0 | 7.
8. Bankers acceptances in domestic offices ..................................................... | RCON 3540 0 | 8.
9. Other trading assets in domestic offices .................................................... | RCON 3541 0 | 9.
10. Trading assets in foreign offices ........................................................... | RCFN 3542 0 | 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts: | /////////////////////// |
a. In domestic offices ...................................................................... | RCON 3543 66,696 | 11.a.
b. In foreign offices ....................................................................... | RCFN 3544 4,658 | 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) ........... | RCFD 3545 71,354 | 12.
<CAPTION>
___________________________
___________________________
| ///////// Bil Mil Thou |
LIABILITIES | ________________________|_
<S> <C> <C>
13. Liability for short positions ............................................................... | RCFD 3546 0 | 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts ................................................................................... | RCFD 3547 57,446 | 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) ...... | RCFD 3548 57,446 | 15.
___________________________
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-9
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
__________
| C425 | <-
______________________________________________________ ________
| | Nontransaction |
| Transaction Accounts | Accounts |
_________________________________________ ____________________
| (Column A) | (Column B) | (Column C) |
| Total transaction | Memo: Total | Total |
| accounts (including| demand deposits | nontransaction |
| total demand | (included in | accounts |
| deposits) | column A) | (including MMDAs) |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
__________________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
Deposits of: | ////////////////// | ////////////////// | ////////////////// |
1. Individuals, partnerships, and corporations .......... | 2201 8,615,650 | 2240 8,158,203 | 2346 22,594,478 | 1.
2. U.S. Government ...................................... | 2202 58,650 | 2280 58,605 | 2520 42,512 | 2.
3. States and political subdivisions in the U.S. ........ | 2203 818,151 | 2290 706,072 | 2530 702,686 | 3.
4. Commercial banks in the U.S. ......................... | 2206 836,005 | 2310 836,005 | 2550 771 | 4.
5. Other depository institutions in the U.S. ............ | 2207 221,571 | 2312 221,571 | 2349 2,968 | 5.
6. Banks in foreign countries ........................... | 2213 18,445 | 2320 18,445 | 2236 0 | 6.
7. Foreign governments and official institutions | ////////////////// | ////////////////// | ////////////////// |
(including foreign central banks) .................... | 2216 108 | 2300 108 | 2377 0 | 7.
8. Certified and official checks ........................ | 2330 198,585 | 2330 198,585 | ////////////////// | 8.
9. Total (sum of items 1 through 8) (sum of | ////////////////// | ////////////////// | ////////////////// |
columns A and C must equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// |
item 13.a) ........................................... | 2215 10,767,165 | 2210 10,197,594 | 2385 23,343,415 | 9.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
______________________
Memoranda Dollar Amounts in Thousands | RCON Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): | ////////////////// |
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ......................... | 6835 2,735,425 | M.1.a.
b. Total brokered deposits ..................................................................... | 2365 1,636,611 | M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): | ////////////////// |
(1) Issued in denominations of less than $100,000 ........................................... | 2343 2,350 | M.1.c.(1)
(2) Issued EITHER in denominations of $100,000 OR in denominations greater than $100,000 | ////////////////// |
and participated out by the broker in shares of $100,000 or less ........................ | 2344 1,634,261 | M.1.c.(2)
d. MATURITY DATA FOR BROKERED DEPOSITS: | ////////////////// |
(1) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF LESS THAN $100,000 WITH A REMAINING | ////////////////// |
MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.c.(1) ABOVE)................. | A243 171 | M.1.d.(1)
(2) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF $100,000 OR MORE WITH A REMAINING | ////////////////// |
MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.b ABOVE)..................... | A244 509,265 | M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. | ////////////////// |
reported in item 3 above which are secured or collateralized as required under state law) ... | 5590 457,587 | M.1.e.
2. Components of total nontransaction accounts (sum of Memoranda items 2.a through 2.d must | ////////////////// |
equal item 9, column C above): | ////////////////// |
a. Savings deposits: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................................................... | 6810 10,738,339 | M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) ................................................. | 0352 2,655,659 | M.2.a.(2)
b. Total time deposits of less than $100,000 ................................................... | 6648 7,247,099 | M.2.b.
c. Time certificates of deposit of $100,000 or more ............................................ | 6645 2,702,318 | M.2.c.
d. Open-account time deposits of $100,000 or more .............................................. | 6646 0 | M.2.d.
3. All NOW accounts (included in column A above) .................................................. | 2398 569,571 | M.3.
4. Not applicable
______________________
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-10
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
_________________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000 (sum of | ////////////////// |
Memorandum items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b above):(1) | ////////////////// |
a. Fixed rate time deposits of less than $100,000 with a remaining maturity of: | ////////////////// |
(1) Three months or less.................................................................... | A225 1,684,248 | M.5.a.(1)
(2) Over three months through 12 months..................................................... | A226 3,493,722 | M.5.a.(2)
(3) Over one year........................................................................... | A227 2,002,999 | M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently............................................................ | A228 66,130 | M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly......................... | A229 0 | M.5.b.(2)
(3) Less frequently than annually........................................................... | A230 0 | M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 5.b.(1) through 5.b.(3) above)............... | A231 45,084 | M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time certificates | ////////////////// |
of deposit of $100,000 or more and open-account time deposits of $100,000 or more) | ////////////////// |
(sum of Memorandum items 6.a.(1) through 6.b.(4) must equal the sum of Memorandum | ////////////////// |
items 2.c and 2.d above):(1) | ////////////////// |
a. Fixed rate time deposits of $100,000 or more with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | A232 534,657 | M.6.a.(1)
(2) Over three months through 12 months .................................................... | A233 754,429 | M.6.a.(2)
(3) Over one year through five years ....................................................... | A234 1,282,541 | M.6.a.(3)
(4) Over five years ........................................................................ | A235 36,761 | M.6.a.(4)
b. Floating rate time deposits of $100,000 or more with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | A236 31,182 | M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | A237 37,950 | M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | A238 24,798 | M.6.b.(3)
(4) Less frequently than every five years .................................................. | A239 0 | M.6.b.(4)
c. Floating rate time deposits of $100,000 or more with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 6.b.(1) through 6.b.(4) above)............... | A240 19,186 | M.6.c.
______________________
</TABLE>
_______________
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
20
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-11
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Continued
Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)
______________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
Deposits of: | ////////////////// |
1. Individuals, partnerships, and corporations ................................................... | 2621 1,730,162 | 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) ................................ | 2623 0 | 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs).... | 2625 0 | 3.
4. Foreign governments and official institutions (including foreign central banks) ............... | 2650 0 | 4.
5. Certified and official checks ................................................................. | 2330 0 | 5.
6. All other deposits ............................................................................ | 2668 15,501 | 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) .......................... | 2200 1,745,663 | 7.
Memorandum
Dollar Amounts in Thousands |RCFN Bil Mil Thou |
________________________________________________________________________________________________________________________
1. Time deposits with a remaining maturity of one year or less (included in Part II, item 7 above) |A245 1,745,263 | M.1.
______________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-F--Other Assets
__________
| C430 | <-
_________________ ________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Income earned, not collected on loans ........................................................ | RCFD 2164 167,538 | 1.
2. Net deferred tax assets(1) ................................................................... | RCFD 2148 0 | 2.
3. Excess residential mortgage servicing fees receivable ........................................ | RCFD 5371 134,288 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)............................. | RCFD 2168 3,676,812 | 4.
_____________ ___________________________
a. | TEXT 3549 | Mortgages held for Resale | RCFD 3549 | 1,858,683 | /////////////////////// | 4.a.
_________________________________________________________________| | | |
___________
b. | TEXT 3550 |____________________________________________________| RCFD 3550 | | /////////////////////// | 4.b.
___________
c. | TEXT 3551 |____________________________________________________| RCFD 3551 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) ........................... | RCFD 2160 3,978,638 | 5.
___________________________
<CAPTION>
Memorandum ___________________________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes ............................... | RCFD 5610 0 | M.1.
___________________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-G--Other Liabilities
__________
| C435 | <-
_________________ ________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices(2) ............................ | RCON 3645 58,011 | 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ................. | RCFD 3646 594,954 | 1.b.
2. Net deferred tax liabilities(1) .............................................................. | RCFD 3049 119,644 | 2.
3. Minority interest in consolidated subsidiaries ............................................... | RCFD 3000 0 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)............................. | RCFD 2938 478,843 | 4.
_____________ ___________________________
a. | TEXT 3552 |____________________________________________________| RCFD 3552 | | /////////////////////// | 4.a.
___________
b. | TEXT 3553 |____________________________________________________| RCFD 3553 | | /////////////////////// | 4.b.
___________
c. | TEXT 3554 |____________________________________________________| RCFD 3554 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) ........................... | RCFD 2930 1,251,452 | 5.
</TABLE>
____________
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
21
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-12
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
__________
| C440 | <-
____________ ________
| Domestic Offices |
____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Customers' liability to this bank on acceptances outstanding .................................... | 2155 16,634 | 1.
2. Bank's liability on acceptances executed and outstanding ........................................ | 2920 16,634 | 2.
3. Federal funds sold and securities purchased under agreements to resell .......................... | 1350 17,428 | 3.
4. Federal funds purchased and securities sold under agreements to repurchase ...................... | 2800 4,868,836 | 4.
5. Other borrowed money ............................................................................ | 3190 1,380,694 | 5.
EITHER | ////////////////// |
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 2163 N/A | 6.
OR | ////////////////// |
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ....................... | 2941 1,669,058 | 7.
| ////////////////// |
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and IBFs) . | 2192 48,946,123 | 8.
| ////////////////// |
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and IBFs)| 3129 42,919,946 | 9.
______________________
</TABLE>
<TABLE>
<CAPTION>
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices. ______________________
| RCON Bil Mil Thou |
____________________
<S> <C> <C>
10. U.S. Treasury securities ....................................................................... | 1779 1,252,796 | 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed | ////////////////// |
securities) .................................................................................... | 1785 505 | 11.
12. Securities issued by states and political subdivisions in the U.S. ............................. | 1786 159,244 | 12.
13. Mortgage-backed securities (MBS): | ////////////////// |
a. Pass-through securities: | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1787 5,684,860 | 13.a.(1)
(2) Other pass-through securities ........................................................... | 1869 4 | 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1877 0 | 13.b.(1)
(2) All other mortgage-backed securities..................................................... | 2253 518 | 13.b.(2)
14. Other domestic debt securities ................................................................. | 3159 812 | 14.
15. Foreign debt securities ........................................................................ | 3160 97,035 | 15.
16. Equity securities: | ////////////////// |
a. Investments in mutual funds ................................................................. | 3161 0 | 16.a.
b. Other equity securities with readily determinable fair values ............................... | 3162 0 | 16.b.
c. All other equity securities ................................................................. | 3169 311,734 | 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) .......... | 3170 7,507,508 | 17.
______________________
</TABLE>
<TABLE>
<CAPTION>
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
EITHER | ////////////////// |
1. Net due from the IBF of the domestic offices of the reporting bank .............................. | 3051 0 | M.1.
OR | ////////////////// |
2. Net due to the IBF of the domestic offices of the reporting bank ................................ | 3059 N/A | M.2.
______________________
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-13
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Schedule RC-I--Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices. __________
| C445 | <-
____________ ________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) ................. | 2133 0 | 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12, | ////////////////// |
column A) ..................................................................................... | 2076 0 | 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A) .... | 2077 0 | 3.
4. Total IBF liabilities (component of Schedule RC, item 21) ..................................... | 2898 0 | 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, | ////////////////// |
part II, items 2 and 3) ....................................................................... | 2379 0 | 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) ..... | 2381 0 | 6.
______________________
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule RC-K--Quarterly Averages (1)
__________
| C455 | <-
_________________ ________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
ASSETS | /////////////////////// |
1. Interest-bearing balances due from depository institutions .............................. | RCFD 3381 10,737 | 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2) ...... | RCFD 3382 6,349,267 | 2.
3. Securities issued by states and political subdivisions in the U.S.(2) ................... | RCFD 3383 155,938 | 3.
4. a. Other debt securities(2) ............................................................. | RCFD 3647 98,458 | 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock). | RCFD 3648 347,675 | 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ............. | RCFD 3365 812,114 | 5.
6. Loans: | ///////////////////// // |
a. Loans in domestic offices: | /////////////////////// |
(1) Total loans ...................................................................... | RCON 3360 31,884,320 | 6.a.(1)
(2) Loans secured by real estate ..................................................... | RCON 3385 14,940,513 | 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers .............. | RCON 3386 5,935 | 6.a.(3)
(4) Commercial and industrial loans .................................................. | RCON 3387 12,923,362 | 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ...... | RCON 3388 2,224,980 | 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............ | RCFN 3360 70,458 | 6.b.
7. Trading assets .......................................................................... | RCFD 3401 105,824 | 7.
8. Lease financing receivables (net of unearned income) .................................... | RCFD 3484 2,231,479 | 8.
9. Total assets (4) ........................................................................ | RCFD 3368 52,282,230 | 9.
LIABILITIES | /////////////////////// |
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, | /////////////////////// |
and telephone and preauthorized transfer accounts) (exclude demand deposits) ............ | RCON 3485 965,535 | 10.
11. Nontransaction accounts in domestic offices: | /////////////////////// |
a. Money market deposit accounts (MMDAs) ................................................ | RCON 3486 9,210,475 | 11.a.
b. Other savings deposits ............................................................... | RCON 3487 3,907,216 | 11.b.
c. Time certificates of deposit of $100,000 or more ..................................... | RCON 3345 2,653,452 | 11.c.
d. All other time deposits .............................................................. | RCON 3469 7,513,443 | 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs.. | RCFN 3404 1,765,593 | 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ............. | RCFD 3353 6,363,286 | 13.
14. Other borrowed money .................................................................... | RCFD 3355 2,670,145 | 14.
___________________________
</TABLE>
_______________
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or
(2) an average of weekly figures (i.e., the Wednesday of each week of the
quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
23
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-14
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts
reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk. __________
| C460 | <-
____________ ________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unused commitments: | ////////////////// |
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home | ////////////////// |
equity lines ............................................................................... | 3814 1,637,875 | 1.a.
b. Credit card lines .......................................................................... | 3815 32,940 | 1.b.
c. Commercial real estate, construction, and land development: | ////////////////// |
(1) Commitments to fund loans secured by real estate ....................................... | 3816 648,369 | 1.c.(1)
(2) Commitments to fund loans not secured by real estate ................................... | 6550 383,022 | 1.c.(2)
d. Securities underwriting .................................................................... | 3817 0 | 1.d.
e. Other unused commitments ................................................................... | 3818 18,626,522 | 1.e.
2. Financial standby letters of credit and foreign office guarantees ............................. | 3819 2,337,268 | 2.
___________________________
a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 158,029 | ////////////////// | 2.a.
___________________________
3. Performance standby letters of credit and foreign office guarantees ........................... | 3821 175,703 | 3.
a. Amount of performance standby letters of credit conveyed to | ////////////////// |
___________________________
others .......................................................... | RCFD 3822 | 12,580 | ////////////////// | 3.a.
___________________________
4. Commercial and similar letters of credit ...................................................... | 3411 176,335 | 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by | ////////////////// |
the reporting bank ............................................................................ | 3428 16,524 | 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting | ////////////////// |
(nonaccepting) bank ........................................................................... | 3429 7,409 | 6.
7. Securities borrowed ........................................................................... | 3432 0 | 7.
8. Securities lent (including customers' securities lent where the customer is indemnified | ////////////////// |
against loss by the reporting bank) ........................................................... | 3433 0 | 8.
9. Loans transferred (i.e., sold or swapped) with recourse that have been treated as sold for | ////////////////// |
Call Report purposes: | ////////////////// |
a. FNMA and FHLMC residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3650 246,244 | 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3651 246,244 | 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3652 33,550 | 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3653 33,550 | 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3654 0 | 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3655 0 | 9.c.(2)
d. Small business obligations transferred with recourse under Section 208 of the | ////////////////// |
Riegle Community Development and Regulatory Improvement Act of 1994: | ////////////////// |
(1) Outstanding principal balance of small business obligations transferred | ////////////////// |
as of the report date................................................................... | A249 0 | 9.d.(1)
(2) Amount of retained recourse on these obligations as of the report date.................. | A250 0 | 9.d.(2)
10. When-issued securities: | ////////////////// |
a. Gross commitments to purchase .............................................................. | 3434 0 | 10.a.
b. Gross commitments to sell .................................................................. | 3435 0 | 10.b.
11. Spot foreign exchange contracts ............................................................... | 8765 622,366 | 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") | 3430 0 | 12.
a. | TEXT 3555 |______________________________________________________| RCFD 3555 | | ////////////////// | 12.a.
b. | TEXT 3556 |______________________________________________________| RCFD 3556 | | ////////////////// | 12.b.
___________
c. | TEXT 3557 |______________________________________________________| RCFD 3557 | | ////////////////// | 12.c.
_____________
d. | TEXT 3558 |______________________________________________________| RCFD 3558 | | ////////////////// | 12.d.
_____________ _______________________________________________
Dollar Amounts in Thousands RCFD Bil Mil Thou
_________________________________________________________________________________________________________________________
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC,item 28,"Total equity capital") | 5591 0 | 13.
_____________ __________________________
a. | TEXT 5592 |______________________________________________________| RCFD 5592 | | ////////////////// | 13.a.
___________
b. | TEXT 5593 |______________________________________________________| RCFD 5593 | | ////////////////// | 13.b.
___________
c. | TEXT 5594 |______________________________________________________| RCFD 5594 | | ////////////////// | 13.c.
_____________
d. | TEXT 5595 |______________________________________________________| RCFD 5595 | | ////////////////// | 13.d.
_____________
________________________________________________
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-15
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-L -- Continued
_____________
| C461 | <-
_________________________________________ ____________________________|___________|
| (Column A) | (Column B) | (Column C) | (Column D) |
| Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
| Contracts | Contracts | Contracts | Contracts |
|___________________|____________________|____________________|____________________|
Dollar Amounts in Thousands |Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou |
_______________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
| Off-balance Sheet Derivatives | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
| Position Indicators | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
____________________________________| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
14. Gross amounts (e.g., notional | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
amounts) (for each column, sum of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
items 14.a through 14.e must equal | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
sum of items 15, 16.a, and 16.b): |___________________|____________________|___________________ |____________________|
a. Futures contracts ............. | 1,229,392 | 0 | 0 | 36,486 | 14.a.
|___________________|____________________|____________________|____________________|
| RCFD 8693 | RCFD 8694 | RCFD 8695 | RCFD 8696 |
|___________________|____________________|____________________|____________________|
b. Forward contracts ............. | 2,576,500 | 1,931,682 | 0 | 21,832 | 14.b.
|___________________|____________________|____________________|____________________|
| RCFD 8697 | RCFD 8698 | RCFD 8699 | RCFD 8700 |
|___________________|____________________|____________________|____________________|
c. Exchange-traded option contracts:| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
|___________________|____________________|____________________|____________________|
(1) Written options .......... | 0 | 0 | 0 | 0 | 14.c.(1)
|___________________|____________________|____________________|____________________|
| RCFD 8701 | RCFD 8702 | RCFD 8703 | RCFD 8704 |
|___________________|____________________|____________________|____________________|
(2) Purchased options ........ | 450,000 | 0 | 0 | 2,206 | 14.c.(2)
|___________________|____________________|____________________|____________________|
| RCFD 8705 | RCFD 8706 | RCFD 8707 | RCFD 8708 |
|___________________|____________________|____________________|____________________|
d. Over-the-counter option contracts: | //////////////////| ///////////////// | ///////////////// | //////////////// |
(1) Written options .......... | 1,324,980 | 3,887 | 0 | 0 | 14.d.(1)
|___________________|____________________|____________________|____________________|
| RCFD 8709 | RCFD 8710 | RCFD 8711 | RCFD 8712 |
|___________________|____________________|____________________|____________________|
(2) Purchased options ........ | 10,131,934 | 3,887 | 0 | 0 | 14.d.(2)
|___________________|____________________|____________________|____________________|
| RCFD 8713 | RCFD 8714 | RCFD 8715 | RCFD 8716 |
|___________________|____________________|____________________|____________________|
e. Swaps ............................ | 19,502,262 | 0 | 0 | 0 | 14.e.
|___________________|____________________|____________________|____________________|
| RCFD 3450 | RCFD 3826 | RCFD 8719 | RCFD 8720 |
|___________________|____________________|____________________|____________________|
15. Total gross notional amount of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading ......................... | 3,386,305 | 1,939,456 | 0 | 2,206 | 15.
|___________________|____________________|____________________|____________________|
| RCFD A126 | RFD A127 | RCFD 8723 | RCFD 8724 |
|___________________|____________________|____________________|____________________|
16. Total gross notional amount of | ///////////////// | //////////////// | ///////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
purposes other than trading: | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
|___________________|____________________|____________________|____________________|
a. Contracts marked to market ... | 4,202,500 | 0 | 0 | 36,486 | 16.a.
|___________________|____________________|____________________|____________________|
| RCFD 8725 | RCFD 8726 | RCF 8727 | RCFD 8728 |
|___________________|____________________|____________________|____________________|
b. Contracts not marked to market | 27,626,263 | 0 | 0 | 21,832 | 16.b.
|___________________|____________________|____________________|____________________|
| RCFD 8729 | RCFD 8730 | RFD 8731 | RCFD 8732 |
|___________________|____________________|____________________|____________________|
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-16
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-L -- Continued
<CAPTION>
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
Dollar Amounts in Thousands | Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
___________________________________| Contracts | Contracts | Contracts | Contracts |
| Off-balance Sheet Derivatives |___________________|____________________|____________________|____________________|
| Position Indicators |RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
|_____________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
17. Gross fair values of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8733 29,782 | 8734 41,523 | 8735 0 | 8736 58 | 17.a.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8737 20,932 | 8738 36,511 | 8739 0 | 8740 0 | 17.a.(2)
b. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are marked | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8741 524 | 8742 0 | 8743 0 | 8744 1,452 | 17.b.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8745 2,834 | 8746 0 | 8747 0 | 8748 0 | 17.b.(2)
c. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are not | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
marked to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .................. | 8749 64,085 | 8750 0 | 8751 0 | 8752 100 | 17.c.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8753 111,703 | 8754 0 | 8755 0 | 8756 0 | 17.c.(2)
|__________________________________________________________________________________|
</TABLE>
<TABLE>
<CAPTION>
______________________
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
_________________________________________________________________________________________________________________________
<S> <C> <C>
1. -2. Not applicable | ////////////////// |
3. Unused commitments with an original maturity exceeding one year that are reported in | ////////////////// |
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments | ////////////////// |
that are fee paid or otherwise legally binding) ................................................ | 3833 16,829,602 | M.3.
a. Participations in commitments with an original maturity | ////////////////// |
exceeding one year conveyed to others ................................|RCFD 3834 | 1,310,691 | ////////////////// | M.3.a.
________________________
4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Standby letters of credit and foreign office guarantees (both financial and performance) issued | ////////////////// |
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above .............. | 3377 341,139 | M.4.
5. Installment loans to individuals for household, family, and other personal expenditures that | ////////////////// |
have been securitized and sold without recourse (with servicing retained), amounts outstanding | ////////////////// |
by type of loan: | ////////////////// |
a. Loans to purchase private passenger automobiles (to be completed for the | ////////////////// |
September report only)....................................................................... | 2741 N/A | M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY)................................... | 2742 0 | M.5.b.
c. All other consumer installment credit (including mobile home loans)(to be completed for the | ////////////////// |
September report only........................................................................ | 2743 N/A | M.5.c
|____________________|
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-17
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9| _____________
| C465 |
_________|___________|
Schedule RC-M--Memoranda | |
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal | ////////////////// |
shareholders, and their related interests as of the report date: | ////////////////// |
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal | ////////////////// |
shareholders and their related interests ..................................................... | 6164 605,294 | 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of all | ////////////////// |
extensions of credit by the reporting bank (including extensions of credit to | ////////////////// |
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number | ////////////////// |
___________________________| ////////////////// |
of total capital as defined for this purpose in agency regulations. | RCFD 6165 | 24 | ////////////////// |
___________________________| ////////////////// | 1.b.
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches | ////////////////// |
and agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b) .................... | 3405 0 | 2.
3. Not applicable. | ////////////////// |
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others | ////////////////// |
(include both retained servicing and purchased servicing): | ////////////////// |
a. Mortgages serviced under a GNMA contract ...................................................... | 5500 28,855,729 | 4.a.
b. Mortgages serviced under a FHLMC contract: | ////////////////// |
(1) Serviced with recourse to servicer ........................................................ | 5501 55,604 | 4.b.(1)
(2) Serviced without recourse to servicer ..................................................... | 5502 32,340,522 | 4.b.(2)
c. Mortgages serviced under a FNMA contract: | ////////////////// |
(1) Serviced under a regular option contract .................................................. | 5503 190,640 | 4.c.(1)
(2) Serviced under a special option contract .................................................. | 5504 38,282,672 | 4.c.(2)
d. Mortgages serviced under other servicing contracts ............................................ | 5505 8,508,320 | 4.d.
5. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must | ////////////////// |
equal Schedule RC, item 9): | ////////////////// |
a. U.S. addressees (domicile) .................................................................... | 2103 16,297 | 5.a.
b. Non-U.S. addressees (domicile) ................................................................ | 2104 337 | 5.b.
6. Intangible assets: | ////////////////// |
a. Mortgage servicing rights ..................................................................... | 3164 1,483,959 | 6.a.
b. Other identifiable intangible assets: | ////////////////// |
(1) Purchased credit card relationships ....................................................... | 5506 0 | 6.b.(1)
(2) All other identifiable intangible assets .................................................. | 5507 126,463 | 6.b.(2)
c. Goodwill ...................................................................................... | 3163 672,992 | 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) ........................ | 2143 2,283,414 | 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or | ////////////////// |
are otherwise qualifying for regulatory capital purposes ...................................... | 6442 0 | 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to | ////////////////// |
redeem the debt ...................................................................................| 3295 75,000 | 7.
______________________
</TABLE>
- ------------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
27
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-18
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-M--Continued ________________________
Dollar Amounts in Thousands | Bil Mil Thou|
_____________________________________________________________________________________________ |_______________________|
<S> <C> <C>
8. a. Other real estate owned: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5372 0 | 8.a.(1)
(2) All other real estate owned: | /////////////////////// |
(a) Construction and land development in domestic offices ....................... | RCON 5508 4,537 | 8.a.(2)(a)
(b) Farmland in domestic offices ................................................ | RCON 5509 0 | 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices ....................... | RCON 5510 8,067 | 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices .......... | RCON 5511 740 | 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices ....................... | RCON 5512 21,202 | 8.a.(2)(e)
(f) In foreign offices .......................................................... | RCFN 5513 0 | 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) ....... | RCFD 2150 34,546 | 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5374 0 | 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies ... | RCFD 5375 0 | 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) ....... | RCFD 2130 0 | 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies ................ | RCFD 5376 0 | 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, | /////////////////////// |
item 23, "Perpetual preferred stock and related surplus" ............................... | RCFD 3778 125,000 | 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include | /////////////////////// |
proprietary, private label, and third party products): | /////////////////////// |
a. Money market funds .................................................................. | RCON 6441 55,245 | 10.a.
b. Equity securities funds ............................................................. | RCON 8427 108,359 | 10.b.
c. Debt securities funds ............................................................... | RCON 8428 13,250 | 10.c.
d. Other mutual funds .................................................................. | RCON 8429 0 | 10.d.
e. Annuities ........................................................................... | RCON 8430 102,292 | 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through | /////////////////////// |
10.e. above) ........................................................................... | RCON 8784 150,100 | 10.f.
_________________________
</TABLE>
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________________
| |
______________________
|Memorandum Dollar Amounts in Thousands | RCFD Bil Mil Thou | |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
|1. Interbank holdings of capital instruments (to be completed for the December report only): | ////////////////// | |
| a. Reciprocal holdings of banking organizations' capital instruments ........................ | 3836 N/A | M.1.a. |
| b. Nonreciprocal holdings of banking organizations' capital instruments ..................... | 3837 N/A | M.1.b. |
______________________
| |
_________________________________________________________________________________________________________________________________
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-19
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-N--Past Due and Nonaccrual Loans, Leases,
and Other Assets
The FFIEC regards the information reported in __________
all of Memorandum item 1, in items 1 through 10, | C470 | <-
column A, and in Memorandum items 2 through 4, ______________________________________________________ ________
column A, as confidential. | (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1245 | 1246 71,390 | 1247 223,962 | 1.a.
b. To non-U.S. addressees (domicile) ............ | 1248 | 1249 0 | 1250 0 | 1.b.
2. Loans to depository institutions and | ///// | ////////////////// | ////////////////// |
acceptances of other banks: | ///// | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository | ///// | ////////////////// | ////////////////// |
institutions ................................. | 5377 | 5378 0 | 5379 0 | 2.a.
b. To foreign banks ............................. | 5380 | 5381 0 | 5382 0 | 2.b.
3. Loans to finance agricultural production and | ///// | ////////////////// | ////////////////// |
other loans to farmers .......................... | 1594 | 1597 385 | 1583 531 | 3.
4. Commercial and industrial loans: | ///// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1251 | 1252 11,945 | 1253 108,334 | 4.a.
b. To non-U.S. addressees (domicile) ............ | 1254 | 1255 0 | 1256 0 | 4.b.
5. Loans to individuals for household, family, and | ///// | ////////////////// | ////////////////// |
other personal expenditures: | ///// | ////////////////// | ///////////////// |
a. Credit cards and related plans ............... | 5383 | 5384 1,187 | 5385 669 | 5.a.
b. Other (includes single payment, installment, | ///// | ////////////////// | ////////////////// |
and all student loans) ....................... | 5386 | 5387 22,600 | 5388 8,465 | 5.b.
6. Loans to foreign governments and official | ///// | ////////////////// | ////////////////// |
institutions .................................... | 5389 | 5390 0 | 5391 0 | 6.
7. All other loans ................................. | 5459 | 5460 14,909 | 5461 1,919 | 7.
8. Lease financing receivables: | ///// | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ................ | 1257 | 1258 95 | 1259 6,544 | 8.a.
b. Of non-U.S. addressees (domicile) ............ | 1271 | 1272 0 | 1791 0 | 8.b.
9. Debt securities and other assets (exclude other | ///// | ////////////////// | ////////////////// |
real estate owned and other repossessed assets) . | 3505 | 3506 0 | 3507 85,778 | 9.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in
items 1 through 8.
________________________________________________________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
10. Loans and leases reported in items 1 | | | |
through 8 above which are wholly or partially | ///// | ////////////////// | ////////////////// |
guaranteed by the U.S. Government ............... | 5612 | 5613 18,447 | 5614 21,415 | 10.
a. Guaranteed portion of loans and leases | ///// | ////////////////// | ////////////////// |
included in item 10 above .................... | 5615 | 5616 18,250 | 5617 16,952 | 10.a.
________________________________________________________________
</TABLE>
29
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-20
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-N--Continued
__________
| C473 | <-
______________________________________________________ ________
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
Memoranda | accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Restructured loans and leases included in | ///// | /////////////////// | ///////////////// |
Schedule RC-N, items 1 through 8, above (and not | ///// | //// | |
reported in Schedule RC-C, part I, Memorandum | ///// | //// | |
item 2) ......................................... | 1658 | 1659 | | M.1.
2. Loans to finance commercial real estate, | ///// | //// | |
construction, and land development activities | ///// | //// | |
(not secured by real estate) included in | ///// | /////////////////// | ///////////////// |
Schedule RC-N, items 4 and 7, above ............. | 6558 | 6559 826 | 6560 7,043 | M.2.
|____________________|____________________ |___________________
3. Loans secured by real estate in domestic offices | RCON | RCON Bil Mil Thou | RCON Bil Mil Thou|
|___________________ |____________________ ____________________
(included in Schedule RC-N, item 1, above): | ///// | ////////////////// | ////////////////// |
a. Construction and land development ............ | 2759 | 2769 1,100 | 3492 26,422 | M.3.a.
b. Secured by farmland .......................... | 3493 | 3494 161 | 3495 0 | M.3.b.
c. Secured by 1-4 family residential properties: | ///// | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by | ///// | ////////////////// | ////////////////// |
1-4 family residential properties and | ///// | ////////////////// | ////////////////// |
extended under lines of credit ........... | 5398 | 5399 5,114 | 5400 17,374 | M.3.c.(1)
(2) All other loans secured by 1-4 family | ///// | ////////////////// | ////////////////// |
residential properties ................... | 5401 | 5402 58,079 | 5403 75,430 | M.3.c.(2)
d. Secured by multifamily (5 or more) | ///// | ////////////////// | ////////////////// |
residential properties ....................... | 3499 | 3500 521 | 3501 12,491 | M.3.d.
e. Secured by nonfarm nonresidential properties . | 3502 | 3503 6,415 | 3504 92,245 | M.3.e.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| Past due 30 | Past due 90 |
| through 89 days | days or more |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Interest rate, foreign exchange rate, and other | ///// | ////////////////// |
commodity and equity contracts: | ///// | ////////////////// |
a. Book value of amounts carried as assets ...... | 3522 | 3528 0 | M.4.a.
b. Replacement cost of contracts with a | ///// | ////////////////// |
positive replacement cost .................... | 3529 | 3530 0 | M.4.b.
___________________________________________
</TABLE>
30
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-21
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
______________________
Schedule RC-O--Other Data for Deposit Insurance Assessments | C475 |
|____________________|
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unposted debits (see instructions): | ////////////////// |
a. Actual amount of all unposted debits ...................................................... | 0030 216 | 1.a.
OR | ////////////////// |
b. Separate amount of unposted debits: | ////////////////// |
(1) Actual amount of unposted debits to demand deposits ................................... | 0031 N/A | 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) ...................... | 0032 N/A | 1.b.(2)
2. Unposted credits (see instructions): | ////////////////// |
a. Actual amount of all unposted credits ..................................................... | 3510 216 | 2.a.
OR | ////////////////// |
b. Separate amount of unposted credits: | ////////////////// |
(1) Actual amount of unposted credits to demand deposits .................................. | 3512 N/A | 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) ..................... | 3514 N/A | 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 3520 101,763 | 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in | ////////////////// |
Puerto Rico and U.S. territories and possessions (not included in total deposits): | ////////////////// |
a. Demand deposits of consolidated subsidiaries .............................................. | 2211 206,111 | 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries ................................. | 2351 20,089 | 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries ...................... | 5514 8 | 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: | ////////////////// |
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) .................. | 2229 0 | 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) ..... | 2383 0 | 5.b.
c. Interest accrued and unpaid on deposits in insured branches | ////////////////// |
(included in Schedule RC-G, item 1.b) ..................................................... | 5515 0 | 5.c.
______________________
______________________
Item 6 is not applicable to state nonmember banks that have not been authorized by the | ////////////////// |
Federal Reserve to act as pass-through correspondents. | ////////////////// |
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on | ////////////////// |
behalf of its respondent depository institutions that are also reflected as deposit liabilities| ////////////////// |
of the reporting bank: | ////////////////// |
a. Amount reflected in demand deposits (included in Schedule RC-E, item 4 or 5, column B)..... | 2314 0 | 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, | ////////////////// |
item 4 or 5, column A or C, but not column B).............................................. | 2315 0 | 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) | ////////////////// |
a. Unamortized premiums ...................................................................... | 5516 769 | 7.a.
b. Unamortized discounts ..................................................................... | 5517 0 | 7.b.
______________________
_______________________________________________________________________________________________________________________________
| |
|8. To be completed by banks with "Oakar deposits." |
______________________
| Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of | ////////////////// | |
| the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s)) .... | 5518 2,188,589 | 8. |
______________________
| |
_______________________________________________________________________________________________________________________________
______________________
9. Deposits in lifeline accounts ................................................................ | 5596 ///////////// | 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 8432 0 | 10.
______________________
______________
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists of nontransaction
accounts and all transaction accounts other than demand deposits.
</TABLE>
31
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-22
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-O--Continued
Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for | ////////////////// |
certain reciprocal demand balances: | ////////////////// |
a. Amount by which demand deposits would be reduced if reciprocal demand balances | ////////////////// |
between the reporting bank and savings associations were reported on a net basis | ////////////////// |
rather than a gross basis in Schedule RC-E .................................................. | 8785 0 | 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand balances | ////////////////// |
between the reporting bank and U.S. branches and agencies of foreign banks were | ////////////////// |
reported on a gross basis rather than a net basis in Schedule RC-E .......................... | A181 0 | 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of | ////////////////// |
collection were included in the calculation of net reciprocal demand balances between | ////////////////// |
the reporting bank and the domestic offices of U.S. banks and savings associations | ////////////////// |
in Schedule RC-E ............................................................................ | A182 0 | 11.c.
____________________
Memoranda (to be completed each quarter except as noted) Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________ ___________________________|____________________|
1. Total deposits in domestic offices of the bank (sum of Memorandum it ems 1.a. (1) and | ////////////////// |
1.b.(1) must equal Schedule RC, item 13.a): | ////////////////// |
a. Deposits accounts of $100,000 or less: | ////////////////// |
(1) amount of deposit accounts of $100,000 or less ....................................... | 2702 19,755,631 | M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number | ////////////////// |
completed for the June report only) .............................|RCON 3779 3,742,107 | ////////////////// | M.1.a.(2)
b. Deposit accounts of more than $100,000: | ////////////////// |
(1) Amount of deposit accounts of more than $100,000 ..................................... | 2710 14,354,949 | M.1.b.(1)
Number | ////////////////// |
(2) Number of deposit accounts of more than $100,000 ................|RCON 2722 27,062 | ////////////////// | M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by mutiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of
more than $100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or
procedure for determining a better estimate of uninsured deposits than the ____________YES_______NO__
estimated described above .................................................................. | 6861| |///| x | M.2.a.
____________________
b. If the box marked YES has been checked, report the estimate of uninsured deposits |RCON Bil Mil Thou|
determined by using your bank's method or procedure .................................... | 5597 N/A | M.2.b.
_____________________________________________________________________________________________________________________________
| C477 | <-
Person to whom questions about the Reports of Condition and Income should be directed: __________
PAMELA S. FLYNN, VICE PRESIDENT (401) 278-5194
___________________________________________________________________________________ ______________________________________
Name and Title (TEXT 8901) Area code and phone number (TEXT 8902)
</TABLE>
32
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-23
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Regulatory Capital
This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC,
item 12, for June 30, 1995, must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets of less than
$1 billion must complete items 1 through 3 below or Schedule RC-R in its entirety, depending on their response to item 1 below.
<S> <C>
____________
| C480 | <-
1. Test for determining the extent to which Schedule RC-R must be completed. To be completed _____|__________|
only by banks with total assets of less than $1 billion. Indicate in the appropriate | YES NO |
box at the right whether the bank has total capital greater than or equal to eight percent___________ _______________
of adjusted total assets ............................................................... | RCFD 6056 | |////| | 1.
_____________________________
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government
agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan
and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the box marked
NO has been checked, the bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than eight
percent or that the bank is not in compliance with the risk-based capital guidelines.
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
|Subordinated Debt(1)| Other |
_________________________________________________________________ | and Intermediate | Limited- |
| NOTE: All banks are required to complete items 2 and 3 below | | Term Preferred | Life Capital |
| See optional worksheet for items 3.a through 3.f. | | Stock | Instruments |
|________________________________________________________________| ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
2. Subordinated debt(1) and other limited-life capital instruments (original | | |
weighted average maturity of at least five years) with a remaining | | |
maturity of: | | |
a. One year or less ...................................................... | 3780 25,737 | 3786 0 | 2.a.
b. Over one year through two years ....................................... | 3781 737 | 3787 0 | 2.b.
c. Over two years through three years .................................... | 3782 10,745 | 3788 0 | 2.c.
d. Over three years through four years ................................... | 3783 0 | 3789 0 | 2.d.
e. Over four years through five years .................................... | 3784 0 | 3790 0 | 2.e.
f. Over five years ....................................................... | 3785 1,101,000 | 3791 0 | 2.f.
3. Amounts used in calculating regulatory capital ratios (report amounts | ////////////////// | ////////////////// |
determined by the bank for its own internal regulatory capital analyses): | ////////////////// | RCFD Bil Mil Thou |
a. Tier 1 capital......................................................... | ////////////////// | 8274 3,590,367 | 3.a.
b. Tier 2 capital......................................................... | ////////////////// | 8275 1,755,646 | 3.b.
c. Total risk-based capital............................................... | ////////////////// | 3792 5,346,013 | 3.c.
d. Excess allowance for loan and lease losses............................. | ////////////////// | A222 297,250 | 3.d.
e. Risk-weighted assets................................................... | ////////////////// | A223 45,718,856 | 3.e.
f. "Average total assets"................................................. | ////////////////// | A224 51,482,775 | 3.f.
___________________________________________
| (Column A) | (Column B) |
Items 4-9 and Memoranda items 1 and 2 are to be completed | Assets | Credit Equiv- |
by banks that answered NO to item 1 above and | Recorded | alent Amount |
by banks with total assets of $1 billion or more. | on the | of Off-Balance |
| Balance Sheet | Sheet Items(2) |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items assigned | | |
to the Zero percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Securities issued by, other claims on, and claims unconditionally | ////////////////// | ////////////////// |
guaranteed by, the U.S. Government and its agencies and other | ////////////////// | ////////////////// |
OECD central governments .......................................... | 3794 2,147,648 | ////////////////// | 4.a.(1)
(2) All other ......................................................... | 3795 1,115,265 | ////////////////// | 4.a.(2)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3796 101,488 | 4.b.
___________________________________________
</TABLE>
_____
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not report in column B the risk-weighted amount of assets reported in
column A.
33
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-24
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Continued
___________________________________________
| (Column A) | (Column B) |
| Assets | Credit Equiv- |
| Recorded | alent Amount |
| on the | of Off-Balance |
| Balance Sheet | Sheet Items(1) |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 20 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Claims conditionally guaranteed by the U.S. Government and its | ////////////////// | ////////////////// |
agencies and other OECD central governments ....................... | 3798 714,375 | ////////////////// | 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. Govern- | ////////////////// | ////////////////// |
ment and its agencies and other OECD central governments; by | ////////////////// | ////////////////// |
securities issued by U.S. Government-sponsored agencies; and | ////////////////// | ////////////////// |
by cash on deposit ................................................ | 3799 0 | ////////////////// | 5.a.(2)
(3) All other ......................................................... | 3800 8,774,345 | ////////////////// | 5.a.(3)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3801 791,065 | 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 50 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3802 5,265,173 | ////////////////// | 6.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3803 409,680 | 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 100 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3804 31,799,547 | ////////////////// | 7.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3805 10,122,631 | 7.b.
8. On-balance sheet asset values excluded from the calculation of the | ////////////////// | ////////////////// |
risk-based capital ratio(2) .............................................. | 3806 83,713 | ////////////////// | 8.
9. Total assets recorded on the balance sheet (sum of | ////////////////// | ////////////////// |
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, | ////////////////// | ////////////////// |
item 12 plus items 4.b and 4.c) .......................................... | 3807 49,900,066 | ////////////////// | 9.
___________________________________________
Memoranda
______________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
1.Current credit exposure across all off-balance sheet derivative contracts covered by the | ///////////////// |
risked-based capital standards .................................................................| 8764 135,825| M.1.
|___________________|
_____________________________________________________________________
| With a remaining maturity of |
|____________________________________________________________________|
| (Column A) | (Column B) | (Column C) |
| | | |
| One year or less | Over one year | Over five years |
| | through five years | |
|______________________|______________________|______________________|
|RCFD Tril Bil Mil Thou|RCFD Tril Bil Mil Thou|RCFD Tril Bil Mil Thou|
|______________________|______________________|______________________|
2. Notional principal amounts of | | | |
off-balance sheet derivative contracts(3):| | | |
a. Interest rate contracts ................. | 3809 8,320,956 | 8766 18,597,686 | 8767 801,055 | M.2.a.
b. Foreign exchange contracts .............. | 3812 1,578,420 | 8769 101,907 | 8770 0 | M.2.b.
c. Gold contracts .......................... | 8771 15,291 | 8772 0 | 8773 0 | M.2.c.
d. Other precious metals contracts ......... | 8774 8,748 | 8775 0 | 8776 0 | M.2.d.
e. Other commodity contracts ............... | 8777 0 | 8778 0 | 8779 0 | M.2.e.
f. Equity derivative contracts ............. | A000 0 | A001 0 | A002 0 | M.2.f.
|____________________________________________________________________|
</TABLE>
_________________
1) Do not report in column B the risk-weighted amount of
assets reported in column A.
2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of these
securities in items 4 through 7 above. Item 8 also includes on-balance sheet
asset values (or portions thereof) of off-balance sheet interest rate, foreign
exchange rate, and commodity contracts and those contracts (e.g., futures
contracts) not subject to risk-based capital. Exclude from item 8 margin
accounts and accrued receivables as well as any portion of the allowance for
loan and lease losses in excess of the amount that may be included in Tier 2
capital. 3) Exclude foreign exchange contracts with an original maturity of 14
days or less and all futures contracts.
34
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK
Address: ONE MONARCH PLACE Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
City, State, Zip: SPRINGFIELD, MA 01102 Page RC-25
FDIC Certificate No.: 02499
</TABLE>
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on June 30, 1996
FLEET NATIONAL BANK SPRINGFIELD , MASSACHUSETTS
- ------------------- ----------------- -------------
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of Condition and
Income. This optional statement will be made available to the public, along
with the publicly available data in the Reports of Condition and Income, in
response to any request for individual bank report data. However, the
information reported in column A and in all of Memorandum item 1 of Schedule
RC-N is regarded as confidential and will not be released to the public.
BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE
STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL
BANK CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS
IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE
MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks
choosing not to make a statement may check the "No comment" box below and
should make no entries of any kind in the space provided for the narrative
statement; i.e., DO NOT enter in this space such phrases as "No statement,"
"Not applicable," "N/A," "No comment," and "None."
The optional statement must be entered on this sheet. The statement should
not exceed 100 words. Further, regardless of the number of words, the
statement must not exceed 750 characters, including punctuation, indentation,
and standard spacing between words and sentences. If any submission should
exceed 750 characters, as defined, it will be truncated at 750 characters with
no notice to the submitting bank and the truncated statement will appear as the
bank's statement both on agency computerized records and in computer-file
releases to the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who
thereby attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing
narrative statement will be deleted from the files, and from disclosure; the
bank, at its option, may replace it with a statement, under signature,
appropriate to the amended data.
The optional narrative statement will appear in agency records and in release
to the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
__________________________________________________________________________
No comment |X| (RCON 6979) | c471 | C472 |<-
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
/s/__Gero DeRosa_______________________________ ___7/25/96________
Signature of Executive Officer of Bank Date of Signature
35
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
----------
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
----------
/ / CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
FLEET NATIONAL BANK
---------------------------------------------------------
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
Not applicable 04-317415
- ------------------------------- -----------------------------
(State of incorporation (I.R.S. Employer
if not a national bank) Identification No.)
One Monarch Place, Springfield, MA 01102
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Pat Beaudry, 777 Main Street, Hartford, CT 06115 (860) 728-2065
--------------------------------------------------------------
(Name, address and telephone number of agent for service)
AmeriKing, Inc.
---------------------------------------------------
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Delaware 36-3970707
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2215 Enterprise Drive, Suite 1502
Westchester, Illinois 60154
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
______% Senior Notes due 2006
------------------------------------------------------------------
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject,
The Comptroller of the Currency,
Washington, D.C.
Federal Reserve Bank of Boston
Boston, Massachusetts
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise
corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor and underwriter. If the obligor or
any underwriter for the obligor is an affiliate of the trustee,
describe each such affiliation.
None with respect to the trustee.
Item 16. List of exhibits.
List below all exhibits filed as a part of this statement of
eligibility and qualification.
(1) A copy of the Articles of Association of the trustee as
now in effect.
(2) A copy of the Certificate of Authority of the trustee
to do business.
(3) A copy of the Certification of Fiduciary Powers of the
trustee.
(4) A copy of the By-Laws of the trustee as now in effect.
(5) Consent of the trustee required by Section 321(b)
of the Act.
(6) A copy of the latest Consolidated Reports of Condition
and Income of the trustee published pursuant to law or
the requirements of its supervising or examining authority.
NOTES
In as much as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base answers to Item 2, the answers to said Items are
based upon imcomplete information. Said Items may, however, be considered
correct unless amended by an amendment to this Form T-1.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, Fleet National Bank, a national banking association organized and
existing under the laws of the United States, has duly caused this statement of
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Providence, and State of
Rhode Island, on the 8th day of November, 1996.
FLEET NATIONAL BANK,
AS TRUSTEE
By: /s/ Susan M. Calise
-------------------------
Susan M. Calise
Its Vice President
<PAGE>
EXHIBIT 1
ARTICLES OF ASSOCIATION
OF
FLEET NATIONAL BANK
FIRST. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Fleet National Bank."
SECOND. The main office of the Association shall be in Springfield, Hampden
County Commonwealth of Massachusetts. The general business of the Association
shall be conducted at its main office and its branches.
THIRD. The board of directors of this Association shall consist of not less
than five (5) nor more than twenty-five (25) shareholders, the exact number of
directors within such minimum and maximum limits to be fixed and determined
from time to time by resolution of a majority of the full board of directors or
by resolution of the shareholders at any annual or special meeting thereof.
Unless otherwise provided by the laws of the United States, any vacancy in the
board of directors for any reason, including an increase in the number thereof,
may be filled by action of the board of directors.
FOURTH. The annual meeting of the shareholders for the election of directors
and the transaction of whatever other business may be brought before said
meeting shall be held at the main office or such other place as the board of
directors may designate, on the day of each year specified therefore in the
bylaws, but if no election is held on that day, it may be held on any
subsequent day according to the provisions of law; and all elections shall be
held according to such lawful regulations as may be prescribed by the board of
directors.
FIFTH. The authorized amount of capital stock of this Association shall be
eight million five hundred thousand (8,500,000) shares of which three million
five hundred thousand (3,500,000) shares shall be common stock with a
par value of six and 25/100 dollars ($6.25) each, and of which five million
(5,000,000) shares without par value shall be preferred stock. The capital
stock may be increased or decreased from time to time, in accordance with
the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the Association shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued or sold, nor
any right of subscription to any thereof other than such, if any, as the board
of directors, in its discretion, may from time to time determine and at such
price as the board of directors may from time to time fix.
<PAGE>
The board of directors of the Association is authorized, subject to limitations
prescribed by law and the provisions of this Article, to provide for the
issuance from time to time in one or more series of any number of the preferred
shares, and to establish the number of shares be included in each series, and
to fix the designation, relative rights, preferences, qualifications and
limitations of the shares of each such series. The authority of the board of
directors with respect to each series shall include, but not be limited to,
determination of the following:
a. The number of shares constituting that series and the distinctive
designation of that series;
b. The dividend rate on the shares of that series, whether dividends shall be
cumulative, and, if so, from which date or dates, and whether they shall be
payable in preference to, or in another relation to, the dividends payable
to any other class or classes or series of stock;
c. Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
d. Whether that series shall have conversion or exchange privileges, and,
if so, the terms and conditions of such conversion or exchange, including
provision for the adjustment of the conversion or exchange rate in such
events as the board of directors shall determine;
e. Whether or not the shares of that series shall be redeemable, and, if so,
the terms and conditions of such redemption, including the manner of
selecting shares for redemption if less than all shares are to be redeemed,
the date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
f. Whether that series shall be entitled to the benefit of a sinking fund to
be applied to the purchase or redemption of shares of that series, and, if
so, the terms and amounts of such sinking fund;
g. The right of the shares of that series to the benefit of conditions and
restrictions upon the creation of indebtedness of the Association or any
subsidiary, upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of
dividends or the making of other distributions on, and the purchase,
redemption or other acquisition by the Association or any subsidiary of
any outstanding stock of the Association;
h. The right of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Association and
whether such rights shall be in preference to, or in another relation to,
the comparable rights of any other class or classes or series of stock; and
i. Any other relative, participating, optional or other special rights,
qualifications, limitations or restrictions of that series.
Shares of any series of preferred stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if convertible
or exchangeable, have been converted into or exchanged for shares of stock of
any other class or classes shall have the status of authorized and unissued
shares of preferred stock of the same series and may be reissued as a part of
the series of which they were originally a part or may be reclassified and
reissued as part of a new series of preferred stock to be created by resolution
or resolutions of the board of directors or as part of any other series or
preferred stock, all subject to the conditions and the restrictions adopted by
the board of directors providing for the issue of any series of preferred
stock and by the provisions of any applicable law.
Subject to the provisions of any applicable law, or except as otherwise
provided by the resolution or resolutions providing for the issue of any series
of preferred stock, the holders of outstanding shares of common stock shall
exclusively possess voting power for the election of directors and for all
purposes, each holder of record of shares of common stock being entitled to one
vote for each share of common stock standing in his name on the books of the
Association.
Except as otherwise provided by the resolution or resolutions providing for the
issue of any series of preferred stock, after payment shall have been made to
the holders of preferred stock of the full amount of dividends to which they
shall be entitled pursuant to the resolution or resolutions providing for the
issue of any other series of preferred stock, the holders of common stock shall
be entitled, to the exclusion of the holders of preferred stock of any and all
series, to receive such dividends as from time to time may be declared by the
board of directors.
Except as otherwise provided by the resolution or resolutions for the issue
of any series of preferred stock, in the event of any liquidation, dissolution
or winding up of the Association, whether voluntary or involuntary, after
payment shall have been made to the holders of preferred stock of the full
amount to which they shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of preferred stock the
holders of common stock shall be entitled, to the exclusion of the holders of
preferred stock of any and all series, to share, ratable according to the
number of shares of common stock held by them, in all remaining assets of the
Association available for distribution to its shareholders.
The number of authorized shares of any class may be increased or decreased by
the affirmative vote of the holders of a majority of the stock of the
Association entitled to vote.
<PAGE>
SIXTH. The board of directors shall appoint one of its members president of
this Association, who shall be chairman of the board, unless the board appoints
another director to be the chairman. The board of directors shall have the
power to appoint one or more vice presidents; and to appoint a secretary and
such other officers and employees as may be required to transact the business
of this Association.
The board of directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all bylaws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a board of
directors to do and perform.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other place within the limits of the City of Hartford,
Connecticut, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of the Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The board of directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten percent (10%) of the
stock of this Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place and purpose of every annual and special meeting of the
shareholders shall be given by first class mail, postage prepaid, mailed at
least ten (10) days prior to the date of such meeting to each shareholder of
record at his address as shown upon the books of this Association.
TENTH. (a) Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to any threatened, pending or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director, officer or employee of the Association or is or was
serving at the request of the Association as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, limited
liability company, trust, or other enterprise, including service with respect
to an employee benefit plan, shall be indemnified and held harmless by the
Association to the fullest extent authorized by the law of the state in which
the Association's ultimate parent company is incorporated, except as provided
in subsection (b). The aforesaid indemnity shall protect the indemnified
person against all expense, liability and loss (including attorney's fees,
judgements, fines ERISA excise taxes or penalties, and amounts paid in
settlement) reasonably incurred by such person in connection with such a
proceeding. Such indemnification shall continue as to a person who has ceased
to be a director, officer or employee and shall inure to the benefit of his or
her heirs, executors, and administrators, but shall only cover such person's
period of service with the Association. The Association may, by action of its
Board of Directors, grant rights to indemnification to agents of the
Association and to any director, officer, employee or agent of any of its
subsidiaries with the same scope and effect as the foregoing indemnification
of directors and officers.
(b) Restrictions on Indemnification. Notwithstanding the foregoing, (i) no
person shall be indemnified hereunder by the Association against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by a federal bank regulatory agency which proceeding or action
results in a final order assessing civil money penalties against that person,
requiring affirmative action by that person in the form of payments to the
Association, or removing or prohibiting that person from service with the
Association, and any advancement of expenses to that person in that proceeding
must be repaid; and (ii) no person shall be indemnified hereunder by the
Association and no advancement of expenses shall be made to any person
hereunder to the extent such indemnification or advancement of expenses would
violate or conflict with any applicable federal statute now or hereafter in
force or any applicable final regulation or interpretation now or hereafter
adopted by the Office of the Comptroller of the Currency ("OCC") or the Federal
Deposit Insurance Corporation ("FDIC"). The Association shall comply with any
requirements imposed on it by any such statue or regulation in connection with
any indemnification or advancement of expenses hereunder by the Association.
With respect to proceedings to enforce a claimant's rights to indemnification,
the Association shall indemnify any such claimant in connection with such a
proceeding only as provided in subsection (d) hereof.
(c) Advancement of Expenses. The conditional right to indemnification
conferred in this section shall be a contract right and shall include the
right to be paid by the Association the reasonable expenses (including
attorney's fees) incurred in defending a proceeding in advance of its final
disposition (an "advancement of expenses"); provided, however, that an
advancement of expenses shall be made only upon (i) delivery to the Association
of a binding written undertaking by or on behalf of the person receiving the
advancement to repay all amounts so advanced if it is ultimately determined
that such person is not entitled to be indemnified in such proceeding,
including if such proceeding results in a final order assessing civil money
penalties against that person, requiring affirmative action by that person
in the form of payments to the Association, or removing or prohibiting that
person from service with the Association, and (ii) compliance with any other
actions or determinations required by applicable law, regulation or OCC or FDIC
interpretation to be taken or made by the Board of Directors of the Association
or other persons prior to an advancement of expenses. The Association shall
cease advancing expenses at any time its Board of Directors believes that any
of the prerequisites for advancement of expenses are no longer being met.
(d) Right of Claimant to Bring Suit. If a claim under subsection (a) of the
section is not paid in full by the Association within thirty (30) days after
written claim has been received by the Association, the claimant may at any time
thereafter bring suit against the Association to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Association to recover an advancement of expenses pursuant
to the terms of an undertaking, the claimant shall be entitled to be paid also
the expense of prosecuting or defending such claim. It shall be a defense to
any such action brought by the claimant to enforce a right to indemnification
hereunder (other than an action brought to enforce a claim for an advancement
of expenses where the required undertaking, if any, has been tendered to the
Association) that the claimant has not met any applicable standard for
indemnification under the law of the state in which the Association's ultimate
parent company is incorporated. In any suit brought by the Association to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Association shall be entitled to recover such expenses upon a final
adjudication that the claimant has not met any applicable standard for
indemnification standard for indemnification under the law of the state in
which the Association's ultimate parent company is incorporated.
(e) Non-Exclusivity of Rights. The rights to indemnification and the
advancement of expenses conferred in this section shall not be exclusive of any
other right which any person may have or hereafter acquired under any statute,
agreement, vote of stockholders or disinterested directors or otherwise.
(f) Insurance. The Association may purchase, maintain, and make payment or
reimbursement for reasonable premiums on, insurance to protect itself and any
director, officer, employee or agent of the Association or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Association would have the power to
indemnify such person against such expense, liability or loss under the law of
the state in which the Association's ultimate parent company is incorporated;
provided however, that such insurance shall explicitly exclude insurance
coverage for a final order of a federal bank regulatory agency assessing civil
money penalties against an Association director, officer, employee or agent.
ELEVENTH. These articles of association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount. The notice of any shareholders' meeting at
which an amendment to the articles of association of this Association is to be
considered shall be given as hereinabove set forth.
I hereby certify that the articles of association of this Association, in their
entirety, are listed above in items first through eleventh.
Secretary/Assistant Secretary
- --------------------------------------------------
Dated at , as of .
--------------------------------------- --------------------
Revision of February 15, 1996
<PAGE>
EXHIBIT 2
[LOGO]
- --------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
that:
(1) The Comptroller of the Currency, pursuant to Revised Statutes
324, et seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession,
custody and control of all records pertaining to the chartering, regulation and
supervision of all National Banking Associations.
(2) "Fleet National Bank", Springfield, Massachusetts
(Charter No. 1338), is a National Banking Association formed under the
laws of the United States and is authorized thereunder to transact the
business of banking on the date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
office to be affixed to these presents at
the Treasury Department, in the City of
Washington and District of Columbia, this
14th day of August, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 3
[LOGO]
- --------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
Certification of Fiduciary Powers
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
the records in this Office evidence "Fleet National Bank",
Springfield, Massachusetts, (Charter No. 1338), was granted, under the hand
and seal of the Comptroller, the right to act in all fiduciary capacities
authorized under the provisions of The Act of Congress approved
September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a. I further certify the
authority so granted remains in full force and effect.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
Office of the Comptroller of the Currency
to be affixed to these presents at the
Treasury Department, in the City of
Washington and District of Columbia, this
4th day of April, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 4
AMENDED AND RESTATED BY-LAWS OF
FLEET NATIONAL BANK
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The regular annual meeting of the shareholders for
the election of Directors and the transaction of any other business that may
properly come before the meeting shall be held at the Main Office of the
Association, or such other place as the Board of Directors may designate, on
the fourth Thursday of April in each year at 1:15 o'clock in the afternoon
unless some other hour of such day is fixed by the Board of Directors.
If, from any cause, an election of Directors is not made on such day, the Board
of Directors shall order the election to be held on some subsequent day, of
which special notice shall be given in accordance with the provisions of law,
and of these bylaws.
Section 2. Special Meetings. Special meetings of the shareholders may be called
at any time by the Board of Directors, the President, or any shareholders
owning not less than twenty-five percent (25%) of the stock of the Association.
Section 3. Notice of Meetings of Shareholders. Except as otherwise provided
by law, notice of the time and place of annual or special meetings of the
shareholders shall be mailed, postage prepaid, at least ten (10) days before
the date of the meeting to each shareholder of record entitled to vote thereat
at his address as shown upon the books of the Association; but any failure to
mail such notice to any shareholder or any irregularity therein, shall not
affect the validity of such meeting or of any of the proceedings thereat.
Notice of a special meeting shall also state the purpose of the meeting.
Section 4. Quorum; Adjourned Meetings. Unless otherwise provided by law, a
quorum for the transaction of business at every meeting of the shareholders
shall consist of not less than two-fifths (2/5) of the outstanding capital
stock represented in person or by proxy; less than such quorum may adjourn the
meeting to a future time. No notice need be given of an adjourned annual or
special meeting of the shareholders if the adjournment be to a definite place
and time.
Section 5. Votes and Proxies. At every meeting of the shareholders, each
share of the capital stock shall be entitled to one vote except as otherwise
provided by law. A majority of the votes cast shall decide every question
or matter submitted to the shareholder at any meeting, unless otherwise
provided by law or by the Articles of Association or these By-laws. Share-
holders may vote by proxies duly authorized in writing and filed with the
Cashier, but no officer, clerk, teller or bookeeper of the Association may act
as a proxy.
<PAGE>
Section 6. Nominations to Board of Directors. At any meeting of shareholders
held for the election of Directors, nominations for election to the Board of
Directors may be made, subject to the provisions of this section, by any share-
holder of record of any outstanding class of stock of the Association entitled
to vote for the election of Directors. No person other than those whose names
are stated as proposed nominees in the proxy statement accompanying the notice
of the meeting may be nominated as such meeting unless a shareholder shall have
given to the President of the Association and to the Comptroller of the
Currency, Washington, DC written notice of intention to nominate such other
person mailed by certified mail or delivered not less than fourteen (14) days
nor more than fifty (50) days prior to the meeting of shareholders at which
such nomination is to be made; provided, however, that if less than twenty-one
(21) days' notice of such meeting is given to shareholders, such notice of
intention to nominate shall be mailed by certified mail or delivered to said
President and said Comptroller on or before the seventh day following the day
on which the notice of such meeting was mailed. Such notice of intention to
nominate shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the Association that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the Association owned by the
notifying shareholder. In the event such notice is given, the proposed nominee
may be nominated either by the shareholder giving such notice or by any other
shareholder present at the meeting at which such nomination is to be made.
Such notice may contain the names of more than one proposed nominee, and if
more than one is named, any one or more of those named may be nominated.
Section 7. Action Taken Without a Shareholder Meeting. Any action requiring
shareholder approval or consent may be taken without a meeting and without
notice of such meeting by written consent of the shareholders.
ARTICLE II
DIRECTORS
Section 1. Number. The Board of Directors shall consist of such number of
shareholders, not less than five (5) nor more than twenty-five (25), as from
time to time shall be determined by a majority of the votes to which all of its
shareholders are at the time entitled, or by the Board of Directors as
hereinafter provided.
Section 2. Mandatory Retirement for Directors. No person shall be elected a
director who has attained the age of 68 and no person shall continue to serve
as a director after the date of the first meeting of the stockholders of the
Association held on or after the date on which such person attains the age of
68; provided, however, that any director serving on the Board as of December
15, 1995 who has attanined the age of 65 on or prior to such date shall be
permitted to continue to serve as a director until the date of the first
meeting of the stockholders of the Association held on or after the date on
which such person attains the age of 70.
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<PAGE>
Section 3. General Powers. The Board of Directors shall exercise all the
coporate powers of the Association, except as expressly limited by law, and
shall have the control, management, direction and dispositon of all its
property and affairs.
Section 4. Annual Meeting. Immediately following a meeting of shareholders
held for the election of Directors, the Cashier shall notify the directors-
elect who may be present of their election and they shall then hold a meeting
at the Main Office of the Association, or such other place as the Board of
Directors may designate, for the purpose of taking their oaths, organizing the
new Board, electing officers and transacting any other business that may come
before such meeting.
Section 5. Regular Meeting. Regular meetings of the Board of Directors shall
be held without notice at the Main Office of the Association, or such other
place as the Board of Directors may designate, at such dates and times as the
Board shall determine. If the day designated for a regular meeting falls on a
legal holiday, the meeting shall be held on the next business day.
Section 6. Special Meetings. A special meeting of the Board of Directors may
be called at anytime upon the written request of the Chairman of the Board, the
President, or of two Directors, stating the purpose of the meeting. Notice of
the time and place shall be given not later than the day before the date of the
meeting, by mailing a notice to each Director at his last known address, by
delivering such notice to him personally, or by telephoning.
Section 7. Quorum; Votes. A majority of the Board of Directors at the time
holding office shall constitute a quorum for the transaction of all business,
except when otherwise provided by law, but less than a quorum may adjourn
a meeting from time to time, and the meeting may be held, as adjourned, without
further notice. If a quorum is present when a vote is taken, the affirmative
vote of a majority of Directors present is the act of the Board of Directors.
Section 8. Action by Directors Without a Meeting. Any action requiring
Director approval or consent may be taken without a meeting and without notice
of such meeting by written consent of all the Directors.
Section 9. Telephonic Participation in Directors' Meetings. A Director or
member of a Committee of the Board of Directors may participate in a meeting of
the Board or of such Committee may participate in a meeting of the Board or of
such Committee by means of a conference telephone or similar communications
equipment enabling all Directors participating in the meeting to hear one
another, and participation in such a meeting shall constitute presence in person
at such a meeting.
Section 10. Vacancies. Vacancies in the Board of Directors may be filled by
the remaining members of the Board at any regular or special meeting of the
Board.
Section 11. Interim Appointments. The Board of Directors shall, if the share-
holders at any meeting for the election of Directors have determined a number
of Directors less than twenty-five (25), have the power, by affirmative vote of
the majority of all the Directors, to increase such number of Directors to not
more than twenty-five (25) and to elect Directors to fill the resulting
vacancies and to serve until the next annual meeting of shareholders or the
next election of Directors; provided, however, that the number of Directors
shall not be so increased by more than two (2) if the number last determined
by shareholders was fifteen (15) or less, or increased by more than four (4) if
the number last determined by shareholders was sixteen (16) or more.
Section 12. Fees. The Board of Directors shall fix the amount and direct the
payment of fees which shall be paid to each Director for attendance at any
meeting of the Board of Directors or of any Committees of the Board.
ARTICLE III
COMMITTEES OF THE BOARD
Section 1. Executive Committee. The Board of Directors shall appoint from its
members an Executive Committee which shall consist of such number of persons as
the Board of Directors shall determine; the Chairman of the Board and the
President shall be members ex-officio of the Executive Committee with full
voting power. The Chairman of the Board or the President may from time to time
appoint from the Board of Directors as temporary additional members of the
Executive Committee, with full voting powers, not more than two members to serve
for such periods as the Chairman of the Board or the President may determine.
The Board of Directors shall designate a member of the Executive Committee to
serve as Chairman thereof. A meeting of the Executive Committee may be called
at any time upon the written request of the Chairman of the Board, the President
or the Chairman of the Executive Committee, stating the purpose of the meeting.
Not less than twenty four hours' notice of said meeting shall be given to each
member of the Committee personally, by telephoning, or by mail. The Chairman of
the Executive Committee or, in his absence, a member of the Committee chosen by
a majority of the members present shall preside at meetings of the Executive
Committee.
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<PAGE>
The Executive Committee shall possess and may exercise all the powers of the
Board when the Board is not in session except such as the Board, only, by law,
is authorized to exercise; it shall keep minutes of its acts and proceedings
and cause same to be presented and reported at every regular meeting and at any
special meeting of the Board including specifically, all its actions relating
to loans and discounts.
All acts done and powers and authority conferred by the Executive Committee,
from time to time, within the scope of its authority, shall be deemed to be,
and may be certified as being, the acts of and under the authority of the
Board.
Section 2. Risk Management Committee. The Board shall appoint from its
members a Risk Management Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Risk
Management Committee to serve as Chairman thereof. It shall be the duty of the
Risk Management Committee to (a) serve as the channel of communication with
management and the Board of Directors of Fleet Financial Group, Inc. to assure
that formal processes supported by management information systems are in place
for the identification, evaluation and management of significant risks inherent
in or associated with lending activities, the loan portfolio, asset-liablity
management, the investment portfolio, trust and investment advisory activities,
the sale of nondeposit investment products and new products and services and
such additional activities or functions as the Board may determine from time
to time; (b) assure the formulation and adoption of policies approved by the
Risk Management Committee or Board governing lending activities, management of
the loan portfolio, the maintenance of an adequate allowance for loan and lease
losses, asset-liability management, the investment portfolio, the retail
sale of non-deposit investment products, new products and services and such
additional activities or functions as the Board may determine from time to time
(c) assure that a comprehensive independent loan review program is in place for
the early detection of problem loans and review significant reports of the loan
review department, management's responses to those reports and the risk
attributed to unresolved issues; (d) subject to control of the Board, exercise
general supervision over trust activities, the investment of trust funds, the
disposition of trust investments and the acceptance of new trusts and the terms
of such acceptance, and (e) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 3. Audit Committee. The Board shall appoint from its members and
Audit Committee which shall consist of such number as the Board shall determine
no one of whom shall be an active officer or employee of the Association or
Fleet Financial Group, Inc. or any of its affiliates. In addition, members of
the Audit Committee must not (i) have served as an officer or employee of the
Association or any of its affiliates at any time during the year prior to their
appointment; or (ii) own, control, or have owned or controlled at any time
during the year prior to appointment, ten percent (10%) or more of any
outstanding class of voting securities of the Association. At least two (2)
members of the Audit Committee must have significant executive, professional,
educational or regulatory experience in financial, auditing, accounting,
or banking matters. No member of the Audit Commitee may have significant
direct or indirect credit or other relationships with the Association, the
termination of which would materially adversely affect the Association's
financial condition or results of operations.
The Board shall designate a member of the Audit Committee to serve as Chairman
thereof. It shall be the duty of the Audit Committee to (a) cause a continuous
audit and examination to be made on its behalf into the affairs of the
Association and to review the results of such examination; (b) review
significant reports of the internal auditing department, management's responses
to those reports and the risk attributed to unresolved issues; (c) review the
basis for the reports issued under Section 112 of The Federal Deposit Insurance
Corporation Improvement Act of 1991; (d) consider, in consultation with the
independent auditor and an internal auditing executive, the adequacy of the
Association's internal controls, including the resolution of identified material
weakness and reportable conditions; (e) review regulatory communications
received from any federal or state agency with supervisory jurisdiction or
other examining authority and monitor any needed corrective action by
management; (f) ensure that a formal system of internal controls is in place
for maintaining compliance with laws and regulations; (g) cause an audit of the
Trust Department at least once during each calendar year and within 15 months
of the last such audit or, in liew thereof, adopt a continuous audit system and
report to the Board each calendar year and within 15 months of the previous
report on the performance of such audit function; and (h) perform such
additional duties and exercise such additional powers of the Board as the Board
may determine from time to time.
The Audit Committee may consult with internal counsel and retain its own
outside counsel without approval (prior or otherwise) from the Board or
management and obligate the Association to pay the fees of such counsel.
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<PAGE>
Section 4. Community Affairs Committee. The Board shall appoint from its
members a Community Affairs Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Community
Affairs Committee to serve as Chairman thereof. It shall be the duty of the
Commmunity Affairs Committee to (a) oversee compliance by the Association with
the Community Reinvestment Act of 1977, as amended, and the regulations
promulgated thereunder; and (b) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 5. Regular Meetings. Except for the Executive Committee which shall
meet on an ad hoc basis as set forth in Section 1 of this Article, regular
meetings of the Committees of the Board of Directors shall be held, without
notice, at such time and place as the Committee or the Board of Directors may
appoint and as often as the business of the Association may require.
Section 6. Special Meetings. A Special Meeting of any of the Committees of
the Board of Directors may be called upon the written request of the Chairman
of the Board or the President, or of any two members of the respective
Committee, stating the purpose of the meeting. Not less than twenty-four
hours' notice of such special meeting shall be given to each member of the
Committee personally, by telephoning, or by mail.
Section 7. Emergency Meetings. An Emergency Meeting of any of the Committees
of the Board of Directors may be called at the request of the Chairman of the
Board or the President, who shall state that an emergency exists, upon not
less than one hour's notice to each member of the Committee personally or by
telephoning.
Section 8. Action Taken Without a Committee Meeting. Any Committee of the
Board of Directors may take action without a meeting and without notice of such
meeting by resolution assented to in writing by all members of such Committee.
Section 9. Quorum. A majority of a Committee of the Board of Directors shall
constitute a quorum for the transaction of any business at any meeting of such
Committee. If a quorum is not available, the Chairman of the Board or the
President shall have power to make temporary appointments to a Committee of-
members of the Board of Directors, to act in the place and stead of members who
temporarily cannot attend any such meeting; provided, however, that any
temporary appointment to the Audit Committee must meet the requirements for
members of that Committee set forth in Section 3 of this Article.
Section 10. Record. The committes of the Board of Directors shall keep a
record of their respective meetings and proceedings which shall be presented
at the regular meeting of the Board of Directors held in the calendar month
next following the meetings of the Committees. If there is no regular Board
of Directors meeting held in the calendar month next following the meeting of
a Committee, then such Committee's records shall be presented at the next
regular Board of Directors meeting held in a month subsequent to such Committee
meeting.
Section 11. Changes and Vacancies. The Board of Directors shall have power
to change the members of any Committee at any time and to fill vacancies on any
Committee; provided, however, that any newly appointed member of the Audit
Committee must meet the requirements for members of that Committee set forth in
Section 3 of this Article.
Section 12. Other Committees. The Board of Directors may appoint, from time
to time, other committees of one or more persons, for such purposes and with
such powers as the Board may determine.
ARTICLE IV
WAIVER OF NOTICE OF MEETINGS
Section 1. Waiver. Whenever notice is required to be given to any shareholder,
Director, or member of a Committee of the Board of Directors, such notice may
be waived in writing either before or after such meeting by any shareholder,
Director or Committee member respectively, as the case may be, who may be
entitled to such notice; and such notice will be deemed to be waived by
attendance at any such meeting.
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<PAGE>
ARTICLE V
OFFICERS AND AGENTS
Section 1. Officers. The Board shall appoint a Chairman of the Board and a
President, and shall have the power to appoint one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Cashier, a Secretary, an Auditor, a Controller, one or more Trust Officers and-
such other officers as are deemed necessary or desirable for the proper
transaction of business of the Association. The Chairman of the Board and the
President shall be appointed from members of the Board of Directors. Any two
or more offices, except those of President and Cashier, or Secretary, may be
held by the same person. The Board may, from time to time, by resolution
passed by a majority of the entire Board, designate one or more officers of the
Association or of an affiliate or of Fleet Financial Group, Inc. with power to
appoint one or more Vice Presidents and such other officers of the Association
below the level of Vice President as the officer or officers designated in such
resolution deem necessary or desirable for the proper transaction of the
business of the Association.
Section 2. Chairman of the Board. The chairman of the Board shall preside at
all meetings of the Board of Directors. Subject to definition by the Board of
Directors, he shall have general executive powers and such specific powers and
duties as from time to time may be conferred upon or assigned to him by the
Board of Directors.
Section 3. President. The President shall preside at all meetings of the
Board of Directors if there be no Chairman or if the Chairman be absent.
Subject to definition by the Board of Directors, he shall have general
executive powers and such specific powers and duties as from time to time may
be conferred upon or assigned to him by the Board of Directors.
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<PAGE>
Section 4. Cashier and Secretary. The Cashier shall be the Secretary of the
Board and of the Executive Committee, and shall keep accurate minutes of their
meetings and of all meetings of the shareholders. He shall attend to the
giving of all notices required by these By-laws. He shall be custodian of the
corporate seal, records, documents and papers of the Association. He shall
have such powers and perform such duties as pertain by law or regulation to the
office of Cashier, or as are imposed by these By-laws, or as may be delegated
to him from time to time by the Board of Directors, the Chairman of the Board
or the President.
Section 5. Auditor. The Auditor shall be the chief auditing officer of the
Association. He shall continuously examine the affairs of the Association and
from time to time shall report to the Board of Directors. He shall have such
powers and perform such duties as are conferred upon, or assigned to him by
these By-laws, or as may be delegated to him from time to time by the Board
of Directors.
Section 6. Officers Seriatim. The Board of Directors shall designate from
time to time not less than two officers who shall in the absence or disability
of the Chairman or President or both, succeed seriatim to the duties and
responsibilities of the Chairman and President respectively.
Section 7. Clerks and Agents. The Board of Directors may appoint, from time
to time, such clerks, agents and employees as it may deem advisable for the
prompt and orderly transaction of the business of the Association, define
their duties, fix the salaries to be paid them and dismiss them. Subject to
the authority of the Board of Directors, the Chairman of the Board or the
President, or any other officer of the Association authorized by either of them
may appoint and dismiss all or any clerks, agents and employees and prescribe
their duties and the conditions of their employment, and from time to time
fix their compensation.
Section 8. Tenure. The Chairman of the Board of Directors and the President
shall, except in the case of death, resignation, retirement or disqualification
under these By-laws, or unless removed by the affirmative vote of at least two-
thirds of all of the members of the Board of Directors, hold office for the
term of one year or until their respective successors are appointed. Either
of such officers appointed to fill a vacancy occurring in an unexpired term
shall serve for such unexpired term of such vacancy. All other officers,
clerks, agents, attorneys-in-fact and employees of the Association shall hold
office during the pleasure of the Board of Directors or of the officer or
committee appointing them respectively.
ARTICLE VI
TRUST DEPARTMENT
Section 1. General Powers and Duties. All fiduciary powers of the Association
shall be exercised through the Trust Department, subject to such regulations as
the Comptroller of the Currency shall from time to time establish. The Trust
Department shall be to placed under the management and immediate supervision
of an officer or officers appointed by the Board of Directors. The duties of
all officers of the Trust Department shall be to cause the policies and
instructions of the Board and the Risk Management Committee with respect to the
trusts under their supervision to be carried out, and to supervise the due
performance of the trusts and agencies entrusted to the Association and under
their supervision, in accordance with law and in accordance with the terms of
such trusts and agencies.
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<PAGE>
ARTICLE VII
BRANCH OFFICES
Section 1. Establishment. The Board of Directors shall have full power to
establish, to discontinue, or, from time to time, to change the location of any
branch office, subject to such limitations as may be provided by law.
Section 2. Supervision and Control. Subject to the general supervision and
control of the Board of Directors, the affairs of branch offices shall be
under the immediate supervision and control of the President or of such other
officer or officers, employee or employees, or other individuals as the Board
of Directors may from time to time determine, with such powers and duties as
the Board of Directors may confer upon or assign to him or them.
ARTICLE VIII
SIGNATURE POWERS
Section 1. Authorization. The power of officers, employees, agents and
attorneys to sign on behalf of and to affix the seal of the Association shall
be prescribed by the Board of Directors or by the Executive Committee or by
both; provided that the President is authorized to restrict such power of any
officer, employee, agent or attorney to the business of a specific department
or departments, or to a specific branch office or branch offices. Facsimile
signatures may be authorized.
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<PAGE>
ARTICLE IX
STOCK CERTIFICATES AND TRANSFERS
Section 1. Stock Records. The Trust Department shall have custody of the
stock certificate books and stock ledgers of the Association, and shall make
all transfers of stock, issue certificates thereof and disburse dividends
declared thereon.
Section 2. Form of Certificate. Every shareholder shall be entitled to a
certificate conforming to the requirements of law and otherwise in such form
as the Board of Directors may approve. The certificates shall state on the
face thereof that the stock is transferable only on the books of the
Association and shall be signed by such officers as may be prescribed from time
to time by the Board of Directors or Executive Committee. Facsimile signatures
may be authorized.
Section 3. Transfers of Stock. Transfers of stock shall be made only on the
books of the Association by the holder in person, or by attorney duly
authorized in writing, upon surrender of the certificate therefor properly
endorsed, or upon the surrender of such certificate accompanied by a properly
executed written assignment of the same, or a written power of attorney to
sell, assign or transfer the same or the shares represented thereby.
Section 4. Lost Certificate. The Board of Directors or Executive Committee
may order a new certificate to be issued in place of a certificate lost or
destroyed, upon proof of such loss or destruction and upon tender to the
Association by the shareholder, of a bond in such amount and with or without
surety, as may be ordered, indemnifying the Association against all liability,
loss, cost and damage by reason of such loss or destruction and the issuance
of a new certificate.
Section 5. Closing Transfer Books. The Board of Directors may close the
transfer books for a period not exceeding thirty days preceding any regular
or special meeting of the shareholders, or the day designated for the payment
of a dividend or the allotment of rights. In lieu of closing the transfer
books the Board of Directors may fix a day and hour not more than thirty days
prior to the day of holding any meeting of the shareholders, or the day
designated for the payment of a dividend, or the day designated for the
allotment of rights, or the day when any change of conversion or exchange of
capital stock is to go into effect, as the day as of which shareholders
entitled to notice of and to vote at such meetings or entitled to such dividend
or to such allotment of rights or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, shall be determined, and
only such shareholders as shall be shareholders of record on the day and hour
so fixed shall be entitled to notice of and to vote at such meeting or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such rights, as the case may be.
ARTICLE X
THE CORPORATE SEAL
Section 1. Seal. The following is an impression of the seal of the
Association adopted by the Board of Directors.
ARTICLE XI
BUSINESS HOURS
Section 1. Business Hours. The main office of this Association and each
branch office thereof shall be open for business on such days, and for such
hours as the Chairman, or the President, or any Executive Vice President, or
such other officer as the Board of Directors shall from time to time
designate, may determine as to each office to conform to local custom and
convenience, provided that any one or more of the main and branch offices or
certain departments thereof may be open for such hours as the President, or
such other officer as the Board of Directors shall from time to time designate,
may determine as to each office or department on any legal holiday on which
work is not prohibited by law, and provided further that any one or more of
the main and branch offices or certain departments thereof may be ordered
closed or open on any day for such hours as to each office or department as
the President, or such other officer as the Board of Directors shall from time
to time designate, subject to applicable laws regulations, may determine when
such action may be required by reason of disaster or other emergency condition.
ARTICLE IX
CHANGES IN BY-LAWS
Section 1. Amendments. These By-laws may be amended upon vote of a majority
of the entire Board of Directors at any meeting of the Board, provided ten (10)
day's notice of the proposed amendment has been given to each member of the
Board of Directors. No amendment may be made unless the By-law, as amended, is
consistent with the requirements of law and of the Articles of Association.
These By-laws may also be amended by the Association's shareholders.
A true copy
Attest:
Secretary/Assistant Secretary
- ---------------------------------------
Dated at , as of .
--------------------------------------- ----------------------
Revision of January 11, 1993
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<PAGE>
EXHIBIT 5
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under the Indenture to be entered into between
AmeriKing, Inc. and Fleet National Bank, as Trustee,
does hereby consent that, pursuant to Section 321(b) of the Trust Indenture
Act of 1939, reports of examinations with respect to the undersigned by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
FLEET NATIONAL BANK,
AS TRUSTEE
By /s/ Susan M. Calise
-------------------------------
Susan M. Calise
Its: Vice President
Dated:
<PAGE>
EXHIBIT 6
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 1999
Federal Financial Institutions Examination Council
- --------------------------------------------------------------------------------
[FEDERAL FINANCIAL Please refer to page i, [1]
INSTITUTIONS EXAMINATION Table of Contents, for
COUNCIL LOGO] the required disclosure
of estimated burden.
- --------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
(960630)
REPORT AT THE CLOSE OF BUSINESS JUNE 30, 1996 -----------
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State member banks);
12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Giro S. DeRosa, Vice President
-----------------------------------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and
Income (including the supporting schedules) have been prepared in conformance
with the instructions issued by the appropriate Federal regulatory authority
and are true to the best of my knowledge and belief.
/s/ Giro DeRosa
- --------------------------------------------------------------------------------
Signature of Officer Authorized to Sign Report
July 25, 1996
- --------------------------------------------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
For Banks Submitting Hard Copy Report Forms:
State Member Banks: Return the original and one copy to the appropriate Federal
Reserve District Bank.
State Nonmember Banks: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
National Banks: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- --------------------------------------------------------------------------------
FDIC Certificate Number | 0 | 2 | 4 | 9 | 9 | Banks should affix
--------------------- the address label
(RCRI 90150) in this space.
CALL NO. 196 31 06-30-96
STAR: 25-0590 00327 STCERT: 25-02490
FLEET NATIONAL BANK
ONE MONARCH PLACE
SPRINGFIELD, MA 01102
Board of Governors of the Federal Reserve System, Federal Deposit
Insurance Corporation, Office of the Comptroller of the Currency
<PAGE>
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
___ ___
FDIC Certificate Number | 0 | 2 | 4 | 9 | 9 | | Banks should affix the address label in this space. |
______________________
(RCRI 9050) CALL NO. 196 31 06-30-96
STBK: 25-0590 00327 STCERT: 25-02499
FLEET NATIONAL BANK
ONE MONARCH PLACE
SPRINGFIELD, MA 01102
|___ ___|
</TABLE>
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>
FFIEC 031
Page i
/2/
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices
________________________________________________________________________________
TABLE OF CONTENTS
SIGNATURE PAGE Cover
REPORT OF INCOME
Schedule RI--Income Statement...........................................RI-1,2,3
Schedule RI-A--Changes in Equity Capital....................................RI-4
Schedule RI-B--Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease
Losses..................................................................RI-4,5
Schedule RI-C--Applicable Income Taxes by
Taxing Authority..........................................................RI-5
Schedule RI-D--Income from
International Operations..................................................RI-6
Schedule RI-E--Explanations...............................................RI-7,8
REPORT OF CONDITION
Schedule RC--Balance Sheet................................................RC-1,2
Schedule RC-A--Cash and Balances Due
From Depository Institutions..............................................RC-3
Schedule RC-B--Securities...............................................RC-3,4,5
Schedule RC-C--Loans and Lease Financing
Receivables:
Part I. Loans and Leases..............................................RC-6,7
Part II. Loans to Small Businesses and
Small Farms (included in the forms for
June 30 only).....................................................RC-7a,7b
Schedule RC-D--Trading Assets and Liabilities
(to be completed only by selected banks)..................................RC-8
Schedule RC-E--Deposit Liabilities....................................RC-9,10,11
Schedule RC-F--Other Assets................................................RC-11
Schedule RC-G--Other Liabilities...........................................RC-11
Schedule RC-H--Selected Balance Sheet Items for
Domestic Offices.........................................................RC-12
Schedule RC-I--Selected Assets and Liabilities
of IBFs..................................................................RC-13
Schedule RC-K--Quarterly Averages..........................................RC-13
Schedule RC-L--Off-Balance Sheet Items...............................RC-14,15,16
Schedule RC-M--Memoranda................................................RC-17,18
Schedule RC-N--Past Due and Nonaccrual Loans,
Leases, and Other Assets..............................................RC-19,20
Schedule RC-O--Other Data for Deposit
Insurance Assessments.................................................RC-21,22
Schedule RC-R--Regulatory Capital.......................................RC-23,24
Optional Narrative Statement Concerning the
Amounts Reported in the Reports of
Condition and Income.....................................................RC-25
Special Report (TO BE COMPLETED BY ALL BANKS)
Schedule RC-J--Repricing Opportunities (sent only to
and to be completed only by savings banks)
DISCLOSURE OF ESTIMATED BURDEN
The estimated average burden associated with this information collection is
32.2 hours per respondent and is estimated to vary from 15 to 230 hours per
response, depending on individual circumstances. Burden estimates include the
time for reviewing instructions, gathering and maintaining data in the required
form, and completing the information collection, but exclude the time for
compiling and maintaining business records in the normal course of a
respondent's activities. Comments concerning the accuracy of this burden
estimate and suggestions for reducing this burden should be directed to the
Office of Information and Regulatory Affairs, Office of Management and Budget,
Washington, D.C. 20503, and to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
For information or assistance, National and State nonmember banks should
contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington,
D.C. 20429, toll free on (800) 688-FDIC (3342), Monday through Friday between
8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-1
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Consolidated Report of Income
for the period January 1, 1996 - June 30, 1996
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
<TABLE>
<CAPTION>
Schedule RI--Income Statement _________
| I480 |
______________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________|_____________________|
<S> <C> <C>
1. Interest income: | ////////////////// |
a. Interest and fee income on loans: | ////////////////// |
(1) In domestic offices: | ////////////////// |
(a) Loans secured by real estate .................................................. | 4011 616,395 | 1.a.(1)(a)
(b) Loans to depository institutions .............................................. | 4019 588 | 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers ........... | 4024 286 | 1.a.(1)(c)
(d) Commercial and industrial loans ............................................... | 4012 562,807 | 1.a.(1)(d)
(e) Acceptances of other banks .................................................... | 4026 261 | 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: | ////////////////// |
(1) Credit cards and related plans ............................................ | 4054 9,643 | 1.a.(1)(f)(1)
(2) Other ..................................................................... | 4055 97,346 | 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions ........................ | 4056 0 | 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political | ////////////////// |
subdivisions in the U.S.: | ////////////////// |
(1) Taxable obligations ....................................................... | 4503 0 | 1.a.(1)(h)(1)
(2) Tax-exempt obligations .................................................... | 4504 5,232 | 1.a.(1)(h)(2)
(i) All other loans in domestic offices ........................................... | 4058 84,576 | 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 4059 1,981 | 1.a.(2)
b. Income from lease financing receivables: | ////////////////// |
(1) Taxable leases .................................................................... | 4505 75,341 | 1.b.(1)
(2) Tax-exempt leases ................................................................. | 4307 791 | 1.b.(2)
c. Interest income on balances due from depository institutions:(1) | ////////////////// |
(1) In domestic offices ............................................................... | 4105 914 | 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 4106 142 | 1.c.(2)
d. Interest and dividend income on securities: | ////////////////// |
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations ... | 4027 209,142 | 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: | ////////////////// |
(a) Taxable securities ............................................................ | 4506 0 | 1.d.(2)(a)
(b) Tax-exempt securities ......................................................... | 4507 2,953 | 1.d.(2)(b)
(3) Other domestic debt securities .................................................... | 3657 12,164 | 1.d.(3)
(4) Foreign debt securities ........................................................... | 3658 3,348 | 1.d.(4)
(5) Equity securities (including investments in mutual funds) ......................... | 3659 10,212 | 1.d.(5)
e. Interest income from trading assets.................................................... | 4069 360 | 1.e.
______________________
</TABLE>
____________
(1) Includes interest income on time certificates of deposit not held for
trading.
3
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI--Continued
________________
Dollar Amounts in Thousands | Year-to-date |
___________________________________________________________________________________ ______________
<S> <C> <C>
1. Interest income (continued) | RIAD Bil Mil Thou |
f. Interest income on federal funds sold and securities purchased | ////////////////// |
under agreements to resell in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4020 24,925 | 1.f.
g. Total interest income (sum of items 1.a through 1.f) ................ | 4107 1,719,407 | 1.g.
2. Interest expense: | ////////////////// |
a. Interest on deposits: | ////////////////// |
(1) Interest on deposits in domestic offices: | ////////////////// |
(a) Transaction accounts (NOW accounts, ATS accounts, and | ////////////////// |
telephone and preauthorized transfer accounts) .............. | 4508 8,583 | 2.a.(1)(a)
(b) Nontransaction accounts: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................... | 4509 133,915 | 2.a.(1)(b)(1)
(2) Other savings deposits .................................. | 4511 26,678 | 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more ........ | 4174 88,690 | 2.a.(1)(b)(3)
(4) All other time deposits ................................. | 4512 214,225 | 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement | ////////////////// |
subsidiaries, and IBFs .......................................... | 4172 50,022 | 2.a.(2)
b. Expense of federal funds purchased and securities sold under | ////////////////// |
agreements to repurchase in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4180 152,094 | 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading | ////////////////// |
liabilities, and other borrowed money ............................... | 4185 121,525 | 2.c.
d. Interest on mortgage indebtedness and obligations under | ////////////////// |
capitalized leases .................................................. | 4072 361 | 2.d.
e. Interest on subordinated notes and debentures ....................... | 4200 26,110 | 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ............... | 4073 822,203 | 2.f.
___________________________
3. Net interest income (item 1.g minus 2.f) ............................... | ////////////////// | RIAD 4074 | 897,204 | 3.
___________________________
4. Provisions: | ////////////////// |
___________________________
a. Provision for loan and lease losses ................................. | ////////////////// | RIAD 4230 | 21,672 | 4.a.
b. Provision for allocated transfer risk ............................... | ////////////////// | RIAD 4243 | 0 | 4.b.
___________________________
5. Noninterest income: | ////////////////// |
a. Income from fiduciary activities .................................... | 4070 144,614 | 5.a.
b. Service charges on deposit accounts in domestic offices ............. | 4080 111,736 | 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum | ////////////////// |
items 8.a through 8.d)............................................... A220 10,646 5.c.
d. Other foreign transaction gains (losses) ............................ | 4076 247 | 5.d.
e. Not applicable | ////////////////// |
f. Other noninterest income: | ////////////////// |
(1) Other fee income ................................................ | 5407 372,950 | 5.f.(1)
(2) All other noninterest income* ................................... | 5408 211,593 | 5.f.(2)
___________________________
g. Total noninterest income (sum of items 5.a through 5.f) ............. | ////////////////// | RIAD 4079 | 851,786 | 5.g.
6. a. Realized gains (losses) on held-to-maturity securities .............. | ////////////////// | RIAD 3521 | 1 | 6.a.
b. Realized gains (losses) on available-for-sale securities ............ | ////////////////// | RIAD 3196 | 16,126 | 6.b.
___________________________
7. Noninterest expense: | ////////////////// |
a. Salaries and employee benefits ...................................... | 4135 322,146 | 7.a.
b. Expenses of premises and fixed assets (net of rental income) | ////////////////// |
(excluding salaries and employee benefits and mortgage interest) .... | 4217 114,912 | 7.b.
c. Other noninterest expense* .......................................... | 4092 631,554 | 7.c.
___________________________
d. Total noninterest expense (sum of items 7.a through 7.c) ............ | ////////////////// | RIAD 4093 | 1,068,612 | 7.d.
___________________________
8. Income (loss) before income taxes and extraordinary items and other | ////////////////// |
___________________________
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d)| ////////////////// | RIAD 4301 | 674,833 | 8.
9. Applicable income taxes (on item 8) .................................... | ////////////////// | RIAD 4302 | 280,303 | 9.
___________________________
10. Income (loss) before extraordinary items and other adjustments | ////////////////// |
___________________________
(item 8 minus 9) ....................................................... | ////////////////// | RIAD 4300 | 394,530 | 10.
_________________________________________________
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
4
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI--Continued
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________ ______________
<S> <C> <C>
11. Extraordinary items and other adjustments: | ////////////////// |
a. Extraordinary items and other adjustments, gross of income taxes* . | 4310 0 | 11.a.
b. Applicable income taxes (on item 11.a)* ........................... | 4315 0 | 11.b.
c. Extraordinary items and other adjustments, net of income taxes | ////////////////// |__________________________
(item 11.a minus 11.b) ............................................ | ////////////////// | RIAD 4320 | 0 | 11.c.
12. Net income (loss) (sum of items 10 and 11.c) ......................... | ////////////////// | RIAD 4340 | 394,530 | 12.
_________________________________________________
</TABLE>
<TABLE>
<CAPTION>
__________
| I481 |
_______________
Memoranda | Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after | ////////////////// |
August 7, 1986, that is not deductible for federal income tax purposes .......................... | 4513 1,798 | M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices | ////////////////// |
(included in Schedule RI, item 8) ............................................................... | 8431 20,910 | M.2.
3.-4. Not applicable | ////////////////// |
5. Number of full-time equivalent employees on payroll at end of current period (round to | //// Number |
nearest whole number) ........................................................................... | 4150 9,852 | M.5.
6. Not applicable | ////////////////// |
7. If the reporting bank has restated its balance sheet as a result of applying push down | //// MM DD YY |
accounting this calendar year, report the date of the bank's acquisition ........................ | 9106 00/00/00 | M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) | ////////////////// |
(sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): | //// Bil Mil Thou |
a. Interest rate exposures ...................................................................... | 8757 1,428 | M.8.a.
b. Foreign exchange exposures ................................................................... | 8758 9,218 | M.8.b.
c. Equity security and index exposures .......................................................... | 8759 0 | M.8.c.
d. Commodity and other exposures ................................................................ | 8760 0 | M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: | ////////////////// |
a. Net increase (decrease) to interest income.....................................................| 8761 (5,575)| M.9.a.
b. Net (increase) decrease to interest expense ...................................................| 8762 (5,752)| M.9.b.
c. Other (noninterest) allocations ...............................................................| 8763 (172)| M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions).................................| A251 0 | M.10.
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
5
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses. _________
| I483 |
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Total equity capital originally reported in the December 31, 1995, Reports of Condition | ////////////////// |
and Income ...................................................................................... | 3215 1,342,473 | 1.
2. Equity capital adjustments from amended Reports of Income, net* ................................. | 3216 0 | 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) ............................ | 3217 1,342,473 | 3.
4. Net income (loss) (must equal Schedule RI, item 12) ............................................. | 4340 394,530 | 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net .............................. | 4346 0 | 5.
6. Changes incident to business combinations, net .................................................. | 4356 4,161,079 | 6.
7. LESS: Cash dividends declared on preferred stock ................................................ | 4470 0 | 7.
8. LESS: Cash dividends declared on common stock ................................................... | 4460 490,634 | 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions | ////////////////// |
for this schedule) .............................................................................. | 4411 0 | 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) | 4412 0 | 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities ................ | 8433 (46,607)| 11.
12. Foreign currency translation adjustments ........................................................ | 4414 0 | 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) ........ | 4415 (1,003,722)| 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC, | ////////////////// |
item 28) ........................................................................................ | 3210 4,357,119 | 14.
______________________
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
<TABLE>
<CAPTION>
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
__________
| I486 |
__________________________________________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
____________________ ____________________
| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4651 35,701 | 4661 8,412 | 1.a.
b. To non-U.S. addressees (domicile) ..................................... | 4652 0 | 4662 0 | 1.b.
2. Loans to depository institutions and acceptances of other banks: | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository institutions .................. | 4653 0 | 4663 0 | 2.a.
b. To foreign banks ...................................................... | 4654 0 | 4664 0 | 2.b.
3. Loans to finance agricultural production and other loans to farmers ...... | 4655 2 | 4665 22 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4645 38,139 | 4617 19,005 | 4.a.
b. To non-U.S. addressees (domicile) ..................................... | 4646 0 | 4618 102 | 4.b.
5. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures: | ////////////////// | ////////////////// |
a. Credit cards and related plans ........................................ | 4656 1,137 | 4666 733 | 5.a.
b. Other (includes single payment, installment, and all student loans) ... | 4657 7,864 | 4667 2,681 | 5.b.
6. Loans to foreign governments and official institutions ................... | 4643 0 | 4627 0 | 6.
7. All other loans .......................................................... | 4644 826 | 4628 541 | 7.
8. Lease financing receivables: | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ......................................... | 4658 3,729 | 4668 3,241 | 8.a.
b. Of non-U.S. addressees (domicile) ..................................... | 4659 0 | 4669 0 | 8.b.
9. Total (sum of items 1 through 8) ......................................... | 4635 87,398 | 4605 34,737 | 9.
___________________________________________
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-B--Continued
Part I. Continued
Memoranda
__________________________________________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
____________________ ____________________
| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1-3. Not applicable | ////////////////// | ////////////////// |
4. Loans to finance commercial real estate, construction, and land | ////////////////// | ////////////////// |
development activities (not secured by real estate) included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, items 4 and 7, above .............................. | 5409 383 | 5410 1,374 | M.4.
5. Loans secured by real estate in domestic offices (included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, item 1, above): | ////////////////// | ////////////////// |
a. Construction and land development ..................................... | 3582 189 | 3583 253 | M.5.a.
b. Secured by farmland ................................................... | 3584 145 | 3585 131 | M.5.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ..................... | 5411 2,650 | 5412 108 | M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties ...... | 5413 13,892 | 5414 1,231 | M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties ............. | 3588 837 | 3589 395 | M.5.d.
e. Secured by nonfarm nonresidential properties .......................... | 3590 17,988 | 3591 6,294 | M.5.e.
|_________________________________________|
</TABLE>
Part II. Changes in Allowance for Loan and Lease Losses
<TABLE>
<CAPTION>
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Balance originally reported in the December 31, 1995, Reports of Condition and Income.......... | 3124 266,943 | 1.
2. Recoveries (must equal part I, item 9, column B above) ........................................ | 4605 34,737 | 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above) ................................. | 4635 87,398 | 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)......................... | 4230 21,672 | 4.
5. Adjustments* (see instructions for this schedule) ................................ ............ | 4815 636,497 | 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, | ////////////////// |
item 4.b) ..................................................................................... | 3123 872,451 | 6.
|____________________|
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of Income.
<TABLE>
<CAPTION>
| I489 | <-
____________ ________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Federal ....................................................................................... | 4780 N/A | 1.
2. State and local................................................................................ | 4790 N/A | 2.
3. Foreign ....................................................................................... | 4795 N/A | 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b) ............ | 4770 N/A | 4.
____________________________| |
5. Deferred portion of item 4 ........................................ | RIAD 4772 | N/A | ////////////////// | 5.
__________________________________________________
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-6
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-D--Income from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs where international operations
account for more than 10 percent of total revenues, total assets, or net income.
Part I. Estimated Income from International Operations
__________
| I492 | <-
______ ________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, | ////////////////// |
and IBFs: | ////////////////// |
a. Interest income booked ................................................................... | 4837 N/A | 1.a.
b. Interest expense booked .................................................................. | 4838 N/A | 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs | ////////////////// |
(item 1.a minus 1.b) ..................................................................... | 4839 N/A | 1.c.
2. Adjustments for booking location of international operations: | ////////////////// |
a. Net interest income attributable to international operations booked at domestic offices .. | 4840 N/A | 2.a.
b. Net interest income attributable to domestic business booked at foreign offices .......... | 4841 N/A | 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) ..................................... | 4842 N/A | 2.c.
3. Noninterest income and expense attributable to international operations: | ////////////////// |
a. Noninterest income attributable to international operations .............................. | 4097 N/A | 3.a.
b. Provision for loan and lease losses attributable to international operations ............. | 4235 N/A | 3.b.
c. Other noninterest expense attributable to international operations ....................... | 4239 N/A | 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a | ////////////////// |
minus 3.b and 3.c) ....................................................................... | 4843 N/A | 3.d.
4. Estimated pretax income attributable to international operations before capital allocation | ////////////////// |
adjustment (sum of items 1.c, 2.c, and 3.d) ................................................. | 4844 N/A | 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect | ////////////////// |
the effects of equity capital on overall bank funding costs ................................. | 4845 N/A | 5.
6. Estimated pretax income attributable to international operations after capital allocation | ////////////////// |
adjustment (sum of items 4 and 5) ........................................................... | 4846 N/A | 6.
7. Income taxes attributable to income from international operations as estimated in item 6 .... | 4797 N/A | 7.
8. Estimated net income attributable to international operations (item 6 minus 7) .............. | 4341 N/A | 8.
______________________
<CAPTION>
Memoranda ______________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Intracompany interest income included in item 1.a above ..................................... | 4847 N/A | M.1.
2. Intracompany interest expense included in item 1.b above .................................... | 4848 N/A | M.2.
______________________
</TABLE>
<TABLE>
<CAPTION>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income booked at IBFs .............................................................. | 4849 N/A | 1.
2. Interest expense booked at IBFs ............................................................. | 4850 N/A | 2.
3. Noninterest income attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs): | ////////////////// |
a. Gains (losses) and extraordinary items ................................................... | 5491 N/A | 3.a.
b. Fees and other noninterest income ........................................................ | 5492 N/A | 3.b.
4. Provision for loan and lease losses attributable to international operations booked at | ////////////////// |
domestic offices (excluding IBFs) ........................................................... | 4852 N/A | 4.
5. Other noninterest expense attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs) ............................................................................ | 4853 N/A | 5.
______________________
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-7
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and other adjustments in Schedule RI, and all
significant items of other noninterest income and other noninterest expense in Schedule RI. (See instructions for details.)
__________
| I495 | <-
______ ________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) | ////////////////// |
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): | ////////////////// |
a. Net gains on other real estate owned ..................................................... | 5415 0 | 1.a.
b. Net gains on sales of loans .............................................................. | 5416 0 | 1.b.
c. Net gains on sales of premises and fixed assets .......................................... | 5417 0 | 1.c.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 5.f.(2): | ////////////////// |
_____________
d. | TEXT 4461 | Income on Mortgages Held for Resale | 4461 81,194 | 1.d.
e. | TEXT 4462 | Gain From Branch Divestitures | 4462 77,976 | 1.e.
___________
f. | TEXT 4463 |______________________________________________________________________________| 4463 | 1.f.
_____________
2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// |
a. Amortization expense of intangible assets ................................................ | 4531 135,939 | 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: | ////////////////// |
b. Net losses on other real estate owned .................................................... | 5418 0 | 2.b.
c. Net losses on sales of loans ............................................................. | 5419 0 | 2.c.
d. Net losses on sales of premises and fixed assets ......................................... | 5420 0 | 2.d.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 7.c: | ////////////////// |
_____________
e. | TEXT 4464 | Intercompany Corporate Support Function Charges | 4464 143,184 | 2.e.
___________
f. | TEXT 4467 | Intercompany Data Processing & Programming Charges | 4467 158,034 | 2.f.
___________
g. | TEXT 4468 |______________________________________________________________________________| 4468 | 2.g.
_____________
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and | ////////////////// |
applicable income tax effect (from Schedule RI, item 11.b) (itemize and describe | ////////////////// |
all extraordinary items and other adjustments): | ////////////////// |
_____________
a. (1) | TEXT 4469 |__________________________________________________________________________| 4469 | 3.a.(1)
_____________
(2) Applicable income tax effect | RIAD 4486 | | ////////////////// | 3.a.(2)
_____________ ____________________________
b. (1) | TEXT 4487 |__________________________________________________________________________| 4487 | 3.b.(1)
_____________
(2) Applicable income tax effect | RIAD 4488 | | ////////////////// | 3.b.(2)
_____________ ____________________________
c. (1) | TEXT 4489 |__________________________________________________________________________| 4489 | 3.c.(1)
_____________
(2) Applicable income tax effect | RIAD 4491 | | ////////////////// | 3.c.(2)
____________________________
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, | ////////////////// |
item 2) (itemize and describe all adjustments): | ////////////////// |
_____________
a. | TEXT 4492 |______________________________________________________________________________| 4492 | 4.a.
___________
b. | TEXT 4493 |______________________________________________________________________________| 4493 | 4.b.
_____________
5. Cumulative effect of changes in accounting principles from prior years (from | ////////////////// |
Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): | ////////////////// |
_____________
a. | TEXT 4494 |______________________________________________________________________________| 4494 | 5.a.
___________
b. | TEXT 4495 |______________________________________________________________________________| 4495 | 5.b.
_____________
6. Corrections of material accounting errors from prior years (from Schedule RI-A, | ////////////////// |
item 10) (itemize and describe all corrections): | ////////////////// |
_____________
a. | TEXT 4496 | 4496 | 6.a.
___________|______________________________________________________________________________
b. | TEXT 4497 4497 | 6.b.
____________|____________________________________________________________________________________________________
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-8
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-E--Continued
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) | ////////////////// |
(itemize and describe all such transactions): | ////////////////// |
_____________
a. | TEXT 4498 | Fleet National Bank Surplus Distribution to FFG | 4498 (1,003,722) | 7.a.
__________________________________________________________________________________________| |
b. | TEXT 4499 | | 4499 | 7.b.
___________________________________________________________________________________________
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, | ////////////////// |
item 5) (itemize and describe all adjustments): | ////////////////// |
_____________ | |
a. | TEXT 4521 | 12/31/95 Ending Balance of Pooled Entities | 4521 | 8.a.
___________________________________________________________________________________________| |
b. | TEXT 4522 | | 4522 | 8.b.
___________________________________________________________________________________________| |
____________________
9. Other explanations (the space below is provided for the bank to briefly describe, | I498 | I499 | <-
______________________
at its option, any other significant items affecting the Report of Income):
___
No comment |X| (RIAD 4769)
___
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-1
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise indicated,
report the amount outstanding as of the last business day of the quarter.
Schedule RC--Balance Sheet
__________
| C400 | <-
____________ ________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
ASSETS | ////////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ////////////////// |
a. Noninterest-bearing balances and currency and coin(1) ................................... | 0081 4,130,928 | 1.a.
b. Interest-bearing balances(2) ............................................................ | 0071 46,521 | 1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A) .............................. | 1754 257,441 | 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ............................ | 1773 7,250,067 | 2.b.
3. Federal funds sold and securities purchased under agreements to resell in domestic offices | ////////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | ////////////////// |
a. Federal funds sold ...................................................................... | 0276 17,428 | 3.a.
b. Securities purchased under agreements to resell ......................................... | 0277 0 | 3.b.
4. Loans and lease financing receivables: ____________________________| ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) | RCFD 2122 | 31,278,251 | ////////////////// | 4.a.
b. LESS: Allowance for loan and lease losses ................... | RCFD 3123 | 872,451 | ////////////////// | 4.b.
c. LESS: Allocated transfer risk reserve ....................... | RCFD 3128 | 0 | ////////////////// | 4.c.
____________________________
d. Loans and leases, net of unearned income, | ////////////////// |
allowance, and reserve (item 4.a minus 4.b and 4.c) ..................................... | 2125 30,405,800 | 4.d.
5. Trading assets (from schedule RC-D )........................................................ | 3545 71,354 | 5.
6. Premises and fixed assets (including capitalized leases) ................................... | 2145 534,844 | 6.
7. Other real estate owned (from Schedule RC-M) ............................................... | 2150 34,546 | 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) ... | 2130 0 | 8.
9. Customers' liability to this bank on acceptances outstanding ............................... | 2155 16,634 | 9.
10. Intangible assets (from Schedule RC-M) ..................................................... | 2143 2,283,414 | 10.
11. Other assets (from Schedule RC-F) .......................................................... | 2160 3,978,638 | 11.
12. Total assets (sum of items 1 through 11) ................................................... | 2170 49,027,615 | 12.
______________________
</TABLE>
____________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
11
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC--Continued
___________________________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
<S> <C> <C>
LIABILITIES | /////////////////////// |
13. Deposits: | /////////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, | /////////////////////// |
part I) ............................................................................... | RCON 2200 34,110,580 | 13.a.
____________________________
(1) Noninterest-bearing(1) ................................ | RCON 6631 10,202,036 | /////////////////////// | 13.a.(1)
(2) Interest-bearing ...................................... | RCON 6636 23,908,544 | /////////////////////// | 13.a.(2)
____________________________
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, | /////////////////////// |
part II) .............................................................................. | RCFN 2200 1,745,663 | 13.b.
____________________________
(1) Noninterest-bearing ................................... | RCFN 6631 400 | /////////////////////// | 13.b.(1)
(2) Interest-bearing ...................................... | RCFN 6636 1,745,263 | /////////////////////// | 13.b.(2)
____________________________
14. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | /////////////////////// |
a. Federal funds purchased ............................................................... | RCFD 0278 4,302,800 | 14.a.
b. Securities sold under agreements to repurchase ........................................ | RCFD 0279 566,036 | 14.b.
15. a. Demand notes issued to the U.S. Treasury .............................................. | RCON 2840 14,411 | 15.a.
b. Trading liabilities (from Schedule RC-D) .............................................. | RCFD 3548 57,446 | 15.b.
16. Other borrowed money: | /////////////////////// |
a. With a remaining maturity of one year or less.......................................... | RCFD 2332 487,435 | 16.a.
b. With a remaining maturity of more than one year........................................ | RCFD 2333 893,259 | 16.b.
17. Mortgage indebtedness and obligations under capitalized leases ........................... | RCFD 2910 11,561 | 17.
18. Bank's liability on acceptances executed and outstanding ................................. | RCFD 2920 16,634 | 18.
19. Subordinated notes and debentures ........................................................ | RCFD 3200 1,213,219 | 19.
20. Other liabilities (from Schedule RC-G) ................................................... | RCFD 2930 1,251,452 | 20.
21. Total liabilities (sum of items 13 through 20) ........................................... | RCFD 2948 44,670,496 | 21.
| /////////////////////// |
22. Limited-life preferred stock and related surplus ......................................... | RCFD 3282 0 | 22.
EQUITY CAPITAL | /////////////////////// |
23. Perpetual preferred stock and related surplus ............................................ | RCFD 3838 125,000 | 23.
24. Common stock ............................................................................. | RCFD 3230 19,487 | 24.
25. Surplus (exclude all surplus related to preferred stock).................................. | RCFD 3839 2,551,927 | 25.
26. a. Undivided profits and capital reserves ................................................ | RCFD 3632 1,693,408 | 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ................ | RCFD 8434 (32,703)| 26.b.
27. Cumulative foreign currency translation adjustments ...................................... | RCFD 3284 0 | 27.
28. Total equity capital (sum of items 23 through 27) ........................................ | RCFD 3210 4,357,119 | 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, | /////////////////////// |
and 28) .................................................................................. | RCFD 3300 49,027,615 | 29.
___________________________
</TABLE>
<TABLE>
<CAPTION>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the Number
most comprehensive level of auditing work performed for the bank by independent external __________________
auditors as of any date during 1995 ............................................................... | RCFD 6724 N/A | M.1.
__________________
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>
____________
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
12
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
__________
| C405 | <-
_________________________________ ________
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and | ////////////////// | ////////////////// |
coin .................................................................... | 0022 3,402,522 | ////////////////// | 1.
a. Cash items in process of collection and unposted debits .............. | ////////////////// | 0020 2,655,163 | 1.a.
b. Currency and coin .................................................... | ////////////////// | 0080 747,539 | 1.b.
2. Balances due from depository institutions in the U.S. ................... | ////////////////// | 0082 500,301 | 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) ... | 0083 0 | ////////////////// | 2.a.
b. Other commercial banks in the U.S. and other depository institutions | ////////////////// | ////////////////// |
in the U.S. (including their IBFs) ................................... | 0085 500,373 | ////////////////// | 2.b.
3. Balances due from banks in foreign countries and foreign central banks .. | ////////////////// | 0070 7,902 | 3.
a. Foreign branches of other U.S. banks ................................. | 0073 690 | ////////////////// | 3.a.
b. Other banks in foreign countries and foreign central banks ........... | 0074 7,948 | ////////////////// | 3.b.
4. Balances due from Federal Reserve Banks ................................. | 0090 265,916 | 0090 0 | 4.
5. Total (sum of items 1 through 4) (total of column A must equal | ////////////////// | ////////////////// |
Schedule RC, sum of items 1.a and 1.b) .................................. | 0010 4,177,449 | 0010 4,176,641 | 5.
___________________________________________
<CAPTION>
______________________
Memorandum Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, | ////////////////// |
column B above) .............................................................................. | 0050 453,780 | M.1.
______________________
</TABLE>
Schedule RC-B--Securities
Exclude assets held for trading.
<TABLE>
<CAPTION>
_______
| C410 | <-
___________________________________________________________________________ ________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C> <C>
1. U.S. Treasury securities ......... | 0211 250 | 0213 250 | 1286 1,274,624 | 1287 1,252,546 | 1.
2. U.S. Government agency | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and corporation obligations | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(exclude mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Issued by U.S. Govern- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
ment agencies(2) .............. | 1289 0 | 1290 0 | 1291 0 | 1293 0 | 2.a.
b. Issued by U.S. | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Government-sponsored | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
agencies(3) ................... | 1294 0 | 1295 0 | 1297 498 | 1298 505 | 2.b.
_____________________________________________________________________________________
</TABLE>
_____________
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Import Bank
participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
13
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B--Continued
_____________________________________________________________________________________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
3. Securities issued by states | ////////////////// |/ //////////////// | ////////////////// | ///////////////// |
and political subdivisions | ////////////////// |////////////////// | ////////////////// | ///////////////// |
in the U.S.: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. General obligations ......... | 1676 150,357 |1677 150,242 | 1678 0 | 1679 0 | 3.a.
b. Revenue obligations ......... | 1681 8,887 |1686 8,889 | 1690 0 | 1691 0 | 3.b.
c. Industrial development | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and similiar obligations .....| 1694 0 |1695 0 | 1696 0 | 1697 0 | 3.c.
4. Mortgage-backed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Pass-through securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Guaranteed by | ////////////////// |////////////////// | ////////////////// | ///////////////// |
GNMA ....................... | 1698 0 |1699 0 | 1701 861,176 | 1702 852,929 | 4.a.(1)
(2) Issued by FNMA | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and FHLMC ................. | 1703 908 |1705 908 | 1706 4,854,605 | 1707 4,831,023 | 4.a.(2)
(3) Other pass-through | ////////////////// |////////////////// | ///////////////////| ///////////////// |
secruities ................. | 1709 4 |1710 4 | 1711 0 | 1713 0 | 4.a.(3)
b. Other mortgage-backed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (include CMO's, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
REMICs, and stripped | ////////////////// |////////////////// | ////////////////// | ///////////////// |
MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Issued or guaranteed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by FNMA, FHLMC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
or GNMA ............... | 1714 0 |1715 0 | 1716 0 | 1717 0 | 4.b.(1)
(2) Collateralized | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by MBS issued or | ////////////////// |////////////////// | ////////////////// | ///////////////// |
guaranteed by FNMA, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
FHLMC, or GNMA ........ | 1718 0 |1719 0 | 1731 0 | 1732 0 | 4.b.(2)
(3) All other mortgage- | ////////////////// |////////////////// | ////////////////// | //////////////// |
backed securities ..... | 1733 0 |1734 0 | 1735 518 | 1736 518 | 4.b.(3)
5. Other debt securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Other domestic debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities.................. | 1737 0 |1738 0 | 1739 817 | 1741 812 | 5.a.
b. Foreign debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities ................. | 1742 97,035 |1743 78,878 | 1744 0 | 1746 0 | 5.b.
6. Equity securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Investments in mutual | ////////////////// |////////////////// | ////////////////// | ///////////////// |
funds ...................... | ////////////////// |////////////////// | 1747 0 | 1748 0 | 6.a.
b. Other equity securities | ////////////////// |////////////////// | ////////////////// | ///////////////// |
with readily determin- | ////////////////// |////////////////// | ////////////////// | ///////////////// |
able fair values ........... | ////////////////// |////////////////// | 1749 0 | 1751 0 | 6.b.
c. All other equity | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (1) ............. | ////////////////// |////////////////// | 1752 311,734 | 1753 311,734 | 6.c.
7. Total (sum of items 1 | ////////////////// |////////////////// | ////////////////// | ///////////////// |
through 6) (total of | ////////////////// |////////////////// | ////////////////// | ///////////////// |
column A must equal | ////////////////// |////////////////// | ////////////////// | ///////////////// |
Schedule RC, item 2.a) | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(total of column D must | ////////////////// |////////////////// | ////////////////// | ///////////////// |
equal Schedule RC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
item 2.b) ..................... | 1754 257,441 | 1771 239,171 | 1772 7,303,972 | 1773 7,250,067 | 7.
|__________________________________________________________________________________|
</TABLE>
____________
1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
14
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B--Continued
<CAPTION>
___________
Memoranda | C412 | <-
___________ _________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Pledged securities(2) ......................................................................... | 0416 2,308,912 | M.1.
2. Maturity and repricing data for debt securities(2),(3),(4) (excluding those in | ////////////////// |
nonaccrual status): | ////////////////// |
a. Fixed rate debt securities with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | 0343 72,490 | M.2.a.(1)
(2) Over three months through 12 months .................................................... | 0344 77,125 | M.2.a.(2)
(3) Over one year through five years ....................................................... | 0345 2,734,577 | M.2.a.(3)
(4) Over five years ........................................................................ | 0346 2,925,207 | M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4)) ..... | 0347 5,809,399 | M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | 4544 531,365 | M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | 4545 855,010 | M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | 4551 0 | M.2.b.(3)
(4) Less frequently than every five years .................................................. | 4552 0 | M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4)) .. | 4553 1,386,375 | M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total debt | ////////////////// |
securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus nonaccrual | ////////////////// |
debt securities included in Schedule RC-N, item 9, column C) ............................... | 0393 7,195,774 | M.2.c.
3. Not applicable | ////////////////// |
4. Held-to-maturity debt securities restructured and in compliance with modified terms (included | ////////////////// |
in Schedule RC-B, items 3 through 5, column A, above) ......................................... | 5365 0 | M.4.
5. Not applicable | ////////////////// |
6. Floating rate debt securities with a remaining maturity of one year or less(2),(4) (included in | ////////////////// |
Memorandum items 2.b(1) through 2.b.(4) above)................................................. | 5519 3,700 | M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or | ////////////////// |
trading securities during the calendar year-to-date (report the amortized cost at date of sale | ////////////////// |
or transfer ................................................................................... | 1778 0 | m.7.
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale | ////////////////// |
accounts in Schedule RC-B, item 4.b): | ////////////////// |
a. Amortized cost ............................................................................. | 8780 0 | M.8.a.
b. Fair Value ................................................................................. | 8781 0 | M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in | ////////////////// |
Schedule RC-B, items 2, 3, and 5): | ////////////////// |
a. Amortized cost ............................................................................. | 8782 0 | M.9.a.
b. Fair Value ................................................................................. | 8783 0 | M.9.b.
----------------------
</TABLE>
____________
(2) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
15
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-6
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
_________
Do not deduct the allowance for loan and lease losses from amounts | C415 | <-
reported in this schedule. Report total loans and leases, net of unearned _________________________________|________|
income. Exclude assets held for trading. | (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate ........................................... | 1410 11,754,916 | ////////////////// | 1.
a. Construction and land development ................................... | ////////////////// | 1415 433,880 | 1.a.
b. Secured by farmland (including farm residential and other | ////////////////// | ////////////////// |
improvements) ....................................................... | ////////////////// | 1420 2,172 | 1.b
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ................... | ////////////////// | 1797 2,022,596 | 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(a) Secured by first liens ...................................... | ////////////////// | 5367 4,418,239 | 1.c.(2)(a)
(b) Secured by junior liens ..................................... | ////////////////// | 5368 492,952 | 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties ........... | ////////////////// | 1460 559,373 | 1.d.
e. Secured by nonfarm nonresidential properties ........................ | ////////////////// | 1480 3,825,704 | 1.e.
2. Loans to depository institutions: | ////////////////// | ////////////////// |
a. To commercial banks in the U.S. ..................................... | ////////////////// | 1505 143,682 | 2.a.
(1) To U.S. branches and agencies of foreign banks .................. | 1506 0 | ////////////////// | 2.a.(1)
(2) To other commercial banks in the U.S. ........................... | 1507 143,682 | ////////////////// | 2.a.(2)
b. To other depository institutions in the U.S. ........................ | 1517 0 | 1517 12,345 | 2.b.
c. To banks in foreign countries ....................................... | ////////////////// | 1510 672 | 2.c.
(1) To foreign branches of other U.S. banks ......................... | 1513 149 | ////////////////// | 2.c.(1)
(2) To other banks in foreign countries ............................. | 1516 523 | ////////////////// | 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers .... | 1590 5,889 | 1590 5,889 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ....................................... | 1763 12,446,547 | 1763 12,402,858 | 4.a.
b. To non-U.S. addressees (domicile) ................................... | 1764 83,521 | 1764 54,074 | 4.b.
5. Acceptances of other banks: | ////////////////// | ////////////////// |
a. Of U.S. banks ....................................................... | 1756 0 | 1756 0 | 5.a.
b. Of foreign banks .................................................... | 1757 0 | 1757 0 | 5.b.
6. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures (i.e., consumer loans) (includes purchased paper) ......... | ////////////////// | 1975 2,217,352 | 6.
a. Credit cards and related plans (includes check credit and other | ////////////////// | ////////////////// |
revolving credit plans) ............................................. | 2008 161,652 | ////////////////// | 6.a.
b. Other (includes single payment, installment, and all student loans).. | 2011 2,055,700 | ////////////////// | 6.b.
7. Loans to foreign governments and official institutions (including | ////////////////// | ////////////////// |
foreign central banks) ................................................. | 2081 0 | 2081 0 | 7.
8. Obligations (other than securities and leases) of states and political | ////////////////// | ////////////////// |
subdivisions in the U.S. (includes nonrated industrial development | ////////////////// | ////////////////// |
obligations) ........................................................... | 2107 167,100 | 2107 167,100 | 8.
9. Other loans ............................................................ | 1563 2,146,172 | ////////////////// | 9.
a. Loans for purchasing or carrying securities (secured and unsecured).. | ////////////////// | 1545 156,275 | 9.a.
b. All other loans (exclude consumer loans) ............................ | ////////////////// | 1564 1,989,897 | 9.b.
10. Lease financing receivables (net of unearned income) ................... | ////////////////// | 2165 2,300,055 | 10.
a. Of U.S. addressees (domicile) ....................................... | 2182 2,300,055 | ////////////////// | 10.a.
b. Of non-U.S. addressees (domicile) ................................... | 2183 0 | ////////////////// | 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above ........ | 2123 0 | 2123 0 | 11.
12. Total loans and leases, net of unearned income (sum of items 1 through | ////////////////// | ////////////////// |
10 minus item 11) (total of column A must equal Schedule RC, item 4.a).. | 2122 31,278,251 | 2122 31,205,115 | 12.
___________________________________________
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page: RC-7
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-C--Continued
Part I. Continued
___________________________________________
| (Column A) | (Column B) |
| Consolidated | Domestic |
Memoranda | Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above .............. | 1496 0 | 1496 0 | M.1.
2. Loans and leases restructured and in compliance with modified terms | ////////////////// | ////////////////// |
(included in Schedule RC-C, part I, above and not reported as past due | ////////////////// | ////////////////// |
or nonaccrual in Schedule RC-N, Memorandum item 1): | ////////////////// | ////////////////// |
a. Loans secured by real estate: | ////////////////// | ////////////////// |
(1) To U.S. addressees (domicile) ................................... | 1687 511 | M.2.a.(1)
(2) To non-U.S. addressees (domicile) ............................... | 1689 0 | M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans | ////////////////// |
to individuals for household, family, and other personal expenditures)| 8691 0 | M.2.b.
c. Commercial and industrial loans to and lease financing receivables | ////////////////// |
of non-U.S. addressees (domicile) included in Memorandum item 2.b | ////////////////// |
above ............................................................... | 8692 0 | M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those | ////////////////// |
in nonaccrual status): | ////////////////// |
a. Fixed rate loans and leases with a remaining maturity of: | ////////////////// |
(1) Three months or less ............................................ | 0348 10,215,575 | M.3.a.(1)
(2) Over three months through 12 months ............................. | 0349 369,421 | M.3.a.(2)
(3) Over one year through five years ................................ | 0356 3,479,742 | M.3.a.(3)
(4) Over five years ................................................. | 0357 5,791,166 | M.3.a.(4)
(5) Total fixed rate loans and leases (sum of | ////////////////// |
Memorandum items 3.a.(1) through 3.a.(4)) ....................... | 0358 19,855,904 | M.3.a.(5)
b. Floating rate loans with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently .................................... | 4554 8,960,876 | M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . | 4555 1,848,295 | M.3.b.(2)
(3) Every five years or more frequently, but less frequently than | ////////////////// |
annually ........................................................ | 4561 250,031 | M.3.b.(3)
(4) Less frequently than every five years ........................... | 4564 12,721 | M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) | ////////////////// |
through 3.b.(4)) ................................................ | 4567 11,071,923 | M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) | ////////////////// |
(must equal the sum of total loans and leases, net, from | ////////////////// |
Schedule RC-C, part I, item 12, plus unearned income from | ////////////////// |
Schedule RC-C, part I, item 11, minus total nonaccrual loans and | ////////////////// |
leases from Schedule RC-N, sum of items 1 through 8, column C) ...... | 1479 30,927,827 | M.3.c.
d. FLOATING RATE LOANS WITH A REMAINING MATURITY OF ONE YEAR OR LESS | ////////////////// |
(INCLUDED IN MEMORANDUM ITEMS 3.b.(1) THROUGH 3.b.(4) ABOVE)......... | A246 1,543,411 | M.3.d.
4. Loans to finance commercial real estate, construction, and land | ////////////////// |
development activities (NOT SECURED BY REAL ESTATE) included in | ////////////////// |
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2) ........... | 2746 271,706 | M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, | ////////////////// |
above .................................................................. | 5369 0 | M.5.
| ////////////////// |_____________________
6. Adjustable rate closed-end loans secured by first liens on 1-4 family | ////////////////// | RCON Bil Mil Thou |
residential properties (included in Schedule RC-C, part I, item | ////////////////// | ___________________|
1.c.(2)(a), column B, page RC-6) ....................................... | ////////////////// | 5370 1.655.898 | M.6.
|_________________________________________|
</TABLE>
_____________________________
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplememtal Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, item 1, column A.
17
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-7a
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<S> <C>
Schedule RC-C--Continued
Part II. Loans to Small Businesses and Small Farms
Schedule RC-C, Part II is to be reported only with the June Report of Condition.
Report the number and amount currently outstanding as of June 30 of business loans with "original amounts" of $1,000,000 or less
and farm loans with "original amounts" of $500,000 or less. The following guidelines should be used to determine the "original
amount" of a loan: (1) For loans drawn down under lines of credit or loan commitments, the "original amount" of the loan is the
size of the line of credit or loan commitment when the line of credit or loan commitment was most recently approved, extended, or
renewed prior to the report date. However, if the amount currently outstanding as of the report date exceeds this size, the
"original amount" is the amount currently outstanding on the report date. (2) For loan participations and syndications, the
"original amount" of the loan participation or syndication is the entire amount of the credit originated by the lead lender.
(3) For all other loans, the "original amount" is the total amount of the loan at origination or the amount currently
outstanding as of the report date, whichever is larger.
Loans to Small Businesses
</TABLE>
<TABLE>
<S> <C>
1. Indicate in the appropriate box at the right whether all or substantially all of the dollar volume of your
bank's "Loans secured by nonfarm nonresidential properties" in domestic offices reported in Schedule RC-C,
part I, item 1.e, column B, and all or substantially all of the dollar volume of your bank's
"Commercial and industrial loans to U.S. addressees" in domestic offices reported in Schedule RC-C, __________
part I, item 4.a, column B, have original amounts of $100,000 or less (If your bank has no loans ________| C415 | <-
outstanding in both of these two loan categories, place an "X" in the box marked "NO" and go to | RCON YES NO|
Item 5; otherwise, see instructions for further information.).................................. | 6999 | |///| x | 1.
___________________
If YES, complete items 2.a and 2.b below, skip items 3 and 4, and go to item 5.
If NO and your bank has loans outstanding in either loan category, skip items 2.a and 2.b,
complete items 3 and 4 below, and go to item 5. _____________________
| Number of Loans |
2. Report the total number of loans currently outstanding for each of the |____________________|
following Schedule RC-C, part I, loan categories: | RCON |/////////// |
a. "Loans secured by nonfarm nonresidential properties" in domestic | ////////////////// |
offices reported in Schedule RC-C, part I, item 1.e, column B....... | 5562 N/A | 2.a.
b. "Commercial and industrial loans to U.S. addressees" in domestic | ////////////////// |
offices reported in Schedule RC-C, part I, item 4.a, column B ...... | 5563 N/A | 2.b.
______________________
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
____________________ ____________________
Dollar Amounts in Thousands | RCON | ///////////| RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
3. Number and amount currently outstanding of "Loans secured by nonfarm | /////////////////////////////////////// | 1.
nonresidential properties" in domestic offices reported in Schedule RC-C | /////////////////////////////////////// | 1.a.
part I item 1.e, column B (sum of items 3.a through 3.c must be less | /////////////////////////////////////// |
or equal to Schedule RC-C, part I, item 1.e, column B): | /////////////////////////////////////// | 1.b
a. With original amounts of $100,000 or less ........................... | 5564 1,988 | 5565 76,370 | 3.a.
b. With original amounts of more than $100,000 through $250,000 ........ | 5566 2,805 | 5567 332,639 | 3.b.
c. With original amounts of more than $250,000 through $1,000,000 ...... | 5568 2,736 | 5569 952,476 | 3.c.
4. Number and amount currently outstanding of "Commercial and industrial | /////////////////////////////////////// |
loans to U.S. addressees" in domestic offices reported in Schedule RC-C, | /////////////////////////////////////// |
part I, item 4.a, column B (sum of items 4.a through 4.c must be less | /////////////////////////////////////// |
than or equal to Schedule RC-C, part I, item 4.a, column B): | /////////////////////////////////////// |
a. With original amounts of $100,000 or less ........................... | 5570 11,433 | 5571 337,759 | 4.a.
b. With original amounts of more than $100,000 through $250,000 ........ | 5572 2,127 | 5573 228,713 | 4.b.
c. With original amounts of more than $250,000 through $1,000,000 ...... | 5574 1,968 | 5575 601,126 | 4.c.
___________________________________________
</TABLE>
17a
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-7b
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-C -- Continued
Part II. Continued
Agricultural Loans to Small Farms
<TABLE>
<S> <C> <C>
5. Indicate in the appropriate box at the right whether all or substantially all of the
dollar volume of your bank's "Loans secured by farmland (including farm residential
and other improvements)" in domestic offices reported in Schedule RC-C, part I, item
1.b, column B, and all or substantially all of the dollar volume of your bank's
"Loans to finance agricultural production and other loans to farmers" in domestic
offices reported in Schedule RC-C, part I, item 3, column B, have original amounts
of $100,000 or less (If your bank has no loans outstanding in both of these two YES NO
loan categories, place an "X" in the box marked "NO" and do not complete items 7 _______________________
and 8; otherwise, see instructions for further information.)................................... | 6860 | | /// | X | 5.
|_____________________|
If YES, complete items 6.a and 6.b below and do not complete items 7 and 8.
If NO and your bank has loans outstanding in either loan category, skip items 6.a and 6.b
and complete items 7 and 8 below.
</TABLE>
<TABLE>
<S> <C>
______________________
| Number of Loans |
6. Report the total number of loans currently outstanding for each of the |____________________|
following Schedule RC-C, part I, loan categories: | RCON |//////////// |
a. "Loans secured by farmland (including farm residential and other |______| |
improvements)" in domestic offices reported in Schedule RC-C, part I, | ////////////////// |
item 1.b, column B........................................................ | 5576 N/A | 6.a.
b. "Loans to finance agricultural production and other loans to farmers" in | ////////////////// |
domestic offices reported in Schedule RC-C, part I, item 3, column B...... | 5577 N/A | 6.b.
|____________________|
</TABLE>
<TABLE>
<S> <C> <C>
_____________________________________________
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
|_____________________|______________________|
Dollar Amounts in Thousands | RCON |/////////////| RCON Bil Mil Thou |
________________________________________________________________________________| ______| |_____________________ |
7. Number and amount currently outstanding of "Loans secured by farmland | ////////////////////////////////////////// |
(including farm residential and other improvements)" in domestic offices | ////////////////////////////////////////// |
reported in Schedule RC-C, part I, item 1.b, column B (sum of items 7.a | ////////////////////////////////////////// |
through 7.c must be less than or equal to Schedule RC-C, part I, item 1.b, | ////////////////////////////////////////// |
column B): | ////////////////////////////////////////// |
a. With original amounts of $100,000 or less............................... | 5578 18 | 5579 292 | 7.a.
b. With original amounts of more than $100,000 through $250,000............ | 5580 8 | 5581 850 | 7.b.
c. With original amounts of more than $250,000 through $500,000............ | 5582 4 | 5583 1,030 | 7.c.
8. Number and amount currently outstanding of "Loans to finance agricultural | ////////////////////////////////////////// |
production and other loans to farmers" in domestic offices reported in | ////////////////////////////////////////// |
Schedule RC-C, part I, item 3, column B (sum of items 8.a through 8.c | ////////////////////////////////////////// |
must be less than or equal to Schedule RC-C, part I, item 3, column B): | ////////////////////////////////////////// |
a. With original amounts of $100,000 or less............................... | 5584 46 | 5585 992 | 8.a.
b. With original amounts of more than $100,000 through $250,000............ | 5586 17 | 5587 1,877 | 8.b.
c. With original amounts of more than $250,000 through $500,000............ | 5588 4 | 5589 1,054 | 8.c.
|_____________________|______________________|
</TABLE>
17b
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-8
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in total assets or with $2 billion or more in par/notional
amount of off-balance sheet derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e, columns A through D).
__________
| C420 |
__________________________
Dollar Amounts in Thousands | ////////// Bil Mil Thou|
__________________________________________________________________________________________________| ________________________|
<S> <C> <C>
ASSETS | /////////////////////// |
1. U.S. Treasury securities in domestic offices ................................................ | RCON 3531 0 | 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude mortgage- | /////////////////////// |
backed securities) .......................................................................... | RCON 3532 0 | 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices ...... | RCON 3533 0 | 3.
4. Mortgage-backed securities (MBS) in domestic offices: | /////////////////////// |
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA ..................... | RCON 3534 0 | 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA | /////////////////////// |
(include CMOs, REMICs, and stripped MBS) ................................................. | RCON 3535 0 | 4.b.
c. All other mortgage-backed securities ......................................................| RCON 3536 0 | 4.c.
5. Other debt securities in domestic offices ................................................... | RCON 3537 0 | 5.
6. Certificates of deposit in domestic offices ................................................. | RCON 3538 0 | 6.
7. Commercial paper in domestic offices ........................................................ | RCON 3539 0 | 7.
8. Bankers acceptances in domestic offices ..................................................... | RCON 3540 0 | 8.
9. Other trading assets in domestic offices .................................................... | RCON 3541 0 | 9.
10. Trading assets in foreign offices ........................................................... | RCFN 3542 0 | 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts: | /////////////////////// |
a. In domestic offices ...................................................................... | RCON 3543 66,696 | 11.a.
b. In foreign offices ....................................................................... | RCFN 3544 4,658 | 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) ........... | RCFD 3545 71,354 | 12.
<CAPTION>
___________________________
___________________________
| ///////// Bil Mil Thou |
LIABILITIES | ________________________|_
<S> <C> <C>
13. Liability for short positions ............................................................... | RCFD 3546 0 | 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts ................................................................................... | RCFD 3547 57,446 | 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) ...... | RCFD 3548 57,446 | 15.
___________________________
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-9
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
__________
| C425 | <-
______________________________________________________ ________
| | Nontransaction |
| Transaction Accounts | Accounts |
_________________________________________ ____________________
| (Column A) | (Column B) | (Column C) |
| Total transaction | Memo: Total | Total |
| accounts (including| demand deposits | nontransaction |
| total demand | (included in | accounts |
| deposits) | column A) | (including MMDAs) |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
__________________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
Deposits of: | ////////////////// | ////////////////// | ////////////////// |
1. Individuals, partnerships, and corporations .......... | 2201 8,615,650 | 2240 8,158,203 | 2346 22,594,478 | 1.
2. U.S. Government ...................................... | 2202 58,650 | 2280 58,605 | 2520 42,512 | 2.
3. States and political subdivisions in the U.S. ........ | 2203 818,151 | 2290 706,072 | 2530 702,686 | 3.
4. Commercial banks in the U.S. ......................... | 2206 836,005 | 2310 836,005 | 2550 771 | 4.
5. Other depository institutions in the U.S. ............ | 2207 221,571 | 2312 221,571 | 2349 2,968 | 5.
6. Banks in foreign countries ........................... | 2213 18,445 | 2320 18,445 | 2236 0 | 6.
7. Foreign governments and official institutions | ////////////////// | ////////////////// | ////////////////// |
(including foreign central banks) .................... | 2216 108 | 2300 108 | 2377 0 | 7.
8. Certified and official checks ........................ | 2330 198,585 | 2330 198,585 | ////////////////// | 8.
9. Total (sum of items 1 through 8) (sum of | ////////////////// | ////////////////// | ////////////////// |
columns A and C must equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// |
item 13.a) ........................................... | 2215 10,767,165 | 2210 10,197,594 | 2385 23,343,415 | 9.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
______________________
Memoranda Dollar Amounts in Thousands | RCON Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): | ////////////////// |
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ......................... | 6835 2,735,425 | M.1.a.
b. Total brokered deposits ..................................................................... | 2365 1,636,611 | M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): | ////////////////// |
(1) Issued in denominations of less than $100,000 ........................................... | 2343 2,350 | M.1.c.(1)
(2) Issued EITHER in denominations of $100,000 OR in denominations greater than $100,000 | ////////////////// |
and participated out by the broker in shares of $100,000 or less ........................ | 2344 1,634,261 | M.1.c.(2)
d. MATURITY DATA FOR BROKERED DEPOSITS: | ////////////////// |
(1) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF LESS THAN $100,000 WITH A REMAINING | ////////////////// |
MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.c.(1) ABOVE)................. | A243 171 | M.1.d.(1)
(2) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF $100,000 OR MORE WITH A REMAINING | ////////////////// |
MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.b ABOVE)..................... | A244 509,265 | M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. | ////////////////// |
reported in item 3 above which are secured or collateralized as required under state law) ... | 5590 457,587 | M.1.e.
2. Components of total nontransaction accounts (sum of Memoranda items 2.a through 2.d must | ////////////////// |
equal item 9, column C above): | ////////////////// |
a. Savings deposits: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................................................... | 6810 10,738,339 | M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) ................................................. | 0352 2,655,659 | M.2.a.(2)
b. Total time deposits of less than $100,000 ................................................... | 6648 7,247,099 | M.2.b.
c. Time certificates of deposit of $100,000 or more ............................................ | 6645 2,702,318 | M.2.c.
d. Open-account time deposits of $100,000 or more .............................................. | 6646 0 | M.2.d.
3. All NOW accounts (included in column A above) .................................................. | 2398 569,571 | M.3.
4. Not applicable
______________________
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-10
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
_________________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000 (sum of | ////////////////// |
Memorandum items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b above):(1) | ////////////////// |
a. Fixed rate time deposits of less than $100,000 with a remaining maturity of: | ////////////////// |
(1) Three months or less.................................................................... | A225 1,684,248 | M.5.a.(1)
(2) Over three months through 12 months..................................................... | A226 3,493,722 | M.5.a.(2)
(3) Over one year........................................................................... | A227 2,002,999 | M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently............................................................ | A228 66,130 | M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly......................... | A229 0 | M.5.b.(2)
(3) Less frequently than annually........................................................... | A230 0 | M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 5.b.(1) through 5.b.(3) above)............... | A231 45,084 | M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time certificates | ////////////////// |
of deposit of $100,000 or more and open-account time deposits of $100,000 or more) | ////////////////// |
(sum of Memorandum items 6.a.(1) through 6.b.(4) must equal the sum of Memorandum | ////////////////// |
items 2.c and 2.d above):(1) | ////////////////// |
a. Fixed rate time deposits of $100,000 or more with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | A232 534,657 | M.6.a.(1)
(2) Over three months through 12 months .................................................... | A233 754,429 | M.6.a.(2)
(3) Over one year through five years ....................................................... | A234 1,282,541 | M.6.a.(3)
(4) Over five years ........................................................................ | A235 36,761 | M.6.a.(4)
b. Floating rate time deposits of $100,000 or more with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | A236 31,182 | M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | A237 37,950 | M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | A238 24,798 | M.6.b.(3)
(4) Less frequently than every five years .................................................. | A239 0 | M.6.b.(4)
c. Floating rate time deposits of $100,000 or more with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 6.b.(1) through 6.b.(4) above)............... | A240 19,186 | M.6.c.
______________________
</TABLE>
_______________
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
20
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-11
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Continued
Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)
______________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
Deposits of: | ////////////////// |
1. Individuals, partnerships, and corporations ................................................... | 2621 1,730,162 | 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) ................................ | 2623 0 | 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs).... | 2625 0 | 3.
4. Foreign governments and official institutions (including foreign central banks) ............... | 2650 0 | 4.
5. Certified and official checks ................................................................. | 2330 0 | 5.
6. All other deposits ............................................................................ | 2668 15,501 | 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) .......................... | 2200 1,745,663 | 7.
Memorandum
Dollar Amounts in Thousands |RCFN Bil Mil Thou |
________________________________________________________________________________________________________________________
1. Time deposits with a remaining maturity of one year or less (included in Part II, item 7 above) |A245 1,745,263 | M.1.
______________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-F--Other Assets
__________
| C430 | <-
_________________ ________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Income earned, not collected on loans ........................................................ | RCFD 2164 167,538 | 1.
2. Net deferred tax assets(1) ................................................................... | RCFD 2148 0 | 2.
3. Excess residential mortgage servicing fees receivable ........................................ | RCFD 5371 134,288 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)............................. | RCFD 2168 3,676,812 | 4.
_____________ ___________________________
a. | TEXT 3549 | Mortgages held for Resale | RCFD 3549 | 1,858,683 | /////////////////////// | 4.a.
_________________________________________________________________| | | |
___________
b. | TEXT 3550 |____________________________________________________| RCFD 3550 | | /////////////////////// | 4.b.
___________
c. | TEXT 3551 |____________________________________________________| RCFD 3551 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) ........................... | RCFD 2160 3,978,638 | 5.
___________________________
<CAPTION>
Memorandum ___________________________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes ............................... | RCFD 5610 0 | M.1.
___________________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-G--Other Liabilities
__________
| C435 | <-
_________________ ________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices(2) ............................ | RCON 3645 58,011 | 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ................. | RCFD 3646 594,954 | 1.b.
2. Net deferred tax liabilities(1) .............................................................. | RCFD 3049 119,644 | 2.
3. Minority interest in consolidated subsidiaries ............................................... | RCFD 3000 0 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)............................. | RCFD 2938 478,843 | 4.
_____________ ___________________________
a. | TEXT 3552 |____________________________________________________| RCFD 3552 | | /////////////////////// | 4.a.
___________
b. | TEXT 3553 |____________________________________________________| RCFD 3553 | | /////////////////////// | 4.b.
___________
c. | TEXT 3554 |____________________________________________________| RCFD 3554 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) ........................... | RCFD 2930 1,251,452 | 5.
</TABLE>
____________
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
21
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-12
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
__________
| C440 | <-
____________ ________
| Domestic Offices |
____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Customers' liability to this bank on acceptances outstanding .................................... | 2155 16,634 | 1.
2. Bank's liability on acceptances executed and outstanding ........................................ | 2920 16,634 | 2.
3. Federal funds sold and securities purchased under agreements to resell .......................... | 1350 17,428 | 3.
4. Federal funds purchased and securities sold under agreements to repurchase ...................... | 2800 4,868,836 | 4.
5. Other borrowed money ............................................................................ | 3190 1,380,694 | 5.
EITHER | ////////////////// |
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 2163 N/A | 6.
OR | ////////////////// |
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ....................... | 2941 1,669,058 | 7.
| ////////////////// |
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and IBFs) . | 2192 48,946,123 | 8.
| ////////////////// |
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and IBFs)| 3129 42,919,946 | 9.
______________________
</TABLE>
<TABLE>
<CAPTION>
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices. ______________________
| RCON Bil Mil Thou |
____________________
<S> <C> <C>
10. U.S. Treasury securities ....................................................................... | 1779 1,252,796 | 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed | ////////////////// |
securities) .................................................................................... | 1785 505 | 11.
12. Securities issued by states and political subdivisions in the U.S. ............................. | 1786 159,244 | 12.
13. Mortgage-backed securities (MBS): | ////////////////// |
a. Pass-through securities: | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1787 5,684,860 | 13.a.(1)
(2) Other pass-through securities ........................................................... | 1869 4 | 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1877 0 | 13.b.(1)
(2) All other mortgage-backed securities..................................................... | 2253 518 | 13.b.(2)
14. Other domestic debt securities ................................................................. | 3159 812 | 14.
15. Foreign debt securities ........................................................................ | 3160 97,035 | 15.
16. Equity securities: | ////////////////// |
a. Investments in mutual funds ................................................................. | 3161 0 | 16.a.
b. Other equity securities with readily determinable fair values ............................... | 3162 0 | 16.b.
c. All other equity securities ................................................................. | 3169 311,734 | 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) .......... | 3170 7,507,508 | 17.
______________________
</TABLE>
<TABLE>
<CAPTION>
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
EITHER | ////////////////// |
1. Net due from the IBF of the domestic offices of the reporting bank .............................. | 3051 0 | M.1.
OR | ////////////////// |
2. Net due to the IBF of the domestic offices of the reporting bank ................................ | 3059 N/A | M.2.
______________________
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-13
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Schedule RC-I--Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices. __________
| C445 | <-
____________ ________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) ................. | 2133 0 | 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12, | ////////////////// |
column A) ..................................................................................... | 2076 0 | 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A) .... | 2077 0 | 3.
4. Total IBF liabilities (component of Schedule RC, item 21) ..................................... | 2898 0 | 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, | ////////////////// |
part II, items 2 and 3) ....................................................................... | 2379 0 | 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) ..... | 2381 0 | 6.
______________________
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule RC-K--Quarterly Averages (1)
__________
| C455 | <-
_________________ ________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
ASSETS | /////////////////////// |
1. Interest-bearing balances due from depository institutions .............................. | RCFD 3381 10,737 | 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2) ...... | RCFD 3382 6,349,267 | 2.
3. Securities issued by states and political subdivisions in the U.S.(2) ................... | RCFD 3383 155,938 | 3.
4. a. Other debt securities(2) ............................................................. | RCFD 3647 98,458 | 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock). | RCFD 3648 347,675 | 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ............. | RCFD 3365 812,114 | 5.
6. Loans: | ///////////////////// // |
a. Loans in domestic offices: | /////////////////////// |
(1) Total loans ...................................................................... | RCON 3360 31,884,320 | 6.a.(1)
(2) Loans secured by real estate ..................................................... | RCON 3385 14,940,513 | 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers .............. | RCON 3386 5,935 | 6.a.(3)
(4) Commercial and industrial loans .................................................. | RCON 3387 12,923,362 | 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ...... | RCON 3388 2,224,980 | 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............ | RCFN 3360 70,458 | 6.b.
7. Trading assets .......................................................................... | RCFD 3401 105,824 | 7.
8. Lease financing receivables (net of unearned income) .................................... | RCFD 3484 2,231,479 | 8.
9. Total assets (4) ........................................................................ | RCFD 3368 52,282,230 | 9.
LIABILITIES | /////////////////////// |
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, | /////////////////////// |
and telephone and preauthorized transfer accounts) (exclude demand deposits) ............ | RCON 3485 965,535 | 10.
11. Nontransaction accounts in domestic offices: | /////////////////////// |
a. Money market deposit accounts (MMDAs) ................................................ | RCON 3486 9,210,475 | 11.a.
b. Other savings deposits ............................................................... | RCON 3487 3,907,216 | 11.b.
c. Time certificates of deposit of $100,000 or more ..................................... | RCON 3345 2,653,452 | 11.c.
d. All other time deposits .............................................................. | RCON 3469 7,513,443 | 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs.. | RCFN 3404 1,765,593 | 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ............. | RCFD 3353 6,363,286 | 13.
14. Other borrowed money .................................................................... | RCFD 3355 2,670,145 | 14.
___________________________
</TABLE>
_______________
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or
(2) an average of weekly figures (i.e., the Wednesday of each week of the
quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
23
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-14
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts
reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk. __________
| C460 | <-
____________ ________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unused commitments: | ////////////////// |
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home | ////////////////// |
equity lines ............................................................................... | 3814 1,637,875 | 1.a.
b. Credit card lines .......................................................................... | 3815 32,940 | 1.b.
c. Commercial real estate, construction, and land development: | ////////////////// |
(1) Commitments to fund loans secured by real estate ....................................... | 3816 648,369 | 1.c.(1)
(2) Commitments to fund loans not secured by real estate ................................... | 6550 383,022 | 1.c.(2)
d. Securities underwriting .................................................................... | 3817 0 | 1.d.
e. Other unused commitments ................................................................... | 3818 18,626,522 | 1.e.
2. Financial standby letters of credit and foreign office guarantees ............................. | 3819 2,337,268 | 2.
___________________________
a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 158,029 | ////////////////// | 2.a.
___________________________
3. Performance standby letters of credit and foreign office guarantees ........................... | 3821 175,703 | 3.
a. Amount of performance standby letters of credit conveyed to | ////////////////// |
___________________________
others .......................................................... | RCFD 3822 | 12,580 | ////////////////// | 3.a.
___________________________
4. Commercial and similar letters of credit ...................................................... | 3411 176,335 | 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by | ////////////////// |
the reporting bank ............................................................................ | 3428 16,524 | 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting | ////////////////// |
(nonaccepting) bank ........................................................................... | 3429 7,409 | 6.
7. Securities borrowed ........................................................................... | 3432 0 | 7.
8. Securities lent (including customers' securities lent where the customer is indemnified | ////////////////// |
against loss by the reporting bank) ........................................................... | 3433 0 | 8.
9. Loans transferred (i.e., sold or swapped) with recourse that have been treated as sold for | ////////////////// |
Call Report purposes: | ////////////////// |
a. FNMA and FHLMC residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3650 246,244 | 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3651 246,244 | 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3652 33,550 | 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3653 33,550 | 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3654 0 | 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3655 0 | 9.c.(2)
d. Small business obligations transferred with recourse under Section 208 of the | ////////////////// |
Riegle Community Development and Regulatory Improvement Act of 1994: | ////////////////// |
(1) Outstanding principal balance of small business obligations transferred | ////////////////// |
as of the report date................................................................... | A249 0 | 9.d.(1)
(2) Amount of retained recourse on these obligations as of the report date.................. | A250 0 | 9.d.(2)
10. When-issued securities: | ////////////////// |
a. Gross commitments to purchase .............................................................. | 3434 0 | 10.a.
b. Gross commitments to sell .................................................................. | 3435 0 | 10.b.
11. Spot foreign exchange contracts ............................................................... | 8765 622,366 | 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") | 3430 0 | 12.
a. | TEXT 3555 |______________________________________________________| RCFD 3555 | | ////////////////// | 12.a.
b. | TEXT 3556 |______________________________________________________| RCFD 3556 | | ////////////////// | 12.b.
___________
c. | TEXT 3557 |______________________________________________________| RCFD 3557 | | ////////////////// | 12.c.
_____________
d. | TEXT 3558 |______________________________________________________| RCFD 3558 | | ////////////////// | 12.d.
_____________ _______________________________________________
Dollar Amounts in Thousands RCFD Bil Mil Thou
_________________________________________________________________________________________________________________________
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC,item 28,"Total equity capital") | 5591 0 | 13.
_____________ __________________________
a. | TEXT 5592 |______________________________________________________| RCFD 5592 | | ////////////////// | 13.a.
___________
b. | TEXT 5593 |______________________________________________________| RCFD 5593 | | ////////////////// | 13.b.
___________
c. | TEXT 5594 |______________________________________________________| RCFD 5594 | | ////////////////// | 13.c.
_____________
d. | TEXT 5595 |______________________________________________________| RCFD 5595 | | ////////////////// | 13.d.
_____________
________________________________________________
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-15
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-L -- Continued
_____________
| C461 | <-
_________________________________________ ____________________________|___________|
| (Column A) | (Column B) | (Column C) | (Column D) |
| Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
| Contracts | Contracts | Contracts | Contracts |
|___________________|____________________|____________________|____________________|
Dollar Amounts in Thousands |Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou |
_______________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
| Off-balance Sheet Derivatives | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
| Position Indicators | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
____________________________________| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
14. Gross amounts (e.g., notional | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
amounts) (for each column, sum of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
items 14.a through 14.e must equal | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
sum of items 15, 16.a, and 16.b): |___________________|____________________|___________________ |____________________|
a. Futures contracts ............. | 1,229,392 | 0 | 0 | 36,486 | 14.a.
|___________________|____________________|____________________|____________________|
| RCFD 8693 | RCFD 8694 | RCFD 8695 | RCFD 8696 |
|___________________|____________________|____________________|____________________|
b. Forward contracts ............. | 2,576,500 | 1,931,682 | 0 | 21,832 | 14.b.
|___________________|____________________|____________________|____________________|
| RCFD 8697 | RCFD 8698 | RCFD 8699 | RCFD 8700 |
|___________________|____________________|____________________|____________________|
c. Exchange-traded option contracts:| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
|___________________|____________________|____________________|____________________|
(1) Written options .......... | 0 | 0 | 0 | 0 | 14.c.(1)
|___________________|____________________|____________________|____________________|
| RCFD 8701 | RCFD 8702 | RCFD 8703 | RCFD 8704 |
|___________________|____________________|____________________|____________________|
(2) Purchased options ........ | 450,000 | 0 | 0 | 2,206 | 14.c.(2)
|___________________|____________________|____________________|____________________|
| RCFD 8705 | RCFD 8706 | RCFD 8707 | RCFD 8708 |
|___________________|____________________|____________________|____________________|
d. Over-the-counter option contracts: | //////////////////| ///////////////// | ///////////////// | //////////////// |
(1) Written options .......... | 1,324,980 | 3,887 | 0 | 0 | 14.d.(1)
|___________________|____________________|____________________|____________________|
| RCFD 8709 | RCFD 8710 | RCFD 8711 | RCFD 8712 |
|___________________|____________________|____________________|____________________|
(2) Purchased options ........ | 10,131,934 | 3,887 | 0 | 0 | 14.d.(2)
|___________________|____________________|____________________|____________________|
| RCFD 8713 | RCFD 8714 | RCFD 8715 | RCFD 8716 |
|___________________|____________________|____________________|____________________|
e. Swaps ............................ | 19,502,262 | 0 | 0 | 0 | 14.e.
|___________________|____________________|____________________|____________________|
| RCFD 3450 | RCFD 3826 | RCFD 8719 | RCFD 8720 |
|___________________|____________________|____________________|____________________|
15. Total gross notional amount of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading ......................... | 3,386,305 | 1,939,456 | 0 | 2,206 | 15.
|___________________|____________________|____________________|____________________|
| RCFD A126 | RFD A127 | RCFD 8723 | RCFD 8724 |
|___________________|____________________|____________________|____________________|
16. Total gross notional amount of | ///////////////// | //////////////// | ///////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
purposes other than trading: | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
|___________________|____________________|____________________|____________________|
a. Contracts marked to market ... | 4,202,500 | 0 | 0 | 36,486 | 16.a.
|___________________|____________________|____________________|____________________|
| RCFD 8725 | RCFD 8726 | RCF 8727 | RCFD 8728 |
|___________________|____________________|____________________|____________________|
b. Contracts not marked to market | 27,626,263 | 0 | 0 | 21,832 | 16.b.
|___________________|____________________|____________________|____________________|
| RCFD 8729 | RCFD 8730 | RFD 8731 | RCFD 8732 |
|___________________|____________________|____________________|____________________|
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-16
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-L -- Continued
<CAPTION>
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
Dollar Amounts in Thousands | Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
___________________________________| Contracts | Contracts | Contracts | Contracts |
| Off-balance Sheet Derivatives |___________________|____________________|____________________|____________________|
| Position Indicators |RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
|_____________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
17. Gross fair values of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8733 29,782 | 8734 41,523 | 8735 0 | 8736 58 | 17.a.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8737 20,932 | 8738 36,511 | 8739 0 | 8740 0 | 17.a.(2)
b. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are marked | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8741 524 | 8742 0 | 8743 0 | 8744 1,452 | 17.b.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8745 2,834 | 8746 0 | 8747 0 | 8748 0 | 17.b.(2)
c. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are not | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
marked to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .................. | 8749 64,085 | 8750 0 | 8751 0 | 8752 100 | 17.c.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8753 111,703 | 8754 0 | 8755 0 | 8756 0 | 17.c.(2)
|__________________________________________________________________________________|
</TABLE>
<TABLE>
<CAPTION>
______________________
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
_________________________________________________________________________________________________________________________
<S> <C> <C>
1. -2. Not applicable | ////////////////// |
3. Unused commitments with an original maturity exceeding one year that are reported in | ////////////////// |
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments | ////////////////// |
that are fee paid or otherwise legally binding) ................................................ | 3833 16,829,602 | M.3.
a. Participations in commitments with an original maturity | ////////////////// |
exceeding one year conveyed to others ................................|RCFD 3834 | 1,310,691 | ////////////////// | M.3.a.
________________________
4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Standby letters of credit and foreign office guarantees (both financial and performance) issued | ////////////////// |
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above .............. | 3377 341,139 | M.4.
5. Installment loans to individuals for household, family, and other personal expenditures that | ////////////////// |
have been securitized and sold without recourse (with servicing retained), amounts outstanding | ////////////////// |
by type of loan: | ////////////////// |
a. Loans to purchase private passenger automobiles (to be completed for the | ////////////////// |
September report only)....................................................................... | 2741 N/A | M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY)................................... | 2742 0 | M.5.b.
c. All other consumer installment credit (including mobile home loans)(to be completed for the | ////////////////// |
September report only........................................................................ | 2743 N/A | M.5.c
|____________________|
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-17
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9| _____________
| C465 |
_________|___________|
Schedule RC-M--Memoranda | |
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal | ////////////////// |
shareholders, and their related interests as of the report date: | ////////////////// |
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal | ////////////////// |
shareholders and their related interests ..................................................... | 6164 605,294 | 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of all | ////////////////// |
extensions of credit by the reporting bank (including extensions of credit to | ////////////////// |
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number | ////////////////// |
___________________________| ////////////////// |
of total capital as defined for this purpose in agency regulations. | RCFD 6165 | 24 | ////////////////// |
___________________________| ////////////////// | 1.b.
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches | ////////////////// |
and agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b) .................... | 3405 0 | 2.
3. Not applicable. | ////////////////// |
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others | ////////////////// |
(include both retained servicing and purchased servicing): | ////////////////// |
a. Mortgages serviced under a GNMA contract ...................................................... | 5500 28,855,729 | 4.a.
b. Mortgages serviced under a FHLMC contract: | ////////////////// |
(1) Serviced with recourse to servicer ........................................................ | 5501 55,604 | 4.b.(1)
(2) Serviced without recourse to servicer ..................................................... | 5502 32,340,522 | 4.b.(2)
c. Mortgages serviced under a FNMA contract: | ////////////////// |
(1) Serviced under a regular option contract .................................................. | 5503 190,640 | 4.c.(1)
(2) Serviced under a special option contract .................................................. | 5504 38,282,672 | 4.c.(2)
d. Mortgages serviced under other servicing contracts ............................................ | 5505 8,508,320 | 4.d.
5. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must | ////////////////// |
equal Schedule RC, item 9): | ////////////////// |
a. U.S. addressees (domicile) .................................................................... | 2103 16,297 | 5.a.
b. Non-U.S. addressees (domicile) ................................................................ | 2104 337 | 5.b.
6. Intangible assets: | ////////////////// |
a. Mortgage servicing rights ..................................................................... | 3164 1,483,959 | 6.a.
b. Other identifiable intangible assets: | ////////////////// |
(1) Purchased credit card relationships ....................................................... | 5506 0 | 6.b.(1)
(2) All other identifiable intangible assets .................................................. | 5507 126,463 | 6.b.(2)
c. Goodwill ...................................................................................... | 3163 672,992 | 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) ........................ | 2143 2,283,414 | 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or | ////////////////// |
are otherwise qualifying for regulatory capital purposes ...................................... | 6442 0 | 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to | ////////////////// |
redeem the debt ...................................................................................| 3295 75,000 | 7.
______________________
</TABLE>
- ------------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
27
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-18
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-M--Continued ________________________
Dollar Amounts in Thousands | Bil Mil Thou|
_____________________________________________________________________________________________ |_______________________|
<S> <C> <C>
8. a. Other real estate owned: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5372 0 | 8.a.(1)
(2) All other real estate owned: | /////////////////////// |
(a) Construction and land development in domestic offices ....................... | RCON 5508 4,537 | 8.a.(2)(a)
(b) Farmland in domestic offices ................................................ | RCON 5509 0 | 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices ....................... | RCON 5510 8,067 | 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices .......... | RCON 5511 740 | 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices ....................... | RCON 5512 21,202 | 8.a.(2)(e)
(f) In foreign offices .......................................................... | RCFN 5513 0 | 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) ....... | RCFD 2150 34,546 | 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5374 0 | 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies ... | RCFD 5375 0 | 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) ....... | RCFD 2130 0 | 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies ................ | RCFD 5376 0 | 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, | /////////////////////// |
item 23, "Perpetual preferred stock and related surplus" ............................... | RCFD 3778 125,000 | 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include | /////////////////////// |
proprietary, private label, and third party products): | /////////////////////// |
a. Money market funds .................................................................. | RCON 6441 55,245 | 10.a.
b. Equity securities funds ............................................................. | RCON 8427 108,359 | 10.b.
c. Debt securities funds ............................................................... | RCON 8428 13,250 | 10.c.
d. Other mutual funds .................................................................. | RCON 8429 0 | 10.d.
e. Annuities ........................................................................... | RCON 8430 102,292 | 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through | /////////////////////// |
10.e. above) ........................................................................... | RCON 8784 150,100 | 10.f.
_________________________
</TABLE>
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________________
| |
______________________
|Memorandum Dollar Amounts in Thousands | RCFD Bil Mil Thou | |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
|1. Interbank holdings of capital instruments (to be completed for the December report only): | ////////////////// | |
| a. Reciprocal holdings of banking organizations' capital instruments ........................ | 3836 N/A | M.1.a. |
| b. Nonreciprocal holdings of banking organizations' capital instruments ..................... | 3837 N/A | M.1.b. |
______________________
| |
_________________________________________________________________________________________________________________________________
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-19
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-N--Past Due and Nonaccrual Loans, Leases,
and Other Assets
The FFIEC regards the information reported in __________
all of Memorandum item 1, in items 1 through 10, | C470 | <-
column A, and in Memorandum items 2 through 4, ______________________________________________________ ________
column A, as confidential. | (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1245 | 1246 71,390 | 1247 223,962 | 1.a.
b. To non-U.S. addressees (domicile) ............ | 1248 | 1249 0 | 1250 0 | 1.b.
2. Loans to depository institutions and | ///// | ////////////////// | ////////////////// |
acceptances of other banks: | ///// | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository | ///// | ////////////////// | ////////////////// |
institutions ................................. | 5377 | 5378 0 | 5379 0 | 2.a.
b. To foreign banks ............................. | 5380 | 5381 0 | 5382 0 | 2.b.
3. Loans to finance agricultural production and | ///// | ////////////////// | ////////////////// |
other loans to farmers .......................... | 1594 | 1597 385 | 1583 531 | 3.
4. Commercial and industrial loans: | ///// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1251 | 1252 11,945 | 1253 108,334 | 4.a.
b. To non-U.S. addressees (domicile) ............ | 1254 | 1255 0 | 1256 0 | 4.b.
5. Loans to individuals for household, family, and | ///// | ////////////////// | ////////////////// |
other personal expenditures: | ///// | ////////////////// | ///////////////// |
a. Credit cards and related plans ............... | 5383 | 5384 1,187 | 5385 669 | 5.a.
b. Other (includes single payment, installment, | ///// | ////////////////// | ////////////////// |
and all student loans) ....................... | 5386 | 5387 22,600 | 5388 8,465 | 5.b.
6. Loans to foreign governments and official | ///// | ////////////////// | ////////////////// |
institutions .................................... | 5389 | 5390 0 | 5391 0 | 6.
7. All other loans ................................. | 5459 | 5460 14,909 | 5461 1,919 | 7.
8. Lease financing receivables: | ///// | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ................ | 1257 | 1258 95 | 1259 6,544 | 8.a.
b. Of non-U.S. addressees (domicile) ............ | 1271 | 1272 0 | 1791 0 | 8.b.
9. Debt securities and other assets (exclude other | ///// | ////////////////// | ////////////////// |
real estate owned and other repossessed assets) . | 3505 | 3506 0 | 3507 85,778 | 9.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in
items 1 through 8.
________________________________________________________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
10. Loans and leases reported in items 1 | | | |
through 8 above which are wholly or partially | ///// | ////////////////// | ////////////////// |
guaranteed by the U.S. Government ............... | 5612 | 5613 18,447 | 5614 21,415 | 10.
a. Guaranteed portion of loans and leases | ///// | ////////////////// | ////////////////// |
included in item 10 above .................... | 5615 | 5616 18,250 | 5617 16,952 | 10.a.
________________________________________________________________
</TABLE>
29
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-20
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-N--Continued
__________
| C473 | <-
______________________________________________________ ________
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
Memoranda | accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Restructured loans and leases included in | ///// | /////////////////// | ///////////////// |
Schedule RC-N, items 1 through 8, above (and not | ///// | //// | |
reported in Schedule RC-C, part I, Memorandum | ///// | //// | |
item 2) ......................................... | 1658 | 1659 | | M.1.
2. Loans to finance commercial real estate, | ///// | //// | |
construction, and land development activities | ///// | //// | |
(not secured by real estate) included in | ///// | /////////////////// | ///////////////// |
Schedule RC-N, items 4 and 7, above ............. | 6558 | 6559 826 | 6560 7,043 | M.2.
|____________________|____________________ |___________________
3. Loans secured by real estate in domestic offices | RCON | RCON Bil Mil Thou | RCON Bil Mil Thou|
|___________________ |____________________ ____________________
(included in Schedule RC-N, item 1, above): | ///// | ////////////////// | ////////////////// |
a. Construction and land development ............ | 2759 | 2769 1,100 | 3492 26,422 | M.3.a.
b. Secured by farmland .......................... | 3493 | 3494 161 | 3495 0 | M.3.b.
c. Secured by 1-4 family residential properties: | ///// | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by | ///// | ////////////////// | ////////////////// |
1-4 family residential properties and | ///// | ////////////////// | ////////////////// |
extended under lines of credit ........... | 5398 | 5399 5,114 | 5400 17,374 | M.3.c.(1)
(2) All other loans secured by 1-4 family | ///// | ////////////////// | ////////////////// |
residential properties ................... | 5401 | 5402 58,079 | 5403 75,430 | M.3.c.(2)
d. Secured by multifamily (5 or more) | ///// | ////////////////// | ////////////////// |
residential properties ....................... | 3499 | 3500 521 | 3501 12,491 | M.3.d.
e. Secured by nonfarm nonresidential properties . | 3502 | 3503 6,415 | 3504 92,245 | M.3.e.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| Past due 30 | Past due 90 |
| through 89 days | days or more |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Interest rate, foreign exchange rate, and other | ///// | ////////////////// |
commodity and equity contracts: | ///// | ////////////////// |
a. Book value of amounts carried as assets ...... | 3522 | 3528 0 | M.4.a.
b. Replacement cost of contracts with a | ///// | ////////////////// |
positive replacement cost .................... | 3529 | 3530 0 | M.4.b.
___________________________________________
</TABLE>
30
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-21
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
______________________
Schedule RC-O--Other Data for Deposit Insurance Assessments | C475 |
|____________________|
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unposted debits (see instructions): | ////////////////// |
a. Actual amount of all unposted debits ...................................................... | 0030 216 | 1.a.
OR | ////////////////// |
b. Separate amount of unposted debits: | ////////////////// |
(1) Actual amount of unposted debits to demand deposits ................................... | 0031 N/A | 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) ...................... | 0032 N/A | 1.b.(2)
2. Unposted credits (see instructions): | ////////////////// |
a. Actual amount of all unposted credits ..................................................... | 3510 216 | 2.a.
OR | ////////////////// |
b. Separate amount of unposted credits: | ////////////////// |
(1) Actual amount of unposted credits to demand deposits .................................. | 3512 N/A | 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) ..................... | 3514 N/A | 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 3520 101,763 | 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in | ////////////////// |
Puerto Rico and U.S. territories and possessions (not included in total deposits): | ////////////////// |
a. Demand deposits of consolidated subsidiaries .............................................. | 2211 206,111 | 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries ................................. | 2351 20,089 | 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries ...................... | 5514 8 | 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: | ////////////////// |
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) .................. | 2229 0 | 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) ..... | 2383 0 | 5.b.
c. Interest accrued and unpaid on deposits in insured branches | ////////////////// |
(included in Schedule RC-G, item 1.b) ..................................................... | 5515 0 | 5.c.
______________________
______________________
Item 6 is not applicable to state nonmember banks that have not been authorized by the | ////////////////// |
Federal Reserve to act as pass-through correspondents. | ////////////////// |
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on | ////////////////// |
behalf of its respondent depository institutions that are also reflected as deposit liabilities| ////////////////// |
of the reporting bank: | ////////////////// |
a. Amount reflected in demand deposits (included in Schedule RC-E, item 4 or 5, column B)..... | 2314 0 | 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, | ////////////////// |
item 4 or 5, column A or C, but not column B).............................................. | 2315 0 | 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) | ////////////////// |
a. Unamortized premiums ...................................................................... | 5516 769 | 7.a.
b. Unamortized discounts ..................................................................... | 5517 0 | 7.b.
______________________
_______________________________________________________________________________________________________________________________
| |
|8. To be completed by banks with "Oakar deposits." |
______________________
| Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of | ////////////////// | |
| the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s)) .... | 5518 2,188,589 | 8. |
______________________
| |
_______________________________________________________________________________________________________________________________
______________________
9. Deposits in lifeline accounts ................................................................ | 5596 ///////////// | 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 8432 0 | 10.
______________________
______________
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists of nontransaction
accounts and all transaction accounts other than demand deposits.
</TABLE>
31
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-22
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-O--Continued
Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for | ////////////////// |
certain reciprocal demand balances: | ////////////////// |
a. Amount by which demand deposits would be reduced if reciprocal demand balances | ////////////////// |
between the reporting bank and savings associations were reported on a net basis | ////////////////// |
rather than a gross basis in Schedule RC-E .................................................. | 8785 0 | 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand balances | ////////////////// |
between the reporting bank and U.S. branches and agencies of foreign banks were | ////////////////// |
reported on a gross basis rather than a net basis in Schedule RC-E .......................... | A181 0 | 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of | ////////////////// |
collection were included in the calculation of net reciprocal demand balances between | ////////////////// |
the reporting bank and the domestic offices of U.S. banks and savings associations | ////////////////// |
in Schedule RC-E ............................................................................ | A182 0 | 11.c.
____________________
Memoranda (to be completed each quarter except as noted) Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________ ___________________________|____________________|
1. Total deposits in domestic offices of the bank (sum of Memorandum it ems 1.a. (1) and | ////////////////// |
1.b.(1) must equal Schedule RC, item 13.a): | ////////////////// |
a. Deposits accounts of $100,000 or less: | ////////////////// |
(1) amount of deposit accounts of $100,000 or less ....................................... | 2702 19,755,631 | M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number | ////////////////// |
completed for the June report only) .............................|RCON 3779 3,742,107 | ////////////////// | M.1.a.(2)
b. Deposit accounts of more than $100,000: | ////////////////// |
(1) Amount of deposit accounts of more than $100,000 ..................................... | 2710 14,354,949 | M.1.b.(1)
Number | ////////////////// |
(2) Number of deposit accounts of more than $100,000 ................|RCON 2722 27,062 | ////////////////// | M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by mutiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of
more than $100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or
procedure for determining a better estimate of uninsured deposits than the ____________YES_______NO__
estimated described above .................................................................. | 6861| |///| x | M.2.a.
____________________
b. If the box marked YES has been checked, report the estimate of uninsured deposits |RCON Bil Mil Thou|
determined by using your bank's method or procedure .................................... | 5597 N/A | M.2.b.
_____________________________________________________________________________________________________________________________
| C477 | <-
Person to whom questions about the Reports of Condition and Income should be directed: __________
PAMELA S. FLYNN, VICE PRESIDENT (401) 278-5194
___________________________________________________________________________________ ______________________________________
Name and Title (TEXT 8901) Area code and phone number (TEXT 8902)
</TABLE>
32
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-23
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Regulatory Capital
This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC,
item 12, for June 30, 1995, must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets of less than
$1 billion must complete items 1 through 3 below or Schedule RC-R in its entirety, depending on their response to item 1 below.
<S> <C>
____________
| C480 | <-
1. Test for determining the extent to which Schedule RC-R must be completed. To be completed _____|__________|
only by banks with total assets of less than $1 billion. Indicate in the appropriate | YES NO |
box at the right whether the bank has total capital greater than or equal to eight percent___________ _______________
of adjusted total assets ............................................................... | RCFD 6056 | |////| | 1.
_____________________________
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government
agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan
and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the box marked
NO has been checked, the bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than eight
percent or that the bank is not in compliance with the risk-based capital guidelines.
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
|Subordinated Debt(1)| Other |
_________________________________________________________________ | and Intermediate | Limited- |
| NOTE: All banks are required to complete items 2 and 3 below | | Term Preferred | Life Capital |
| See optional worksheet for items 3.a through 3.f. | | Stock | Instruments |
|________________________________________________________________| ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
2. Subordinated debt(1) and other limited-life capital instruments (original | | |
weighted average maturity of at least five years) with a remaining | | |
maturity of: | | |
a. One year or less ...................................................... | 3780 25,737 | 3786 0 | 2.a.
b. Over one year through two years ....................................... | 3781 737 | 3787 0 | 2.b.
c. Over two years through three years .................................... | 3782 10,745 | 3788 0 | 2.c.
d. Over three years through four years ................................... | 3783 0 | 3789 0 | 2.d.
e. Over four years through five years .................................... | 3784 0 | 3790 0 | 2.e.
f. Over five years ....................................................... | 3785 1,101,000 | 3791 0 | 2.f.
3. Amounts used in calculating regulatory capital ratios (report amounts | ////////////////// | ////////////////// |
determined by the bank for its own internal regulatory capital analyses): | ////////////////// | RCFD Bil Mil Thou |
a. Tier 1 capital......................................................... | ////////////////// | 8274 3,590,367 | 3.a.
b. Tier 2 capital......................................................... | ////////////////// | 8275 1,755,646 | 3.b.
c. Total risk-based capital............................................... | ////////////////// | 3792 5,346,013 | 3.c.
d. Excess allowance for loan and lease losses............................. | ////////////////// | A222 297,250 | 3.d.
e. Risk-weighted assets................................................... | ////////////////// | A223 45,718,856 | 3.e.
f. "Average total assets"................................................. | ////////////////// | A224 51,482,775 | 3.f.
___________________________________________
| (Column A) | (Column B) |
Items 4-9 and Memoranda items 1 and 2 are to be completed | Assets | Credit Equiv- |
by banks that answered NO to item 1 above and | Recorded | alent Amount |
by banks with total assets of $1 billion or more. | on the | of Off-Balance |
| Balance Sheet | Sheet Items(2) |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items assigned | | |
to the Zero percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Securities issued by, other claims on, and claims unconditionally | ////////////////// | ////////////////// |
guaranteed by, the U.S. Government and its agencies and other | ////////////////// | ////////////////// |
OECD central governments .......................................... | 3794 2,147,648 | ////////////////// | 4.a.(1)
(2) All other ......................................................... | 3795 1,115,265 | ////////////////// | 4.a.(2)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3796 101,488 | 4.b.
___________________________________________
</TABLE>
_____
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not report in column B the risk-weighted amount of assets reported in
column A.
33
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-24
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Continued
___________________________________________
| (Column A) | (Column B) |
| Assets | Credit Equiv- |
| Recorded | alent Amount |
| on the | of Off-Balance |
| Balance Sheet | Sheet Items(1) |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 20 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Claims conditionally guaranteed by the U.S. Government and its | ////////////////// | ////////////////// |
agencies and other OECD central governments ....................... | 3798 714,375 | ////////////////// | 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. Govern- | ////////////////// | ////////////////// |
ment and its agencies and other OECD central governments; by | ////////////////// | ////////////////// |
securities issued by U.S. Government-sponsored agencies; and | ////////////////// | ////////////////// |
by cash on deposit ................................................ | 3799 0 | ////////////////// | 5.a.(2)
(3) All other ......................................................... | 3800 8,774,345 | ////////////////// | 5.a.(3)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3801 791,065 | 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 50 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3802 5,265,173 | ////////////////// | 6.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3803 409,680 | 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 100 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3804 31,799,547 | ////////////////// | 7.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3805 10,122,631 | 7.b.
8. On-balance sheet asset values excluded from the calculation of the | ////////////////// | ////////////////// |
risk-based capital ratio(2) .............................................. | 3806 83,713 | ////////////////// | 8.
9. Total assets recorded on the balance sheet (sum of | ////////////////// | ////////////////// |
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, | ////////////////// | ////////////////// |
item 12 plus items 4.b and 4.c) .......................................... | 3807 49,900,066 | ////////////////// | 9.
___________________________________________
Memoranda
______________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
1.Current credit exposure across all off-balance sheet derivative contracts covered by the | ///////////////// |
risked-based capital standards .................................................................| 8764 135,825| M.1.
|___________________|
_____________________________________________________________________
| With a remaining maturity of |
|____________________________________________________________________|
| (Column A) | (Column B) | (Column C) |
| | | |
| One year or less | Over one year | Over five years |
| | through five years | |
|______________________|______________________|______________________|
|RCFD Tril Bil Mil Thou|RCFD Tril Bil Mil Thou|RCFD Tril Bil Mil Thou|
|______________________|______________________|______________________|
2. Notional principal amounts of | | | |
off-balance sheet derivative contracts(3):| | | |
a. Interest rate contracts ................. | 3809 8,320,956 | 8766 18,597,686 | 8767 801,055 | M.2.a.
b. Foreign exchange contracts .............. | 3812 1,578,420 | 8769 101,907 | 8770 0 | M.2.b.
c. Gold contracts .......................... | 8771 15,291 | 8772 0 | 8773 0 | M.2.c.
d. Other precious metals contracts ......... | 8774 8,748 | 8775 0 | 8776 0 | M.2.d.
e. Other commodity contracts ............... | 8777 0 | 8778 0 | 8779 0 | M.2.e.
f. Equity derivative contracts ............. | A000 0 | A001 0 | A002 0 | M.2.f.
|____________________________________________________________________|
</TABLE>
_________________
1) Do not report in column B the risk-weighted amount of
assets reported in column A.
2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of these
securities in items 4 through 7 above. Item 8 also includes on-balance sheet
asset values (or portions thereof) of off-balance sheet interest rate, foreign
exchange rate, and commodity contracts and those contracts (e.g., futures
contracts) not subject to risk-based capital. Exclude from item 8 margin
accounts and accrued receivables as well as any portion of the allowance for
loan and lease losses in excess of the amount that may be included in Tier 2
capital. 3) Exclude foreign exchange contracts with an original maturity of 14
days or less and all futures contracts.
34
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK
Address: ONE MONARCH PLACE Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
City, State, Zip: SPRINGFIELD, MA 01102 Page RC-25
FDIC Certificate No.: 02499
</TABLE>
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on June 30, 1996
FLEET NATIONAL BANK SPRINGFIELD , MASSACHUSETTS
- ------------------- ----------------- -------------
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of Condition and
Income. This optional statement will be made available to the public, along
with the publicly available data in the Reports of Condition and Income, in
response to any request for individual bank report data. However, the
information reported in column A and in all of Memorandum item 1 of Schedule
RC-N is regarded as confidential and will not be released to the public.
BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE
STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL
BANK CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS
IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE
MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks
choosing not to make a statement may check the "No comment" box below and
should make no entries of any kind in the space provided for the narrative
statement; i.e., DO NOT enter in this space such phrases as "No statement,"
"Not applicable," "N/A," "No comment," and "None."
The optional statement must be entered on this sheet. The statement should
not exceed 100 words. Further, regardless of the number of words, the
statement must not exceed 750 characters, including punctuation, indentation,
and standard spacing between words and sentences. If any submission should
exceed 750 characters, as defined, it will be truncated at 750 characters with
no notice to the submitting bank and the truncated statement will appear as the
bank's statement both on agency computerized records and in computer-file
releases to the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who
thereby attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing
narrative statement will be deleted from the files, and from disclosure; the
bank, at its option, may replace it with a statement, under signature,
appropriate to the amended data.
The optional narrative statement will appear in agency records and in release
to the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
__________________________________________________________________________
No comment |X| (RCON 6979) | c471 | C472 |<-
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
/s/__Gero DeRosa_______________________________ ___7/25/96________
Signature of Executive Officer of Bank Date of Signature
35
