<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 25, 1996
333-04261
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- -----------------------------------------------------------------------------
AMENDMENT NO. 6
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. [ ]
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 25, 1996
PROSPECTUS
, 1996
##################################################
GRAPHIC OMITTED
IGT: "AMERKI"
##################################################
$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"). Other than the outstanding BBI Notes in
an aggregate principal amount of $600,000, the Company has not issued, and
does not currently have any current firm arrangements to issue, any
significant indebtedness to which the Senior Notes would be senior. In
addition, the Senior Notes will be effectively subordinate to all of the
outstanding indebtedness of the Company, other than the BBI Notes, and all of
the outstanding and future indebtedness of the Company's subsidiaries.
Interest on the Senior Notes is payable semi-annually in cash in arrears on
June 1 and December 1 of each year, commencing on June 1, 1997. The Senior
Notes will mature on December 1, 2006. The Senior Notes will be redeemable at
the option of the Company, in whole or in part, at any time on or after
December 1, 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 December 1, 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. In the event of a Change
of Control, there can be no assurance that the Company will have, or will
have access to, sufficient funds to repurchase the Senior Notes or to pay the
holders of the Senior Notes. See "Risk Factors--Change of Control Provisions;
Limitations on Rights of Repayment," "Description of Securities--Certain
Covenants," "--Certain Definitions" and "Mandatory Offers to Purchase Senior
Notes--Change of Control."
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--Subordination as a result of BKC Intercreditor Agreement" and
"Description of Securities."
Concurrent with the Notes Offering, the Company is offering 30,000 Units
(the "Units"), each consisting of 40 shares of % Senior Exchangeable
Preferred Stock due 2008 (the "Senior Preferred Stock") of the Company and
1.561 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 TO THE
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)
<PAGE>
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
$2,200,000.
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
IGT: "BURGER"
#############################################################################
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 DISCONTINUED AT ANY TIME.
THE COMPANY DOES NOT INTEND TO APPLY FOR LISTING OF THE SENIOR NOTES 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 SENIOR
NOTES, THEY ARE NOT OBLIGATED TO DO SO AND MAY DISCONTINUE SUCH MARKET MAKING
AT ANY TIME WITHOUT NOTICE. SEE "RISK FACTORS--ABSENCE OF PUBLIC MARKET FOR
THE SECURITIES."
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-for-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 $23.3 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 44% 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 4.5% 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. The Company continually
engages in discussions with Burger King franchisees, including with
respect to the potential acquisition of the business or assets of such
franchisees. The Company is not currently engaged in any negotiations
with respect to acquisitions, and the Company has no current or pending
contracts or commitments with respect to acquisitions.
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 ended July 31,
1994, prior to the close of the acquisition, to the twelve month period
ended 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 and the
twelve-month period ended October 28, 1996, the Company's comparable
restaurant sales increased by 10.7% and 0.5%, respectively, over the same
period for the prior fiscal year on a pro forma basis, based upon the sales
of the Company's restaurants including the periods in 1995 during which
certain of those restaurants where operated by their prior owners.
THE NOTES OFFERING
Securities Offered ..... $100.0 million aggregate principal amount of
% Senior Notes due 2006.
Maturity ............... December 1, 2006.
Interest ............... The Senior Notes will bear interest at a
rate of % per annum, payable semi-annually
in cash in arrears on each June 1 and
December 1, commencing on December 1, 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 forego-
5
<PAGE>
ing, at any time prior to December 1, 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. Except as
described under "Description of
Securities--Senior Notes--Mandatory Offers
to Purchase Senior Notes--Change of
Control," the indenture pursuant to which
the Senior Notes will be issued (the
"Indenture") does not contain provisions
that permit the holder 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.
Consequently, the Change of Control
provisions will not afford any protection in
a highly leveraged transaction, including
such a transaction initiated by the Company,
management of the Company or an affiliate of
the Company, if such transaction does not
result in 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 will permit the Company and its
subsidiaries to incur additional
Indebtedness, including secured
Indebtedness, subject to certain
limitations. See "Risk
Factors--Subordination as a Result of BKC
Intercreditor Agreement," "Business--
6
<PAGE>
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 CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth certain unaudited actual and 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
FISCAL OCTOBER 2, SEPTEMBER 30, ENDED SEPTEMBER
1995 1995 1996 30, 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) .......................................... $ 23,411 $ 17,814 $ 17,713 $ 23,310
Adjusted EBITDA (2) ................................. 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
(3). ................................................ 2.1% 3.7% 0.4% (0.3)%
Average sales per restaurant (4) .................... $ 1,113 $ 856 $ 858 $ 1,132
PRO FORMA RATIOS:
EBITDA/cash interest expense (5) .................... 2.1x
Net debt/EBITDA (6) ................................. 4.4
Adjusted EBITDA/cash interest expense (5) .......... 2.3
Net debt/Adjusted EBITDA (6) ........................ 4.1
ACTUAL
Cash flow from operating activities ................. $ 4,173 $ 2,898 $ 10,931 $ 12,206
Cash flow from investing activities ................. (15,092) (5,394) (43,623) (53,321)
Cash flow from financing activities ................. 5,156 (2,625) 33,510 41,291
</TABLE>
8
<PAGE>
<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 ....................... 148,481 153,207
Total debt and capitalized leases . 126,363 108,613
Senior Exchangeable Preferred Stock -- 28,281
Total stockholders' equity ......... 8,105 3,089
</TABLE>
- ------------
(1) EBITDA, on a pro forma basis, represents operating income plus
depreciation and amortization. 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 herein to provide additional information with respect to the
ability of the Company to meet its future debt service, capital
expenditure and working capital requirements. In addition, management
believes that certain investors find EBITDA to be a useful tool for
measuring the ability of the Company to service its debt. 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) Adjusted EBITDA, on a pro forma basis, represents EBITDA plus
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
FISCAL OCTOBER 2, SEPTEMBER 30, ENDED SEPTEMBER
1995 1995 1996 30, 1996
-------- ------------ --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <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>
Adjusted EBITDA is included 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.
Adjusted EBITDA may not be comparable to EBITDA measures reported by
other companies.
(3) 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%.
(4) Reflects the results of only those restaurants operating for the entire
period.
(5) 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. The ratios of EBITDA and Adjusted EBITDA to cash interest
expense are included because the Company believes that prospective
investors find the ratios helpful in evaluating the ability of the
Company to service its indebtedness, including indebtedness under the
Senior Notes. The information does not purport to represent what the
Company's ratios are or would have been had the Senior Notes and the
Senior Preferred Stock been outstanding during the periods presented.
(6) Net debt represents total debt and capitalized leases less cash and
cash equivalents. The pro forma ratios of net debt to EBITDA and net
debt to Adjusted EBITDA were calculated based on pro forma net debt as
of September 30, 1996 of $103.6 million. The ratios of net debt to
EBITDA and to Adjusted EBITDA are included because the Company believes
that prospective investors find the ratios helpful in evaluating the
ability of the Company to incur additional indebtedness, including
indebtedness that could be incurred to repay or otherwise refinance the
Senior Notes and the Senior Preferred Stock. The information does not
purport to represent what the Company's ratios are or would have been
had the Senior Notes and the Senior Preferred Stock been outstanding
during the periods presented.
9
<PAGE>
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.
SUBSTANTIAL CURRENT LEVERAGE; AND LIMITATIONS ON ABILITY TO SERVICE
INDEBTEDNESS
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 $3.1 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."
SUBORDINATION OF SENIOR NOTES, SENIOR PREFERRED STOCK AND EXCHANGE DEBENTURES
TO CURRENT AND FUTURE OBLIGATIONS
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 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
10
<PAGE>
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."
SUBORDINATION AS A RESULT OF 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."
RESTRICTIVE COVENANTS LIMITING THE COMPANY'S ABILITY TO REPAY THE SENIOR
NOTES AND SENIOR PREFERRED STOCK
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
11
PAGE>
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; LIMITATIONS ON RIGHTS OF REPAYMENT
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 holders of Senior Notes, the Senior Preferred Stock and the Exchange
Debentures have limited rights to require the Company to purchase or redeem
the Senior Notes, the Senior Preferred Stock and the Exchange Debentures in
the event of a takeover, recapitalization or similar restructuring, including
an issuer recapitalization or similar transaction with management.
Consequently, the Change of Control provisions will not afford any protection
in a highly leveraged transaction, including such a transaction initiated by
the Company, management of the Company or an affiliate of the Company, if
such transaction does not result in a Change of Control. In addition, because
the obligations of the Company with respect to the Senior Notes, the Senior
Preferred Stock and the Exchange Debentures are effectively subordinated to
all secured indebtedness of the Company and all obligations of the Company's
subsidiaries, existing or future secured indebtedness of the Company or
obligations of the Company's subsidiaries may prohibit the Company from
repurchasing or redeeming any of the Senior Notes, the Senior Preferred Stock
and the Exchange Debentures upon a Change of Control. Moreover, the ability
of the Company to repurchase or redeem the Senior Notes, the Senior Preferred
Stock and the Exchange Debentures following a Change of Control will be
limited by the Company's then-available resources. Accordingly, the Change of
Control provision is likely to be of limited usefulness in such situations.
The Change of Control provisions may not be waived by the Board of Directors
of the Company or the Trustee without the consent of holders of at least a
majority in principal amount of the Senior Notes, the Senior Preferred Stock
or the Exchange Debentures, as applicable. See "Description of
Securities--Senior Notes--Mandatory Offers to Purchase Senior Notes--Change
of Control," "--Exchange Debentures--Mandatory Offers to Purchase Exchange
Debentures--Change of Control" and "--Amendment, Supplement and Waiver."
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.
12
<PAGE>
TAX CONSEQUENCES OF DISTRIBUTIONS WITH RESPECT TO THE SENIOR PREFERRED STOCK
AND EXCHANGE DEBENTURES; POTENTIAL FOR UNPLANNED DEEMED DIVIDEND INCOME
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 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
13
<PAGE>
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.
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 AND TO PAYMENT OF DIVIDENDS; 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."
In connection with the Offerings, the Company has committed to BKC that,
without BKC's prior written consent, (i) it will not pay cash dividends on
the Senior Preferred Stock on or prior to December 1, 2001 and (ii) it will
not pay cash dividends to Holders of Common Stock until the Senior Notes are
repaid in full and the Senior Preferred Stock is redeemed or otherwise
retired.
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
14
<PAGE>
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 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,
15
<PAGE>
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 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 48.3% of the Company's outstanding shares of Common
Stock (assuming the issuance of 46,817 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."
16
<PAGE>
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 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 approximately $3.4
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 prepayment penalty of approximately $3.4 million in
connection with the prepayment of the Senior Subordinated Notes. See
"Certain Transactions."
(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 3.1
-------- -----------
Total capitalization ..................... $134.5 $140.0
======== ===========
</TABLE>
DIVIDEND POLICY
The Company is not required to pay cash dividends on the Senior Preferred
Stock until after December 1, 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 December 1, 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."
In connection with the Offerings, the Company has committed to BKC that,
without BKC's prior written consent, (i) it will not pay cash dividends on
the Senior Preferred Stock on or prior to December 1, 2001 and (ii) it will
not pay cash dividends to holders of Common Stock until the Senior Notes are
repaid in full and the Senior Preferred Stock is redeemed or otherwise
retired. See "Risk Factors--BKC Consent to Issuance of Securities and to
Payment of Dividends."
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
--------------------
SEPTEMBER 2, 1994
JANUARY 1, 1994 THROUGH
FISCAL THROUGH DECEMBER 31, PRO
1993 SEPTEMBER 1, 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 number of
shares outstanding (in
thousands)(6) .............. 1,124 1,124 1,047
Net income per share(6) .... $ 0.11 $ 0.40 $ (1.71)
OTHER DATA:
EBITDA(7) .................. $ 3,889 $ 15,613 $ 23,411
Adjusted EBITDA(8) ......... 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(9) ................
Net debt/EBITDA(10) ........
Adjusted EBITDA/cash
interest expense(9) .......
Net debt/Adjusted
EBITDA(10) ................
</TABLE>
20
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------------------ TWELVE MONTHS ENDED
OCTOBER 2, 1995 SEPTEMBER 30, 1996 SEPTEMBER 30, 1996
-------------------- -------------------- --------
PRO PRO PRO
ACTUAL FORMA(4) ACTUAL FORMA(4) ACTUAL 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) (3,559) (4,024) (3,699)
-------- ---------- -------- ---------- -------- ----------
Total other income
(expense) ............... (6,522) (8,900) (12,767) (12,068) (15,005) (15,040)
-------- ---------- -------- ---------- -------- ----------
Income (loss) before income
taxes ...................... 1,382 3,445 (1,064) (280) (719) 550
Provision (benefit) for
income taxes .............. 661 1,507 (426) (104) (262) 259
-------- ---------- -------- ---------- -------- ----------
Net income (loss) .......... $ 721 $ 1,938 $ (638) $ (176) $ (457) $ 291
Preferred stock
dividends(5) .............. 3,150 3,150 4,200
Weighted average number of
shares outstanding (in
thousands)(6) .............. 1,124 1,047 1,000 1,047 1,000 1,047
Net income per share(6) .... $ 0.34 $ (1.16) $ (0.98) $ (3.18) $ (0.91) $ (3.73)
OTHER DATA:
EBITDA(7) .................. $ 11,697 $ 17,814 $ 17,456 $ 17,713 $ 21,372 $ 23,310
Adjusted EBITDA(8) ......... 18,749 19,115 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(9) ................ 2.1x
Net debt/EBITDA(10) ........ 4.4
Adjusted EBITDA/cash
interest expense(9) ....... 2.3
Net debt/Adjusted
EBITDA(10) ................ 4.1
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
THE INITIAL
ACQUISITIONS(1)(2) THE COMPANY
------------------------- --------------------------------------
FISCAL 1995
------------------
SEPTEMBER 2, 1994
JANUARY 1, 1994 THROUGH
FISCAL THROUGH DECEMBER 31, PRO
1993 SEPTEMBER 1, 1994 1994(3) ACTUAL FORMA(4)
------ ----------------- ------------------ ------ ----------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
SELECTED OPERATING DATA:
Restaurants open at end of
period .................. 82 82 121 140 176
Percentage change in
comparable restaurant
sales(11) ............... (0.1)% 2.1%
Average sales per
restaurant(12) ..........$ 1,011 $1,125 $1,113
Ratio of earnings to fixed
charges(13) ............. 1.1x 1.3x
Ratio of earnings to fixed
charges and preferred
stock dividends(13) ...... 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
------------------ ------------------ ------------------
PRO PRO PRO
ACTUAL FORMA(4) ACTUAL FORMA(4) ACTUAL FORMA(4)
------ ---------- ------ ---------- ------ ----------
SELECTED OPERATING DATA:
RESTAURANTS OPEN AT END OF
PERIOD 127 176 183 183 183 183
<S> <C> <C> <C> <C> <C> <C>
Percentage change in
comparable restaurant
sales(11) ............... 1.4% 3.7% 1.8% 0.4% 0.6% (0.3)%
Average sales per
restaurant(12) .......... $852 $856 $862 $858 $1,135 $1,132
Ratio of earnings to fixed
charges(13) ............. 1.2x 1.3x 0.9x 1.0x 1.0x 1.0x
Ratio of earnings to fixed
charges and preferred
stock dividends(13) ...... 1.2 1.2 0.9 1.0 1.0 1.0
</TABLE>
<TABLE>
<CAPTION>
THE INITIAL ACQUISITIONS
-------------------------
JANUARY 1,
1994 THROUGH
FISCAL SEPTEMBER 1,
1993 1994
--------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
SUPPLEMENTAL DATA(14)(15):
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(16)
--------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ......... $ 2,705 $ 5,055
Total assets ...................... 148,481 153,207
Total debt and capitalized leases 126,363 108,613
Senior Exchangeable Preferred
Stock ............................ -- 28,281
Total stockholders' equity ....... 8,105 3,089
</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.
21
<PAGE>
(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 $10.0 million (approximately
$5.9 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 $3.4 million (approximately $2.0 million or on
after-tax basis) prepayment penalty incurred in connection with the
prepayment of the Senior Subordinated Notes.
(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."
21
<PAGE>
(6) Net income per share was computed by deducting in all periods
dividends payable to the holders of Original Preferred Stock (as
defined) and deducting in the pro forma periods dividends payable to
the holders of Senior Preferred Stock and using the weighted average
number of shares of Common Stock outstanding assuming (i) the
1,000-for-1 stock split of Common Stock pursuant to the
Recapitalization, (ii) for the pro forma periods only, the issuance
of 46,817 shares of Common Stock in the Units Offering in connection
with the consummation of the Offerings and (iii) for all periods in
which there is positive earnings available for the holders of Common
Stock, the conversion of immediately exercisable warrants and options
to purchase 123,600 shares of Common Stock. See "Description of
Capital Stock--The Recapitalization."
(7) EBITDA represents operating income plus depreciation and amortization.
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 herein to provide additional
information with respect to the ability of the Company to meet its
future debt service, capital expenditure and working capital
requirements. In addition, management believes that certain investors
find EBITDA to be a useful tool for measuring the ability of the Company
to service its debt. 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) Adjusted EBITDA, on a pro forma basis, represents EBITDA plus
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 certain non-recurring items
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>
Adjusted EBITDA is included 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. Adjusted
EBITDA may not be comparable to EBITDA measures reported by other
companies.
(9) 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. The ratios of EBITDA and Adjusted EBITDA to cash
interest expense are included because the Company believes that
prospective investors find the ratios helpful in evaluating the
ability of the Company to service its indebtedness, including
indebtedness under the Senior Notes. The information does not purport
to represent what the Company's ratios are or would have been had the
Senior Notes and the Senior Preferred Stock been outstanding during
the periods presented.
(10) Net debt represents total debt and capitalized leases less cash and
cash equivalents. The pro forma ratios of net debt to EBITDA and net
debt to Adjusted EBITDA were calculated based on pro forma net debt
as of September 30, 1996 of $103.6 million. The ratios of net debt to
EBITDA and to Adjusted EBITDA are included because the Company
believes that prospective investors find the ratios helpful in
evaluating the ability of the Company to incur additional
indebtedness, including indebtedness that could be incurred to repay
or otherwise refinance the Senior Notes and the Senior Preferred
Stock. The information does not purport to represent what the
Company's ratios are or would have been had the Senior Notes and the
Senior Preferred Stock been outstanding during the periods presented.
(11) 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%.
(12) Reflects the results of only those restaurants operating for the
entire period.
(13) 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.
(14) 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.
(15) 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
<PAGE>
Restaurants acquired from entities owned or controlled by William
Osborn, the current Vice Chairman of the Company's Board of
Directors.
(16) 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 approximately $3.4 million ($2.0 million net of
applicable taxes) related to a prepayment penalty in connection with
the prepayment of 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 $23.3 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.
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 to provide additional information with respect
to the ability of the Company to meet its future debt service, capital
expenditure and working capital requirements. In addition, management
believes that certain investors find EBITDA to be a useful tool for measuring
the ability of the Company to service its debt. 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, and the
twelve month period ended October 28, 1996, the Company's comparable
restaurant sales increased by 10.7% and 0.5%, respectively, over the same
period for the prior fiscal year on a pro forma basis, based upon the sales
of the Company's restaurants including the periods in 1995 during which
certain of those restaurants were operated by their prior owners.
23
<PAGE>
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
-------------- ----------------- -----------------
JANUARY 1, 1994 SEPTEMBER 2, 1994
THROUGH THROUGH
FISCAL 1993 SEPTEMBER 1, 1994 DECEMBER 31, 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
============== ================= =================
General and administrative expenses ... -- -- 1,374
Operating income ....................... -- -- 2,681
EBITDA ................................. $ -- $ -- $ 3,889
============== ================= =================
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
COMBINED THE COMPANY
---------- -----------------------------------------
NINE MONTHS ENDED
-----------------------------
FISCAL FISCAL OCTOBER 2, SEPTEMBER 30,
1994 1995 1995 1996
---------- ---------- ------------ ---------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
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
========== ========== ============ ===============
General and administrative expenses ... -- 5,904 4,202 5,907
Operating income ....................... -- 10,487 7,904 11,703
EBITDA ................................. $ -- $ 15,613 $ 11,697 $ 17,456
========== ========== ============ ===============
</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 COMBINED THE COMPANY
-------------- ----------------- ----------------- ---------- --------------------------------------
NINE MONTHS ENDED
JANUARY 1, 1994 SEPTEMBER 2, 1994 -----------------------------
THROUGH THROUGH FISCAL FISCAL OCTOBER 2, SEPTEMBER 30,
FISCAL 1993 SEPTEMBER 1, 1994 DECEMBER 31, 1994 1994 1995 1995 1996
-------------- ----------------- ----------------- ---------- -------- ------------ ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Restaurant sales ..... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Restaurant operating
expenses:
Cost of sales ....... 31.2 32.8 31.8 32.4 32.1 32.1 32.3
Restaurant labor and
related costs ....... 26.5 27.4 25.5 26.7 24.7 25.0 24.9
Depreciation and
amortization ........ 2.5 2.4 3.5 2.8 3.6 3.5 3.6
Occupancy and other
operating expenses .. 31.9 31.5 27.2 29.9 27.9 27.7 27.5
-------------- ----------------- ----------------- ---------- -------- ------------ ---------------
Total restaurant
operating expenses .. 92.1 94.1 88.0 91.8 88.3 88.3 88.3
-------------- ----------------- ----------------- ---------- -------- ------------ ---------------
Restaurant
contribution ........ 7.9% 5.9% 12.0% 8.2% 11.7% 11.7% 11.7%
============== ================= ================= ========== ======== ============ ===============
General and
administrative
expenses ............ -- -- 3.6% -- 3.7% 3.5% 3.4%
Operating income ..... -- -- 7.9% -- 7.5% 7.6% 7.8%
EBITDA ............... -- -- 11.5% -- 11.2% 11.3% 11.6%
============== ================= ================= ========== ======== ============ ===============
</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%.
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
25
<PAGE>
restaurants. Other operating expenses increased $7.9 million during the nine
months ended 1996, or 0.1% 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 49.2%, to $17.5 million in the
nine months September 30, 1996 from $11.7 million in the nine months ended
October 2, 1995. As a percentage of restaurant sales, EBITDA increased 0.3%,
to 11.6% in the nine months ended September 30, 1996 from 11.3% for the nine
months ended October 2, 1995.
Operating Income. Operating income increased $3.8 or 48.1% to $11.7
million for the nine months ended September 30, 1996 from $7.9 million for
the nine months ended October 2, 1995. As a percentage of restaurant sales,
operating income increased 0.2%, to 7.8% in the nine months ended September
30, 1996 from 7.6% for the nine months ended October 2, 1995. This increase
was primarily due to a decrease in general and administrative expense as a
percentage of sales of 0.1% to 3.4% in the nine months ended September 30,
1996 from 3.5% 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.
26
<PAGE>
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.
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. In connection with certain of its
previous acquisitions of Burger King restaurants, the Company committed to
expend up to $2.25 million by September 1, 1997 to upgrade the initial 68
Burger King restaurants it acquired. The Company has met this commitment. In
addition, the Company has committed to BKC that it will make capital
expenditures at its Chattanooga, Tennessee restaurants of approximately $1.5
million on or before September 7, 1997, of which $300,000 had been spend as
of September 30, 1996. In addition, the Company has committed to BKC that (i)
it will make capital expenditures on its existing restaurants equal to 1% of
its gross sales for the foreseeable future. The Company has also committed to
BKC that it will develop 17 restaurants in fiscal 1997. In the event the
Company fails to meet the development commitment, it will pay Burger King a
fee of $75,000 per restaurant not developed. The actual amount
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<PAGE>
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, 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 is structured as a holding company with no independent
operations, as the Company's operations are conducted exclusively through its
wholly-owned subsidiaries. The Company's only significant assets are the
capital stock of its subsidiaries. As a holding company, the Company's cash
flow, its ability to meet is debt service requirements and its ability to pay
cash dividends on the Senior Preferred Stock are dependent upon the earnings
of its subsidiaries and their ability to declare dividends or make other
intercompany transfers to the Company. 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. 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's subsidiaries from declaring dividends
or making other intercompany transfers to the Company in certain
circumstances. See "Description of Securities" and "Description of Certain
Indebtedness--Credit Agreement."
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
29
<PAGE>
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 $5.9 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 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 $23.3 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 continually engages in
discussions with Burger King franchisees, including with respect to the
potential acquisition of the business or assets of such franchisees. The
Company is not currently engaged in any negotiations with respect to
acquisitions, and the Company has no current or pending contracts or
commitments with respect to acquisitions.
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>
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
32
<PAGE>
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 ended July 31, 1994, prior to
the close of the acquisition, to the twelve month period ended 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.
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
33
<PAGE>
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 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 44% 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 4.5% over 1995, more than double the 2.0% projected growth rate of
full-service restaurants. According to Technomic
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<PAGE>
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 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)
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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 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
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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 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--Subordination as a Result of BKC Intercreditor Agreement,"
"Description of Securities--Senior Notes--BKC Intercreditor Agreement,"
"--Senior Preferred Stock--BKC Intercreditor Agreement" and "--Exchange
Debentures--BKC Intercreditor Agreement."
In connection with the Offerings, the Company has committed to BKC that,
without BKC's prior written consent, (i) it will not pay cash dividends on
the Senior Preferred Stock on or prior to December 1, 2001 and (ii) it will
not pay cash dividends to holders of Common Stock until the Senior Notes are
repaid in full and the Senior Preferred Stock is redeemed or otherwise
retired. See "Risk Factors--BKC Consent to Issuance of Securities and to
Payment of Dividends."
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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 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
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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.
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.
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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.
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.
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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.
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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.
Indemnification Agreements. Simultaneously with the consummation of the
Offerings, the Company and each of its directors will enter into
indemnification agreements. The indemnification agreements will provide that
the Company will indemnify the directors against certain liabilities
(including settlements) and expenses actually and reasonably incurred by them
in connection with any threatened or pending legal action, proceeding or
investigation (other than actions brought by or in the right of the Company)
to which any of them is, or is threatened to be, made a party by reason of
their status as a director, officer or agent of the Company, or serving at
the request of the Company in any other capacity for or on behalf of the
Company; provided that (i) such director acted in good faith and in a manner
not opposed to the best interest of the Company, (ii) with respect to any
criminal proceedings, such director had no reasonable cause to believe his or
her conduct was unlawful, (iii) such director is not finally adjudged to be
liable for negligence or misconduct in the performance of his or her duty to
the Company, unless the court views in light of the circumstances the
director is nevertheless entitled to indemnification, and (iv) the
indemnification does not relate to any liability arising under Section 16(b)
of the Exchange Act or the rules or regulations promulgated thereunder. With
respect to any action brought by or in the right of the Company, directors
may also be indemnified, to the extent not prohibited by applicable laws or
as determined by a court of competent jurisdiction, against costs and
expenses actually and reasonably incurred by them in connection with such
action if they acted in good faith and in the best interests of the Company.
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Director Compensation. Directors who are not employees of the Company
receive $12,500 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").
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.
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<PAGE>
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> <C> <C> <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 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
44
<PAGE>
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 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
45
<PAGE>
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 expire on September 1, 1999.
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.
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% 21.7%
William C. Osborn (3) ............................ 93,949 9.4 9.0
Gary W. Hubert ................................... 33,710 3.4 3.2
Joel D. Aaseby ................................... 11,240 1.1 1.1
Thomas H. Quinn (4) .............................. 33,705 3.4 3.2
John W. Jordan, II (5) ........................... 44,348 4.4 4.2
A. Richard Caputo, Jr. (6) ....................... 14,606 1.5 1.4
David W. Zalaznick (7) ........................... 44,348 4.4 4.2
Scott E. Vasatka ................................. 5,620 0.6 0.5
All directors and executive officers as a group
(9 persons) (8) ................................. 508,624 50.9 48.3
OTHER PRINCIPAL STOCKHOLDERS:
MCIT PLC ("MCIT") (9) ............................ 285,310 28.5% 27.3%
Leucadia Investors, Inc. (10) .................... 71,327 7.1 6.8
BancBoston Investments Inc. ("BancBoston") (11) . 112,360 10.1 9.7
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 cancel the warrants
held by PMI to purchase 71,720 shares of Common Stock. 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 46,817 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."
46
PAGE>
(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.
(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(1 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 cancel
these warrants upon the consummation of the Offerings. See "Use of
Proceeds" and "Certain Transactions."
47
<PAGE>
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 December 1, 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
June 1 and December 1 in each year, commencing June 1, 1997, to holders of
record of Senior Notes at the close of business on the May 15 or November 15
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
48
<PAGE>
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 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 permitted by the
Indenture 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--Subordination of Senior Notes,
Senior Preferred Stock and Exchange Debentures to Current and Future
Obligations" 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 "--Subordination as a Result of BKC Intercreditor
Agreement."
REDEMPTION OF SENIOR NOTES
Optional Redemption. The Senior Notes may not be redeemed at the option of
the Company prior to December 1, 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 December 1 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 December 1, 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.
49
<PAGE>
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. Consequently, the
Change of Control provisions will not afford any protection in a highly
leveraged transaction, including such a transaction initiated by the Company,
management of the Company or an affiliate of the Company, if such transaction
does not result in a Change of Control. In addition, because the obligations
of the Company with respect to the Senior Notes are effectively subordinated
to all secured indebtedness of the Company and all obligations of the
Company's subsidiaries, existing or future secured indebtedness of the
Company or obligations of the Company's subsidiaries may prohibit the Company
from repurchasing the Senior Notes upon a Change of Control. Moreover, the
ability of the Company to repurchase Senior Notes following a Change of
Control will be limited by the Company's then-available resources. The Change
of Control provisions may not be waived by the Board of Directors of the
Company or the Trustee without the consent of holders of at least a majority
in principal amount of the Senior Notes. See "--Amendment, Supplement and
Waiver."
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 and Remedies" 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--Substantial Current Leverage; Limitations on Ability to Service
Indebtedness" and "--Holding Company Structure; Dependence on Subsidiaries;
Limitations on Access to Cash Flow of the Subsidiaries."
50
<PAGE>
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 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
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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 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
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(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
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);
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(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 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;
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(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. 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.
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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, 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) or (iii) of the second paragraph of the "Limitation on
Incurrence of Indebtedness" covenant or clauses (i), (v), (vi), (vii),
(ix), (x) or (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 or clauses (i), (v), (vi), (vii),
(ix), (x) or (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
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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.
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; or
(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
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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 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
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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 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.
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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 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
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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 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
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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 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
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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. 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 Disqualified
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 Term Loan and
Revolving 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
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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 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 (and in the case of Mr. Osborn, as of the
date of issuance of the Senior Notes), 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 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
December 1, 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) 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 September
1, 1994, 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 $1,000 aggregate liquidation
preference of Senior Preferred Stock and 1.561 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) December
1, 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
2,500,000 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 "--Subordination as a Result of 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 March 1, June 1, September 1 and December 1
of each year, commencing on March 1, 1997. On or before December 1, 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 December
1, 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
December 1, 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 Limiting the Company's Ability to Repay the
Senior Notes and Senior Preferred Stock," "--Senior Notes--Certain Covenants"
and "Description of Certain Indebtedness." If any dividend (or portion
thereof) payable on any dividend payment date after December 1, 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.
In connection with the Offerings, the Company has committed to BKC that,
without BKC's prior written consent, (i) it will not pay cash dividends on
the Senior Preferred Stock on or prior to December 1, 2001 and (ii) it will
not pay cash dividends to holders of Common Stock until the Senior Notes are
repaid in full and the Senior Preferred Stock is redeemed or otherwise
retired. See "Risk Factors--BKC Consent to Issuance of Securities and to
Payment of Dividends."
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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 December 1, 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 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 December 1
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 December 1, 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.
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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 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.
Except as described under "--Change of Control," the Certificate of
Designation does not contain provisions that permit the holders of Senior
Preferred Stock to require the Company to redeem the Senior Preferred Stock
in the event of a takeover, recapitalization or similar restructuring,
including an issuer recapitalization or similar transaction with management.
Consequently, the Change of Control provisions will not afford any protection
in a highly leveraged transaction, including such a transaction initiated by
the Company, management of the Company or an affiliate of the Company, if
such transaction does not result in a Change of Control. The Change of
Control provisions may not be waived by the Board of Directors of the Company
without the consent of holders of at least a majority of the outstanding
Senior Preferred Stock. See "--Voting Rights."
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,
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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 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 December 1,
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 December 1, 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
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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 Senior 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.
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 after December 1, 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);
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(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
clause (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;
(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
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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 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. Harris Trust and Savings Bank 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
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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 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 December 1, 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 December
1, 2001, in additional Exchange Debentures, at the option of the Company) in
arrears on June 1 and December 1 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 "--Subordination as a Result of 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
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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.
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
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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 "--Subordination as a
Result of BKC Intercreditor Agreement."
REDEMPTION OF EXCHANGE DEBENTURES
Optional Redemption. The Exchange Debentures may not be redeemed at the
option of the Company prior to December 1, 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 December 1 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>
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.
Consequently, the Change of Control provisions will not afford any
protection in a highly leveraged transaction, including such a transaction
initiated by the Company, management of the Company or an affiliate of the
Company, if such transaction does not result in a Change of Control. In
addition, because the obligations of the Company with respect to the Exchange
Debentures are effectively subordinated to all secured indebtedness of the
Company and all obligations of the Company's subsidiaries, existing or future
secured indebtedness of the Company or obligations of the Company's
subsidiaries may prohibit the Company from repurchasing the Exchange
Debentures upon a Change of Control. Moreover, the ability of the Company to
repurchase Exchange Debentures following a Change of Control will be limited
by the Company's then-available resources. The Change of Control provisions
may not be waived by the Board of Directors of the Company or the Trustee
without the consent of holders of at least a majority in principal amount of
the Exchange Debentures. See "--Amendment, Supplement and Waiver."
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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 and Remedies" 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--Substantial Current Leverage;
Limitations in Ability to Service Indebtedness" and "--Holding Company
Structure; Dependence on Subsidiaries; Limitations on Access to Cash Flow of
the Subsidiaries."
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
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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 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
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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 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
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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 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;
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(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;
(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
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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 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) or (iii) of the second paragraph of the "Limitation on
Incurrence of Indebtedness" covenant or clauses (i), (v), (vi), (vii),
(ix), (x) or (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,
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(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 or clauses (i), (v), (vi), (vii),
(ix), (x) or (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.
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.
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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; or
(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.
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
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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 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.
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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 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)
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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."
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, 2,500,000 shares of Senior
Preferred Stock and 100,000 shares of undesignated, serial preferred stock.
In connection with the Offerings, the Company has committed to BKC that,
without BKC's prior written consent, (i) it will not pay cash dividends on
the Senior Preferred Stock on or prior to December 1, 2001 and (ii) it will
not pay cash dividends to holders of Common Stock until the Senior Notes are
repaid in full and the Senior Preferred Stock is redeemed or otherwise
retired. See "Risk Factors--BKC Consent to Issuance of Securities and to
Payment of Dividends."
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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, 1,046,827 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."
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
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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 cancel the Senior
Subordinated Warrants at any time prior to August 7, 1997 in the event of a
public offering of Common Stock prior to such date upon the prepayment of the
Senior Subordinated Notes. The Company currently intends to cancel the Senior
Subordinated Warrants in connection with the consummation of the Offerings
and the repayment of the Senior Subordinated Notes held by PMI. The Senior
Subordinated Warrants expire on February 7, 2006. See "Use of Proceeds" and
"Description of Certain Indebtedness--Senior Subordinated Notes."
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 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 and MCIT.
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Pursuant to the Stockholders Agreement, the TJC Investors (other than
MCIT) and BancBoston 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. 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.
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
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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;
provided, that the holders of the Preferred Stock outstanding prior to the
Offerings will be required to consent to the issuance of certain series of
Preferred Stock that are senior in right of payment of dividends or
liquidations. 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 100,000 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.
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 Note 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 approximately $3.4 million). See "Use of Proceeds."
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."
103
<PAGE>
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 approximately $3.4 million to PMI). In connection
with the prepayment of the Senior Subordinated Notes, the Company will cancel
the Warrants 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) $600,000 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 disinterested third 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 $1.5 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 of its acquisitions of 36 Burger King restaurants on February 7,
1996, the Company and ATCI (i) renewed
104
<PAGE>
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. The Company believes
that the terms of these leases are comparable to the terms it would obtain
from disinterested third parties for comparable sites.
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. In September
1996, the Company canceled 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.
105
<PAGE>
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."
106
<PAGE>
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.
The statements in the Units Prospectus under the caption "Certain Federal
Income Tax Considerations" have been examined by and passed upon for the
Company by Mayer, Brown & Platt, and are included in reliance upon such
examination and upon the authority of such counsel as experts on the Federal
income taxation matters set forth therein.
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
107
<PAGE>
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.
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 give 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 accounted for under the
purchase method of accounting 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
accounted for under the purchase method of accounting 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 number of shares
outstanding (in thousands)(20) ........ 1,124
Net income per common share(20) ....... $ 0.40
EBITDA ................................. $ 15,613 (18)
=========== ============== ============== =============
Adjusted EBITDA(19) ....................
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ADJUSTMENTS
--------- -----------
PRO FORMA PRO FORMA AS
SUBTOTAL OFFERINGS ADJUSTED
--------- ----------- --------------
<S> <C> <C> <C> <C>
Restaurant sales ....................... $195,692 $ 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 (15) 1,870
--------- ----------- --------------
Net income ............................. $ 1,547 $ 858 $ 2,405 (16)(17)
========= =========== ==============
Preferred stock dividends .............. 4,200
Weighted average number of shares
outstanding (in thousands)(20) ........ 1,047
Net income per common share(20) ....... $ (1.71)
========= ==============
EBITDA ................................. $ 23,411 (18)
========= =========== ==============
Adjusted EBITDA(19) .................... $ 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 number of shares
outstanding (in thousands)(20) ......... 1,124
Net income per common share(20) ........ $ 0.34
EBITDA .................................. $ 11,697 (18)
=========== ============== ============== =============
Adjusted EBITDA(19) .....................
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ADJUSTMENTS
--------- -----------
PRO FORMA PRO FORMA AS
SUBTOTAL OFFERINGS ADJUSTED
--------- ----------- --------------
<S> <C> <C> <C>
Restaurant sales ........................ $147,399 $ 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 (15) 1,507
--------- ----------- --------------
Net income .............................. $ 1,2190 $ 719 $ 1,938 (16)(17)
========= =========== ==============
Preferred stock dividends ............... 3,150
Weighted average number of shares
outstanding (in thousands)(20) ......... 1,047
Net income per common share(20) ........ $ (1.16)
========= ==============
EBITDA .................................. $ 17,814 (18)
========= =========== ==============
Adjusted EBITDA(19) ..................... $ 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 number of shares
outstanding (in thousands) (20) ....... 1,000
Net income per common share (20) ....... $ (0.98)
EBITDA .................................. $ 17,456 (18)
============= =============== ============= ===========
Adjusted EBITDA(19) .....................
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ADJUSTMENTS
------------- PRO FORMA AS
OFFERINGS ADJUSTED
------------- --------------
<S> <C> <C> <C>
Restaurant sales ........................ $ 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)
------------- --------------
Total other income (expense) .......... 194 (12,068)
------------- --------------
Income before provision for income taxes 194 (280)
Provision for income taxes .............. 80 (15) (104)
------------- --------------
Net income .............................. $ 114 $ (176) (16)(17)
============= ==============
Preferred stock dividends ............... 3,150
Weighted average number of shares
outstanding (in thousands) (20) ....... 1,047
Net income per common share (20) ....... $ (3.18)
============= ==============
EBITDA .................................. $ 17,713 (18)
============= ==============
Adjusted EBITDA(19) ..................... $ 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 number of shares
outstanding
(in thousands) (20) ........................
Net income per common share (20) ............
EBITDA ...................................... $ 21,372 (18)
=========== ============= ============= ===========
Adjusted EBITDA(19) .........................
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ADJUSTMENTS
-----------
PRO FORMA PRO FORMA
SUBTOTAL OFFERINGS AS ADJUSTED
--------- ----------- ------------
<S> <C> <C> <C>
Restaurant sales ............................ $201,720 $ 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)
--------- ----------- ------------
Total other income (expense) .............. (15,470) 430 (15,040)
--------- ----------- ------------
Income before provision for income taxes ... 120 430 550
Provision for income taxes(6) ............... 82 177 (15) 259
--------- ----------- ------------
Net income .................................. $ 38 $253 $ 291 (16)(17)
========= =========== ============
Preferred stock dividends ................... 4,200
Weighted average number of shares
outstanding
(in thousands) (20) ........................ 1,047
Net income per common share (20) ............ $ (3.73)
========= ============
EBITDA ...................................... $ 23,310 (18)
========= =========== ============
Adjusted EBITDA(19) ......................... $ 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) Represents the incremental tax effect of the Offerings pro forma
adjustments assuming an effective corporate tax rate of 41.0%.
(16) Does not reflect anticipated future increases in salary expenses
under the Company's employment agreements with its executive
officers. See "Management--Employment Agreements."
(17) 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 $10,015 (approximately $5,909 on an after-tax
basis), consisting of (i) an approximate $6,565 (approximately $3,873
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
to a related party of approximately $3,450 ($2,036 net of applicable
taxes) incurred in connection with the prepayment of the Senior
Subordinated Notes. See "Certain Transactions--Subordinated
Debtholders."
P-7
<PAGE>
(18) EBITDA represents operating income plus depreciation and
amortization. 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
herein to provide additional information with respect to the ability
of the Company to meet its future debt service, capital expenditure
and working capital requirements. In addition, management believes
that certain investors find EBITDA to be a useful tool for measuring
the ability of the Company to service its debt. 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.
(19) Adjusted EBITDA, on a pro forma basis, represents EBITDA plus
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 certain 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> <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>
Adjusted EBITDA is included 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.
Adjusted EBITDA may not be comparable to EBITDA measures reported by
other companies.
(20) Net income per share was computed by deducting in all periods
dividends payable to the holders of Original Preferred Stock and
deducting in the pro forma periods dividends payable to the holders
of Senior Preferred Stock and using the weighted average number of
shares of Common Stock outstanding assuming (i) the 1,000-for-1 stock
split of Common Stock pursuant to the Recapitalization, (ii) for the
pro forma period only, the issuance of 46,817 shares of Common Stock
in the Units Offering in connection with consummation of the
Offerings and (iii) for all periods in which there is positive
earnings available for the holders of Common Stock, the conversion of
immediately exercisable warrants and options to purchase 123,600
shares of Common Stock.
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 ............... -- 2,696 (3) 2,696
---------- -------------- -------------
Total other assets ................ 10,007 2,376 12,383
---------- -------------- -------------
TOTAL ASSETS ........................ $148,481 $ 4,726 $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 (5,106)(7) (4,511)
---------- -------------- -------------
Total stockholders' equity ....... 8,105 (5,106) 3,089
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY .............................. $148,481 $ 4,726 $153,207
---------- -------------- -------------
</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 the gross 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 prepayment of indebtedness under the Credit Agreement.
(5) Reflects the prepayment 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 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 end of the third quarter ended
September 30, 1996, such charge would have been approximately $8,501
(approximately $5,016 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 to a related party
of approximately $3,450 (approximately $2,036 on an after-tax basis)
in connection with the prepayment of the Senior Subordinated Notes.
See "Certain Transactions--Subordinated Debtholders."
P-10
APITAL PRINTING SYSTEMS]
<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%
============== ============ ============== ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 1,123,610 1,123,610
NET INCOME PER SHARE .......................... $ 0.40 $ 0.11
</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%
=============== ============ ============== ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 1,000,010 1,123,610
NET INCOME PER SHARE .......................... $ (0.98) $ 0.34
</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
--------------------------- ----------------------------
CURRENT LONG-TERM CURRENT LONG-TERM
------------ ------------- ------------- -------------
(UNAUDITED)
<S> <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
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
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
============ ============= ============= =============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------------
CURRENT LONG-TERM
------------ -------------
<S> <C> <C>
Term Loan A, at a variable interest rate,
8.687% at January 1, 1996, due 2002 ..... $3,250,000 $45,250,000
Term Loan B, at a variable interest rate,
9.187% at January 1, 1996, due 2004 ..... 200,000 19,800,000
Letter of Credit, at a variable interest
rate, 8.6871, at January 1, 1996,
due 2002 .................................
Franchise Acceptance Corporation
Limited note, at a variable interest
rate,
8.56% at January 1, 1996, due 2005 ......
Burger King Corporation note,
9.75%, due 1996 ..........................
Franchise Acceptance Corporation Limited
note, 9.86%, due 2006 ....................
Franchise Acceptance Corporation Revolving
Facility at a variable interest rate,
10.52% at September 30, 1996
due ......................................
------------ -------------
Total ..................................... $3,450,000 $65,050,000
============ =============
</TABLE>
Debt to related parties consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 JANUARY 1, 1996
--------------------------- ------------------------
CURRENT LONG-TERM CURRENT LONG-TERM
------------ ------------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Subordinated notes,
12.75%, due 2005 ......... $15,400,000 $15,400,000
Junior subordinated notes,
6.00%, due 2005 .......... 600,000 600,000
Senior subordinated notes,
12.5%, due 2005 .......... 15,000,000
------------ ------------- --------- -------------
Total ..................... $31,000,000 $16,000,000
============ ============= ========= =============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
DECEMBER 31, 1994
------------------------
CURRENT LONG-TERM
--------- -------------
<S> <C> <C>
Subordinated notes,
12.75%, due 2005 ......... $15,400,000
Junior subordinated notes,
6.00%, due 2005 .......... 600,000
Senior subordinated notes,
12.5%, due 2005 ..........
--------- -------------
Total ..................... $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
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)
<PAGE>
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 (common stock in
thousands):
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SHARES ISSUED VOTING
VALUE PER SHARES AND RIGHTS PER
SHARE AUTHORIZED OUTSTANDING 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 the date such
warrants are exercised in full or 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 90 to 180 days
after separation of the employee from the Company or 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.
In connection with its Recapitalization and the Offerings, the Company (i)
converted all of its authorized, issued and outstanding Class A Common Stock,
Class C Common Stock and Class D Common Stock into an equal number of shares
of Common Stock, (ii) converted all of its authorized, issued and outstanding
shares of Class B Common Stock into an equal number of Non-Voting Common
Stock and (iii) split all of its shares of Common Stock and Non-Voting Common
Stock on a 1,000 for 1 basis. All applicable share and per share data have
been restated to give effect to the stock split.
Net income per share was computed by deducting in all periods dividends
payable to the holders of Original Preferred Stock and using the weighted
average number of Common Stock outstanding.
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 $300,000 or 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 $600,000 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)
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
INVESTMENTS, INC. C&N DINING, INC.
FOR THE PERIOD FOR THE PERIOD
JANUARY 1, 1996 JANUARY 1, 1996
THROUGH FEBRUARY THROUGH FEBRUARY
6, 1996 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
INVESTMENTS, INC. C&N 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:
<TABLE>
<CAPTION>
<S> <C>
BUILDING IMPROVEMENTS ........................... 10-20 YEARS
FURNITURE, FIXTURES AND RESTAURANT EQUIPMENT ... 5-10 YEARS
</TABLE>
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>
#############################################################################
GRAPHIC OMITTED
IGT: "AMERI"
#############################################################################
<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
##################################################################
GRAPHIC OMITTED
IGT: "AMERKI"
##################################################################
% 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 25, 1996
PROSPECTUS
, 1996
############################################
GRAPHIC OMITTED
IGT: "AMERKI"
############################################
UNITS CONSISTING OF
$30,000,000
% SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2008
AND
SHARES OF COMMON STOCK
The 30,000 Units (the "Units"), each consisting of 40 shares of % Senior
Exchangeable Preferred Stock due 2008 (the "Senior Preferred Stock") of
AmeriKing, Inc. (the "Company") and 1.561 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 March 1, June 1, September 1 and December 1 of each year at
a rate of % per annum of the liquidation preference. On or before December
1, 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 December 1, 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 the event of a Change
of Control, there can be no assurance that the Company will have, or will
have access to, sufficient funds to repurchase the Senior Preferred Stock or
to pay the holders of the Senior Preferred Stock. In addition, the Company's
obligations under the Senior Preferred Stock are subject to the terms of the
BKC Intercreditor Agreement. See "Risk Factors--Subordination as a Result of
BKC Intercreditor Agreement" and "--Change of Control Provisions; Limitations
on Rights of Repayment" and "Description of Securities--Senior Preferred
Stock--Certain Covenants" and "--Redemption of Senior Preferred Stock--Change
of Control."
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 June 1 and December
1 of each year, commencing with the first such date to occur after the date
of exchange. On or before December 1, 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 December
1, 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 the event of a Change of
Control, there can be no assurance that the Company will have, or will have
access to, sufficient funds to repurchase the Exchange Debentures or to pay
the holders of the Exchange Debentures. In addition, the Company's
obligations under the Exchangeable Debentures are subject to the terms of the
BKC Intercreditor Agreement. See "Risk Factors--Subordination as a Result of
BKC Intercreditor Agreement" and "--Change of Control Provisions; Limitations
on Rights of Repayment" and "Description of Securities--Exchange
Debentures--Certain Covenants" and "--Mandatory Offers to Purchase Exchange
Debentures--Change of Control."
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
$2,200,000.
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
IGT: "BURGER"
#############################################################################
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 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 UNDERWRITER
HAS ADVISED THE COMPANY THAT IT CURRENTLY INTENDS TO MAKE A MARKET IN THE
SECURITIES, IT IS NOT OBLIGATED TO DO SO AND MAY DISCONTINUE SUCH MARKET
MAKING AT ANY TIME WITHOUT NOTICE. SEE "RISK FACTORS--ABSENCE OF PUBLIC
MARKET FOR THE SECURITIES."
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
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THE UNITS OFFERING
UNITS:
Securities Offered ... Units, consisting of an aggregate of
1,200,000 shares of Senior Preferred Stock
of the Company with an aggregate liquidation
preference of $30,000,000 and 46,817 shares
of Common Stock of the Company. Each Unit
will consist of 40 shares of Senior
Preferred Stock and 1.561 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 ... 1,200,000 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 March 1,
June 1, September 1 and December 1of each
year at a rate of % per annum of the
liquidation preference. On or before
December 1, 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--Subordination
as a Result of 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
December 1, 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.
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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 (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. Except as described under
"Description of Securities--Senior Preferred
Stock--Redemption of Senior Preferred
Stock--Change of Control," the certificate
of designations with respect to the Senior
Preferred Stock will be issued (the
"Certification of Designation") does not
contain provisions that permit the holder of
Senior Preferred Stock to require the
Company to redeem the Senior Preferred Stock
in the event of a takeover, recapitalization
or similar restructuring, including an
issuer recapitalization or similar
transaction with management. Consequently,
the Change of Control provisions will not
afford any protection in a highly leveraged
transaction, including such a transaction
initiated by the Company, management of the
Company or an affiliate of the Company, if
such transaction does not result in a Change
of Control. See "Description of
Securities--Senior Preferred
Stock--Redemption of Senior Preferred
Stock--Change of Control."
Covenants ............ 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.
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Maturity ............ December 1, 2008.
Interest ............. The Exchange Debentures will bear interest
at a rate of % per annum, payable
semi-annually in arrears on June 1 and
December 1 of each year, commencing with the
first such date to occur after the date of
exchange. On or before December 1, 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 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--Subordination as Result of BKC
Intercreditor Agreement,"
"Business--Obligations to Burger King
Corporation" and "Description of
Securities--Exchange Debentures--BKC
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 December 1,
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. Except as
described under "Description of
Securities--Exchange Debentures--Mandatory
Offers to Purchase Exchange
Debentures--Change of Control," the
indenture pursuant to which the Exchange
Debentures will be issued (the "Exchange
Debenture Indenture") does not contain
provisions that permit the holder of
Exchange Debentures to require the Company
to purchase or redeem the Exchange
Debentures in the event of a takeover,
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recapitalization or similar restructuring,
including an issuer recapitalization or
similar transaction with management.
Consequently, the Change of Control
provisions will not afford any protection in
a highly leveraged transaction, including
such a transaction initiated by the Company,
management of the Company or an affiliate of
the Company, if such transaction does not
result in a Change of Control. See
"Description of Securities--Exchange
Debentures--Mandatory Offers to Purchase
Exchange Debentures--Change of Control."
Certain Covenants .... 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.
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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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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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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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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 or Common 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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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
ALT-11
<PAGE>
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-12
<PAGE>
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-13
<PAGE>
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 for the
Securities."
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>
#############################################################################
GRAPHIC OMITTED
IGT: "AMERI"
#############################################################################
<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 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.
##################################################################
GRAPHIC OMITTED
IGT: "AMERKI"
##################################################################
UNITS
CONSISTING OF
$30,000,000
% SENIOR EXCHANGEABLE
PREFERRED STOCK DUE 2008
AND
SHARES
OF COMMON STOCK
PROSPECTUS
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
, 1996
<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 .. $ 40,734
NASD Filing Fee ....................................... 12,313
Printing and Engraving Expenses ....................... 300,000
Accounting Fees and Expenses .......................... 500,000
Attorneys' Fees and Expenses .......................... 700,000
Trustee Fees .......................................... 10,000
Rating Agency Fees .................................... 50,000
Blue Sky Fees and Expenses (including attorneys' fees) 20,000
Miscellaneous ......................................... 366,953
Total ............................................... $2,200,000
</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, 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. In addition, each of the Company's directors will
enter into indemnification agreements with the Company upon the consummation
of the Offerings.
(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
B-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.
B-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 25, 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 25th day of November, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------- ---------------------------------------------------
<S> <C>
*
- ----------------------------------- Managing Owner, Chairman and Chief Executive Officer
Lawrence E. Jaro (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>
B-3
<PAGE>
REGISTRATION NO. 333-04261
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- -----------------------------------------------------------------------------
EXHIBITS
TO
AMENDMENT NO. 6
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
- -----------------------------------------------------------------------------
AMERIKING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
<S> <C> <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 .............................................
<PAGE>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
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 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. ....................................................... *
4.21 JUNIOR SUBORDINATED NOTE, DATED NOVEMBER 30, 1994, FROM AMERIKING TO BANCBOSTON
INVESTMENTS, INC. IN THE AGGREGATE PRINCIPAL AMOUNT OF $600,000 .................... *
<PAGE>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
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 FROM AMERIKING TO PMI
MEZZANINE FUND, L.P. ............................................................... *
4.38++++ INDENTURE BETWEEN AMERIKING AND TRUSTEE WITH RESPECT TO SENIOR NOTES ................
4.39++++ FORM OF SENIOR NOTES (ATTACHED TO EXHIBIT 4.38) ......................................
4.40++++ INDENTURE BETWEEN AMERIKING AND TRUSTEE WITH RESPECT TO EXCHANGE DEBENTURES ......... *
<PAGE>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
4.41 INTENTIONALLY OMITTED ................................................................
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 DESIGNATION 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 BY AND AMONG AMERIKING, SCOTT
VASATKA AND DONALD STAHURSKI .......................................................
4.47++++ FORM OF AMENDMENT NO. 1 TO MANAGEMENT SUBSCRIPTION AGREEMENT .........................
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 ..................................................................... *
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 .......................................................................... *
<PAGE>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
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 ............... *
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 .......................................................... *
<PAGE>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
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 BY AND AMONG BKC, AMERIKING, AND THE TRUSTEE AS
REPRESENTATIVE OF THE HOLDERS OF SENIOR NOTES UNDER THE INDENTURE (ATTACHED TO
EXHIBIT 4.38) ......................................................................
10.48 FORM OF RESTATED EMPLOYMENT AND NON-INTERFERENCE AGREEMENT BETWEEN WILLIAM OSBORN AND
ENTERPRISES ........................................................................
10.49 FORM OF RECAPITALIZATION AGREEMENT AMONG AMERIKING AND THE STOCKHOLDERS APPEARING ON
THE SIGNATURE PAGES THERETO ........................................................
10.50 MEMORANDUM OF UNDERSTANDING BETWEEN BKC AND THE COMPANY ..............................
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>
- ------------
* 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.
===============================================================================
AMERIKING, INC.
----------------------------------------
$100,000,000
___% SENIOR NOTES DUE 2006
----------------------------------------
-------------------
UNDERWRITING AGREEMENT
DATED AS OF NOVEMBER ___, 1996
-------------------
Donaldson, Lufkin & Jenrette Jefferies & Company, Inc.
Securities Corporation
===============================================================================
<PAGE>
November___, 1996
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
JEFFERIES & COMPANY, INC.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
140 Broadway
New York, New York 10005
Ladies and Gentlemen:
AmeriKing, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell (the "Notes Offering") $100,000,000 principal amount of its ___%
Senior Notes due 2006 (the "Securities") to Donaldson, Lufkin & Jenrette
Securities Corporation and Jefferies & Company, Inc. (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 Fleet
National Bank, as Trustee (the "Trustee").
Concurrently with the Notes Offering, the Company is offering (the
"Units Offering" and, together with the Notes Offering, the "Offerings")
__________ Units (the "Units"), consisting of $30,000,000 aggregate liquidation
preference of ___% Senior Exchangeable Preferred Stock due 2008 (the "Senior
Preferred Stock") and ___________ shares of Common Stock (the "Common Stock").
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, the
"Act"), a registration statement on Form S-1 (File No. 333-04261), 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 Offerings 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
<PAGE>
and sell to each Underwriter, 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 a purchase
price of ____% of the principal amount thereof (the "Purchase Price"), plus
accrued interest thereon, if any, from December 3, 1996, to the date of payment
and delivery.
3. TERMS OF PUBLIC OFFERING. The Company is advised by each of you
that you propose (i) to make a public offering of your 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., Eastern Standard Time, on
December 3, 1996, or such other date as may be 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, New
York, New York 10022. 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 no 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., Eastern Standard
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 wire transfer or certified or official bank check or
checks payable in same day funds to the order of the Company or as the Company
may direct.
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 the Registration
Statement 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
2
<PAGE>
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 Section 5(e) 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 provide you, without charge, one signed copy of the
Registration Statement as first filed with the Commission and of each
amendment to it, including all exhibits, and to furnish to 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 to 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 many copies of the
Prospectus (and of any amendment or supplement to the Prospectus) as
such Underwriter or dealer may reasonably request; provided, however,
that in the event either Underwriter is required to deliver a
prospectus nine months or more after the date hereof, the Company
promptly will prepare, at such Underwriter's expense, such amendment
or amendments to the Registration Statement and supplements or
amendments to the Prospectus as may be necessary to comply with the
requirements of Section 10(a)(3) of the Act.
(f) If during the period specified in Section 5(e), any event
shall occur as a result of which, in the opinion of counsel to the
Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements
3
<PAGE>
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, promptly
(i) 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 (ii) to furnish to each of
you and to such dealers as you shall specify, such number of copies of
the Prospectus as so amended or supplemented as you or such dealers
may reasonably request; provided, however, that in the event either
Underwriter is required to deliver a prospectus nine months or more
after the date hereof, the Company promptly will prepare, at such
Underwriter's expense, such amendment or amendments to the
Registration Statement and supplements or amendments to the Prospectus
as may be necessary to comply with the requirements of Section
10(a)(3) of the Act.
(g) Prior to any public offering of the Securities, (i) to
cooperate with the Underwriters and counsel to 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 the
Underwriters may request, (ii) to continue such qualification in
effect so long as required for distribution of the Securities and
(iii) to file such consents to service of process or other documents
as may be necessary to effect such registration or qualification;
provided that in no event shall the Company be obligated to qualify to
do business in any jurisdiction where it is not now so qualified, or
to take any action which would subject it to general service of
process in any jurisdiction where it is not so subject.
(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.
(i) So long as required by the Indenture or the Exchange Act, to
file reports pursuant to Section 13 or 15(d) of the Exchange Act, and,
during the period of three years following the date of this Agreement,
to deliver to you, promptly upon their becoming available, (i) copies
of all current, regular and periodic reports filed by the Company with
any securities exchange or with the Commission or any governmental
authority succeeding to any of the Commission's functions, and (ii)
copies of each report or other publicly available information of the
Company mailed to the holders of the Securities and
4
<PAGE>
such other publicly available information concerning the
Company and its subsidiaries as you may request.
(j) Prior to the Closing Date, to furnish to you, as soon as they
have been prepared by the Company, a copy of any consolidated
financial statements of the Company for any period subsequent to the
period covered by the financial statements appearing in the
Registration Statement.
(k) To use the proceeds from the sale of the Securities in the
manner specified in the Registration Statement (and any amendments or
supplements thereto) under the caption "Use of Proceeds."
(l) Not to voluntarily claim, and to resist actively any attempts
to claim, the benefit of any usury laws against the holders of the
Securities.
(m) 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 Section 5(e);
(ii) the printing and delivery of the Prospectus and all
amendments or supplements to the Prospectus during the period
specified in Section 5(e);
(iii) the printing and delivery of this Agreement, the
Indenture, the Securities, the Preliminary and Supplemental Blue
Sky Memoranda and all other agreements, memoranda, correspondence
and other documents printed and delivered in connection herewith
and with the Notes Offering (including, in each case, any
disbursements of your counsel relating to such printing and
delivery);
(iv) the issuance and delivery by the Company of the
Securities;
(v) 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 your counsel relating to such registration or qualification
and memoranda relating thereto);
(vi) filings and clearance with the National Association of
Securities Dealers, Inc. in connection with the Notes Offering;
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(vii) furnishing such copies of the Registration Statement,
each preliminary prospectus and the Prospectus (including all
documents incorporated by reference therein) and all amendments
and supplements thereto as may be requested for use in connection
with the offering or sale of the Securities by you or by dealers
to whom Securities may be sold;
(viii) the rating of the Securities by rating agencies, if
any;
(ix) all fees and expenses (including fees and expenses of
counsel) of the Company in connection with approval of the
Securities by the Depository Trust Company for "book-entry"
transfer; and
(x) the performance by the Company of its other obligations
under this Agreement.
(n) If this Agreement shall be terminated pursuant to any of the
provisions hereof (other than a default by the Underwriters) or if for
any reason the Company shall be unable or unwilling to perform its
obligations hereunder, the Company shall, except as otherwise agreed
by the parties hereto, reimburse the Underwriters for the fees and
expenses to be paid or reimbursed by the Company pursuant to Section
5(m), and reimburse the Underwriters for all out-of-pocket expenses
(including the fees and expenses of counsel to the Underwriters)
reasonably incurred by the Underwriters or by dealers to whom
Securities may be sold in connection with the transactions
contemplated by this Agreement.
(o) During the period beginning on the date of this Agreement and
continuing to and including the Closing Date, not to offer, sell,
contract to sell or otherwise dispose of any securities of the Company
or warrants to purchase securities of the Company substantially
similar to the Securities (other than (i) the Securities and (ii) the
Units and the Senior Preferred Stock and the Common Stock comprising
the Units), without your prior written consent.
(p) Not to distribute any offering material in connection with
the offering and sale of the Securities other than the Registration
Statement, the Prospectus, and any preliminary prospectus.
(q) 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.
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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 Section 6(b) do
not apply to statements or omissions in the Registration Statement or
the Prospectus based upon information relating to either Underwriter
furnished to the Company in writing by such Underwriter 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) Each of the Company and its subsidiaries (i) is duly
incorporated, validly existing as a corporation and in good standing
under the laws of its jurisdiction of incorporation, (ii) has full
corporate power and authority to carry on its business as it is
currently being conducted and to own, lease and operate its properties
and (iii) is duly qualified and in good standing as a foreign
corporation registered 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 condition
(financial or other), business, property, prospects, net worth or
results of operations of the Company and its subsidiaries taken as a
whole (a "Material Adverse Effect").
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(e) (i) All of the outstanding shares of capital stock of the
Company and each of its subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable, are not and, as a
result of the Notes Offering, will not be, subject to preemptive or
similar rights, (ii) except as described in the Prospectus, all shares
of the Company's subsidiaries' capital stock are owned by the Company,
directly or indirectly, free and clear of any security interest,
claim, lien or encumbrance and (iii) except as described in the
Prospectus, there are no outstanding rights, warrants or options to
acquire, or instruments convertible into or exchangeable for, any
capital stock or other equity interest in the Company or any of its
subsidiaries.
(f) Neither the Company nor any of its subsidiaries is (i) in
violation of its respective charter or bylaws or (ii) in default in
any material respect 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.
(g) None of (i) the execution, delivery or performance by the
Company of its obligations under this Agreement or the Indenture, (ii)
the issuance and sale of the Securities by the Company and (iii) the
consummation by the Company of the transactions described in the
Prospectus under the caption "Use of Proceeds," will conflict with or
constitute a breach of any of the terms or provisions of, or a default
under, or result in the imposition of a lien or encumbrance on any
properties of the Company or any of its subsidiaries, or an
acceleration of indebtedness pursuant to, (A) the charter or bylaws of
the Company or any of its subsidiaries, (B) any bond, debenture, note,
indenture, 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 their property is bound, the violation of which would
reasonably be expected to result in a Material Adverse Effect, or (C)
any law or administrative regulation applicable to the Company, any of
its subsidiaries or any of their assets or properties, or any
judgment, order or decree of any court or governmental agency or
authority entered in any proceeding to which the Company or any of its
subsidiaries was or is now a party or to which any of them or their
respective properties may be subject.
(h) No consent, approval, authorization or order of, or filing or
registration with, any regulatory body, administrative agency, or
other governmental agency (except as securities or Blue Sky laws of
the various states may require)
8
<PAGE>
that has not been made or obtained is required for (i) the execution,
delivery and performance of the Company's obligations under this
Agreement or the Indenture, (ii) the valid issuance and sale of the
Securities or (iii) the performance by the Company of the transactions
contemplated hereby or by the Indenture. No consents or waivers from
any person are required to consummate the transactions contemplated by
this Agreement, the Indenture, the Prospectus or the Registration
Statement, other than such consents and waivers as have been or will
be obtained prior to the Closing Date.
(i) The Company has all necessary corporate power and authority
to enter into and perform its obligations under this Agreement and the
Indenture and to issue, sell and deliver the Securities to
Underwriters.
(j) This Agreement has been duly authorized and validly executed
by the Company and (assuming the due execution and delivery thereof by
you) is a legally valid and binding obligation of the Company,
enforceable against it in accordance with its terms, except as the
enforceability thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which
affect the enforcement of creditors' rights generally, (ii) limited by
general principles of equity (whether considered in a proceeding at
law or in equity) and (iii) limited by securities laws prohibiting or
limiting the availability of, and public policy against,
indemnification or contribution.
(k) The Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended.
(l) The Company has duly authorized the Indenture and, when
executed and delivered (assuming the due authorization, execution and
delivery thereof by the Trustee), the Indenture will be a legally
valid and binding obligation of the Company, enforceable against it in
accordance with its terms, except as the enforceability thereof may be
(i) subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement
of creditors' rights generally and (ii) limited by general principles
of equity (whether considered in a proceeding at law or in equity).
(m) The Company has duly authorized the Securities and, when
issued and authenticated in accordance with the terms of the Indenture
and delivered to and paid for by the Underwriters in accordance with
the terms hereof, the Securities will conform to the description
thereof in the Prospectus and will be the legally valid and binding
obligations of the Company, enforceable against it in accordance with
their terms, except as the enforceability
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<PAGE>
thereof may be (i) subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors' rights generally and (ii) limited by general
principles of equity (whether considered in a proceeding at law or in
equity).
(n) There is (i) no action, suit or proceeding before or by any
court, arbitrator or governmental agency, body or official, domestic
or foreign, now pending or, to the knowledge of the Company,
threatened or contemplated to which the Company or any of its
subsidiaries is or may be a party or to which the business or property
of the Company or any of its subsidiaries is subject, (ii) no statute,
rule, regulation or order that has been enacted, adopted or issued by
any governmental agency or, to the best knowledge of the Company,
proposed by any governmental body and (iii) no injunction, restraining
order or order of any nature by a federal or state court of competent
jurisdiction to which the Company or any of its subsidiaries is or may
be subject issued that, in the case of clauses (i), (ii) and (iii)
above, (A) is required to be disclosed in the Registration Statement
or the Prospectus and that is not so disclosed, (B) might have a
Material Adverse Effect, (C) would interfere with or adversely affect
the issuance of the Securities or (D) in any manner draw into question
the validity of this Agreement, the Indenture or the Securities.
(o) No holder of any security of the Company or any of its
subsidiaries has any right or, by reason of the execution by the
Company of this Agreement or the Indenture or the consummation of the
transactions contemplated hereby or thereby, will have the right to
require registration of any security of the Company.
(p) 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 is involved
in any material labor dispute nor, to the knowledge of the Company or
any of its subsidiaries, is any material labor dispute threatened
which, if such dispute were to occur, could have a Material Adverse
Effect.
(r) Neither the Company nor any of its subsidiaries has violated
any safety or similar law applicable to its business, 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 of 1974, as amended ("ERISA"), or the rules and regulations
promulgated thereunder, except for such instances of noncompliance
that,
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either singly or in the aggregate, could not have a Material
Adverse Effect.
(s) Each of the Company and its subsidiaries is in compliance
with all applicable existing federal, state, local and foreign laws
and regulations relating to the protection of human health or the
environment or imposing liability or standards of conduct concerning
any Hazardous Material (as defined below) (collectively,
"Environmental Laws"), except for such instances of noncompliance
that, either singly or in the aggregate, could not have a Material
Adverse Effect. The term "Hazardous Material" means (i) any "hazardous
substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (ii) any
"hazardous waste" as defined by the Resource Conservation and Recovery
Act of 1976, as amended, (iii) any petroleum or petroleum product,
(iv) any polychlorinated biphenyl and (v) any pollutant or contaminant
or hazardous, dangerous or toxic chemical, material, waste or
substance regulated under or within the meaning of any other
Environmental Law. There is no alleged liability, or, to the best
knowledge and information of the Company, potential liability
(including, without limitation, alleged or potential liability for
investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, or
penalties) of the Company or any of its subsidiaries arising out of,
based on, or resulting from (A) the presence or release into the
environment of any Hazardous Material at any location currently or
previously owned by the Company or any of its subsidiaries or at any
location currently or previously used or leased by the Company or any
of its subsidiaries or (B) any violation or alleged violation of any
Environmental Law, except in each case with respect to clauses (A) and
(B), alleged or potential liabilities that, singly or in the
aggregate, could not have a Material Adverse Effect.
(t) Each of the Company and its subsidiaries owns or possesses
the right to use the patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks and trade names
(collectively, "Intellectual Property") presently employed by it in
connection with the businesses it now operates, except where the
failure to own or possess such Intellectual Property could not, either
singly or in the aggregate, have a Material Adverse Effect, and
neither the Company nor any of its subsidiaries has received any
notice that its use of any Intellectual Property allegedly infringes
upon, or conflicts with, rights asserted by others, except for such
instances that, singly or in the aggregate, could not have a Material
Adverse Effect if an unfavorable decision, judgment, ruling or
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finding is rendered against the Company or any of its subsidiaries.
(u) Except as set forth in the Prospectus, all tax returns
required to be filed by each of the Company and its subsidiaries in
any jurisdiction have been filed, and all material taxes (including,
but not limited to, withholding taxes, penalties and interest,
assessments, fees and other charges due or claimed to be due from any
taxing authority) have been paid other than those (i) being contested
in good faith and for which adequate reserves have been provided, or
(ii) currently payable without penalty or interest.
(v) Except as set forth in the Prospectus or that, singly or in
the aggregate, could not have a Material Adverse Effect, (i) each of
the Company and its subsidiaries has (A) such permits, licenses,
franchises and authorizations of governmental or regulatory
authorities ("Permits") as are necessary to own, lease and operate its
properties and to conduct its business as presently conducted, and (B)
fulfilled and performed all of its material obligations with respect
to the Permits, and (ii) no event has occurred that could allow, or
after notice or lapse of time could allow, revocation or termination
of any Permit or that could result in any other material impairment of
the rights granted to the Company or any of its subsidiaries under any
Permit, and the Company has no reason to believe that any governmental
body or agency is considering limiting, suspending or revoking any
Permit.
(w) Except as set forth in the Prospectus or that, singly or in
the aggregate, could not have a Material Adverse Effect, (i) each of
the Company and 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 Prospectus as being owned by it, (ii) each lease to
which the Company or any of its subsidiaries is a party is valid and
binding and no default has occurred or is continuing thereunder, and
(iii) each of the Company and its subsidiaries enjoys peaceful and
undisturbed possession under all such leases to which it is a party as
lessee.
(x) Each of the Company and its subsidiaries maintains adequate
insurance for its businesses and the value of its properties
(including, without limitation, public liability insurance, third
party property damage insurance and replacement value insurance) and
all such insurance is outstanding and in force as of the date of this
Agreement.
(y) The financial statements, together with the 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
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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, and such financial 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. The pro forma financial
statements, together with the related schedules and notes, forming
part of the Registration Statement and the Prospectus (and any
amendment or supplement thereto) are, in all material respects,
accurately presented and prepared in good faith on the basis of the
assumptions described therein, and such assumptions are reasonable and
the adjustments used therein are appropriate to give effect to the
transactions and circumstances referred to therein.
(z) Each of the Company and its subsidiaries maintains a system
of internal accounting controls sufficient to provide 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 accountability for
assets; and
(iii) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate
action is taken with respect thereto.
(aa) Subsequent to the dates for which information is given in
the Registration Statement and the Prospectus and up to the Closing
Date, unless set forth in the Registration Statement and the
Prospectus:
(i) none of the Company or its subsidiaries has incurred any
liabilities or obligations, direct or contingent, which are
material, singly or in the aggregate, to the Company and its
subsidiaries taken as a whole, nor entered into any material
transactions not in the ordinary course of business;
(ii) there has not been any decrease in the Company's
capital stock or the capital stock of any of the Company's
subsidiaries or any increase in long-term indebtedness to meet
working capital requirements or any material increase in
short-term indebtedness of the Company or any of its subsidiaries
or any payment of or declaration to pay any dividends or any
other distribution with respect to the Company's or any of its
subsidiaries' capital stock, as the case may be; and
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(iii) there has not been any event or series of events that
would have a Material Adverse Effect.
(bb) Prior to and after the issuance of the Securities and the
Units, (i) the present fair salable value of the assets of the Company
and its subsidiaries exceeded and will exceed the amount that will be
required to be paid on, or in respect of, the debts and other
liabilities (including contingent liabilities) of the Company and its
subsidiaries as they become absolute and matured, (ii) the assets of
the Company and its subsidiaries do not constitute and will not
constitute unreasonably small capital to carry out their businesses as
conducted or as proposed to be conducted, and (iii) the Company and
its subsidiaries do not intend to, or believe that they will, incur
debts or other liabilities beyond their ability to pay such debts and
liabilities as they mature. The Company does not intend to, and does
not intend to permit any of its subsidiaries to, incur debts or other
liabilities beyond their respective ability to pay such debts and
liabilities as they mature.
(cc) 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.
(dd) Deloitte & Touche LLP are independent public accountants
with respect to the Company as required by the Act.
(ee) The Company has no direct or indirect subsidiaries other
than those listed on Exhibit 21 to the Registration Statement.
(ff) The execution and delivery of this Agreement, the Indenture
and the sale of the Securities will not involve any prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975
of the Code.
(gg) The Company has complied with all provisions of Section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls either Underwriter
within the meaning of Section 15 of the Act or Section 20 of 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
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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 either
Underwriter furnished in writing to the Company by such Underwriter
expressly for use therein; provided, however, that the indemnification
contained in this Section 7(a) with respect to any preliminary
prospectus shall not inure to the benefit of either Underwriter (or to
the benefit of any person controlling such Underwriter) on account of
any such loss, claim, damage, liability or judgment (i) arising from
the sale of the Securities by such Underwriter to any person if a copy
of the Prospectus shall not have been delivered or sent to such
person, at or prior to the written confirmation of such sale, and the
untrue statement or alleged untrue statement or omission or alleged
omission of a material fact contained in such preliminary prospectus
was corrected in the Prospectus, provided that the Company has
delivered the Prospectus to the Underwriters in requisite quantity on
a timely basis to permit such delivery or sending or (ii) resulting
from the use by such Underwriter of any registration statement or
prospectus, or any amendment or supplement thereto, referred to in
Section 5(e) when, under Section 10 hereof, such Underwriter was not
permitted to do so; provided further, however, that the foregoing
exceptions in clauses (i) and (ii) shall not affect the indemnity with
respect to any other Underwriter not otherwise subject to such
exceptions.
(b) In case any action shall be brought against either
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. Either 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 reasonable 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
has been specifically authorized in writing by the Company, (ii) the
Company has 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
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<PAGE>
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 the
written consent of the Company but, if settled with the Company's
written consent, the Company agrees to indemnify and hold harmless
such Underwriter and any such controlling person from and against any
loss or liability by reason 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 them
within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act (collectively, the "Company Indemnified Parties"), 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 such Underwriter expressly for use
in the Registration Statement, the Prospectus or any preliminary
prospectus. In case any action shall be brought against any Company
Indemnified Party based on the Registration Statement, the Prospectus
or any preliminary prospectus in respect of which indemnity may be
sought against an Underwriter, such 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 Indemnified Parties
shall have the rights and duties given to such 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
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<PAGE>
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 of the
Securities (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 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 losses,
claims, damages, liabilities or judgments of an indemnified party
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 discounts and commissions received by it 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 principal amount of
17
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Securities purchased by each of the Underwriters hereunder and not
joint.
(e) The Company hereby designates The Jordan Company, 9 West 57th
Street, New York, New York 10019, as its authorized agent, upon which
process may be served in any action, suit or proceeding which may be
instituted in any state or federal court in the State of New York by
either Underwriter or person controlling such Underwriter asserting a
claim for indemnification or contribution under or pursuant to this
Section 7, and the Company will accept the jurisdiction of such court
in such action, and waive, to the fullest extent permitted by
applicable law, any defense based upon lack of personal jurisdiction
or venue. A copy of any such process shall be sent or given to the
Company, at the address for notices specified in Section 11(a) hereof.
(f) The indemnity and contribution agreements contained in this
Section 7 are in addition to any liability which the indemnifying
persons may otherwise have to the indemnified persons referred to
above.
8. CONDITIONS OF THE 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 date
hereof and on the Closing Date, with the same force and effect as if
made on and as of the date hereof and the Closing Date, respectively.
The Company shall have performed or complied with all of the
agreements and satisfied all conditions to be performed, complied with
or satisfied by it on or prior to 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.),
Eastern Standard 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 the rating
accorded any of the Company's
18
<PAGE>
securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2)
under the Act.
(d) (i) The Prospectus shall have been printed and copies
distributed to the Underwriters not later than 9:00 a.m., Eastern
Standard Time, on ________________, 1996, or at such later date and
time as the Underwriters may approve in writing; and
(ii) no injunction, restraining order or order of any nature
by a federal or state court of competent jurisdiction shall have
been issued as of the Closing Date which would prevent the
issuance of the Securities.
(e) (i) Since the date of the latest balance sheet included in
the Registration Statement and the Prospectus, there shall not have
been any event that had a Material Adverse Effect, or any development
involving a prospective change that could have a Material Adverse
Effect, whether or not arising in the ordinary course of business;
(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
change, in the capital stock or in the long-term debt of the
Company and its subsidiaries from that set forth in the
Registration Statement and the Prospectus;
(iii) the Company and its subsidiaries shall have no
material liability or obligation, direct or contingent, other
than those reflected in the Registration Statement and the
Prospectus; and
(iv) on the Closing Date you shall have received
certificates dated the Closing Date, signed on behalf of the
Company by the Chief Executive Officer and the Chief Financial
Officer of the Company, confirming all of the matters set forth
in Sections 8(a), (b), (c), (d) and (e) of this Agreement with
respect to the Company.
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel to you) dated the Closing Date, of
Mayer, Brown & Platt, counsel to the Company (provided that the
opinions with respect to subsidiaries of the Company incorporated in
the states of Colorado, Illinois, Michigan and Ohio will be provided
by Freeborn & Peters), to the effect that:
(i) based on telephonic confirmation from the Commission,
the Registration Statement has become effective under the Act
and, to the knowledge of such counsel, no stop order suspending
its effectiveness has
19
<PAGE>
been issued and no proceedings for that purpose are pending
before, threatened or contemplated by the Commission;
(ii) the Registration Statement (including any Registration
Statement filed under Rule 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;
(iii) each of the Company and its subsidiaries is duly
incorporated, validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has the
full corporate power and authority required to carry on its
business as it is currently being conducted and to own, lease and
operate its properties;
(iv) each of the Company and its subsidiaries is duly
qualified and in good standing as a foreign corporation
registered 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;
(v) all of the outstanding shares of capital stock of the
Company and each of its subsidiaries have been duly authorized
and validly issued, are fully paid and non-assessable, are not
subject to preemptive or similar rights and all shares of the
Company's subsidiaries' capital stock are owned, directly or
indirectly, by the Company, to the best of such counsel's
knowledge, free and clear of any security interest, claim, lien
or encumbrance;
(vi) to such counsel's knowledge, except as disclosed in the
Prospectus, there are no outstanding rights, warrants or options
to acquire, or instruments convertible into or exchangeable for,
any capital stock, or other equity interest, in the Company or
any of its subsidiaries;
(vii) neither the Company nor any of its subsidiaries is in
violation of its respective charter or bylaws and, to the
knowledge of such counsel 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
20
<PAGE>
any of its subsidiaries is a party or by which it or any of its
subsidiaries or their respective property is bound;
(viii) none of (A) the execution, delivery or performance by
the Company of this Agreement or the Indenture, (B) the issuance
and sale of the Securities by the Company and (C) the
consummation by the Company of the transactions described in the
Prospectus under the caption "Use of Proceeds," will conflict
with or constitute a breach of any of the terms or provisions of,
or a default under, or result in the imposition of a lien or
encumbrance on any properties of the Company or any of its
subsidiaries, or an acceleration of indebtedness pursuant to, (1)
the charter or bylaws of any of the Company or the Company's
subsidiaries, (2) any bond, debenture, note, indenture, mortgage,
deed of trust or other agreement or instrument known to such
counsel after due inquiry to which the Company or any of its
subsidiaries is a party or by which any of them or their property
is bound, or (3) to the best of such counsel's knowledge, any law
or administrative regulation applicable to the Company, any of
its subsidiaries or any of their assets or properties, or any
judgment, order or decree of any court or governmental agency or
authority entered in any proceeding to which the Company or any
of its subsidiaries was or is now a party or to which any of them
or their respective properties may be subject and which is known
to such counsel;
(ix) no consent, approval, authorization or order of, or
filing or registration with, any regulatory body, administrative
agency, or other governmental agency (except as securities or
Blue Sky laws of the various states may require) that has not
been made or obtained is required for (A) the execution, delivery
and performance of this Agreement or the Indenture, (B) the valid
issuance and sale of the Securities or (C) the performance by the
Company of the transactions contemplated hereby or by the
Indenture, such as to which the failure to be obtained or made
would not reasonably be expected, either singly or in the
aggregate, to have a Material Adverse Effect;
(x) to such counsel's knowledge, no consents or waivers from
any person are required to consummate the transactions
contemplated by this Agreement or the Indenture, other than such
consents and waivers as have been or will be obtained prior to
the Closing Date;
(xi) the Company has all necessary corporate power and
authority to enter into and perform its obligations under this
Agreement and the Indenture and to issue, sell
21
<PAGE>
and deliver the Securities to the Underwriters to be sold by the
Underwriters pursuant to this Agreement;
(xii) this Agreement has been duly authorized and validly
executed by the Company and (assuming the due execution and
delivery thereof by you) is a legally valid and binding
obligation of the Company, enforceable against it in accordance
with its terms, except as the enforceability thereof may be (A)
subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the
enforcement of creditors' rights generally, (B) limited by
general principles of equity (whether considered in a proceeding
at law or in equity) and (C) limited by securities laws
prohibiting or limiting the availability of, and public policy
against, indemnification or contribution;
(xiii) the Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended;
(xiv) the Company has duly authorized the Indenture and,
when executed and delivered (assuming due authorization,
execution and delivery of the Indenture by the Trustee), the
Indenture will be a legally valid and binding obligation of the
Company, enforceable against it in accordance with its terms,
except as the enforceability thereof may be (A) subject to
applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws in effect which affect the enforcement of creditors
rights generally and (B) limited by general principles of equity
(whether considered in a proceeding at law or in equity);
(xv) the Company has duly authorized the Securities and,
when issued and authenticated in accordance with the terms of the
Indenture and delivered to and paid for by the Underwriters in
accordance with the terms of this Agreement, the Securities will
conform to the description in the Prospectus, and will be the
legally valid and binding obligations of the Company, enforceable
against it in accordance with their terms, except as the
enforceability thereof may be (A) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar
laws in effect which affect the enforcement of creditors' rights
generally and (B) limited by general principles of equity
(whether considered in a proceeding at law or in equity);
(xvi) to the best knowledge of such counsel, after due
inquiry, there is (i) no action, suit or proceeding before or by
any court, arbitrator or governmental agency, body or official,
domestic or foreign, now pending, threatened or contemplated to
which the Company or any of its subsidiaries is or may be a
22
<PAGE>
party or to which the business or property of the Company or any
of its subsidiaries is or may be subject, (ii) no statute, rule,
regulation or order that has been enacted, adopted or issued by
any governmental agency or proposed by any governmental body, or
(iii) no injunction, restraining order or order of any nature by
a federal or state court of competent jurisdiction applicable to
the Company or any of its subsidiaries has been issued that, in
the case of clauses (i), (ii) and (iii) above, (a) is required to
be disclosed in the Registration Statement or the Prospectus and
that is not so disclosed, (b) would interfere with or adversely
affect the issuance of the Securities, or (c) might invalidate
any provision or the validity of this Agreement, the Indenture or
the Securities;
(xvii) 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 any security of the Company;
(xviii) the statements under the captions "Description of
Securities," "Description of Certain Indebtedness," and "Certain
Transactions" in the Prospectus, as amended or supplemented, and
Item 14 and, assuming the accuracy of the representations and
warranties of the Company at the time of the transactions
referred to therein, which such counsel has no reason to believe
are inaccurate, Item 15 of Part II of the Registration Statement,
insofar as such statements constitute a summary of legal matters,
documents or proceedings referred to therein, present fairly the
information called for with respect to such legal matters,
documents or proceedings; and
(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.
In addition, such counsel shall state that it has participated in
conferences with certain officers and other representatives of the
Company, representatives of the Company's accountants, the
Underwriters' representatives and counsel to the Underwriters, at
which conferences the contents of the Registration Statement and
Prospectus and any amendments or supplements thereto, and related
matters were discussed, and, although such counsel has not
independently verified and is not passing upon and assumes no
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and the Prospectus,
and any amendment or supplement thereto, no facts have come to such
counsel's attention which led it to believe that the Registration
Statement as of the effective date or on the date
23
<PAGE>
of such opinion contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary
to make the statements contained therein not misleading, and that the
Prospectus, as of the date thereof or on the date of such opinion,
contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the
statements contained therein, in light of the circumstances under
which they were made, not misleading (it being understood that such
counsel need express no view with respect to the financial statements
and data and related notes, the financial statement schedules and
other financial, statistical and accounting data included in the
Registration Statement and Prospectus).
(g) You shall have received on the Closing Date an opinion, dated
the Closing Date, of Latham & Watkins, counsel to you, in form and
substance reasonably satisfactory to you, and the Company shall have
provided Latham & Watkins such papers and information as it requests
to enable it to pass upon the matters contained in such opinion.
(h) You shall have received letters from Deloitte & Touche LLP,
independent public accountants, on the date hereof and on the Closing
Date, in form and substance satisfactory to you, with respect to the
financial statements and certain financial information contained in
the Registration Statement and the Prospectus.
(i) The Company and the Trustee shall have entered into the
Indenture and you shall have received counterparts, conformed as
executed thereof.
(j) The Company shall have fully performed or complied with all
of the agreements contained in this Agreement and required to be
performed or complied with by the Company on or prior to the Closing
Date.
(k) On the Closing Date, the Units Offering shall be consummated
on substantially the same terms as those set forth in the Registration
Statement and the Prospectus.
9. EFFECTIVE DATE OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the later of (i) the execution of this Agreement or (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:
(a) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any
24
<PAGE>
adverse change or development involving a prospective adverse change
which would cause a Material Adverse Effect, on the earnings, affairs,
or business prospects of the Company or any of its subsidiaries,
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;
(b) Any outbreak or escalation of hostilities or other national
or international calamity or crisis or material change in economic
conditions, if the effect of such outbreak, escalation, calamity,
crisis or change on the financial markets of the United States or
elsewhere would, in your judgment, be material and adverse and make it
impracticable to market the Securities on the terms and in the manner
contemplated in the Prospectus;
(c) The suspension or material limitation of trading in
securities on the New York Stock Exchange, the American Stock Exchange
or the Nasdaq National Market or the limitation on prices for
securities on any such exchange or National Market System;
(d) 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 causes or will
cause a Material Adverse Effect;
(e) The declaration of a banking moratorium by either federal or
New York State authorities;
(f) 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; or
(g) Any of the Company's securities shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization, provided that in the case
of such "watch list" placement, termination shall be permitted only if
such placement would, in your judgment, make it impracticable or
inadvisable to market the Securities or to enforce contracts for the
sale of the Securities or materially impair the investment quality of
the Securities.
If on the Closing Date either of the Underwriters shall fail or refuse
to purchase the Securities which it has agreed to purchase hereunder on such
date and arrangements satisfactory to the non-defaulting Underwriter 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 such
non-defaulting Underwriter. In any such case that does not result in
termination of this Agreement, such non-defaulting Underwriter or
25
<PAGE>
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 by
it under this Agreement.
10. AGREEMENT OF THE UNDERWRITERS.
Each Underwriter agrees, severally and not jointly, that, upon its
receipt of any written notice from the Company of the existence of any fact or
the happening of any event that requires the making of any additions to or
changes in the Registration Statement or the Prospectus or any amendment or
supplement thereto in order that such document will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances
existing as of the date such document was delivered, not misleading, such
Underwriter shall forthwith discontinue disposition of the Securities pursuant
to such document until (i) such Underwriter receives from the Company copies of
an amended or supplemented document that the Company states in writing may be
used by such Underwriter or (ii) such Underwriter is advised in writing by the
Company that the use of such document may be resumed.
11. MISCELLANEOUS.
(a) Notices given pursuant to any provision of this Agreement
shall be addressed as follows: (i) if to the Company, to AmeriKing,
Inc., 2215 Enterprise Drive, Suite 1502, Westchester, Illinois 60154,
Attention: Chief Financial Officer, with a copy to Mayer, Brown &
Platt, 1675 Broadway, Suite 1900, New York, New York 10019, Attention:
James B. Carlson, and (ii) if to the Underwriters, (A) to Donaldson,
Lufkin & Jenrette Securities Corporation, 140 Broadway, New York, New
York 10005, Attention: Syndicate Department and Compliance Department
and (B) to Jefferies & Company, Inc., 11100 Santa Monica Boulevard,
Los Angeles, California 90025, Attention: Syndicate Department and
Compliance Department, with a copy to Latham & Watkins, 885 Third
Avenue, New York, New York 10022, Attention: Philip E. Coviello, or in
any case to such other address as the person to be notified may have
requested in writing.
(b) The respective indemnities, contribution agreements,
representations, warranties and other statements 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 such person, (ii)
acceptance of the
26
<PAGE>
Securities and payment for them under this Agreement and (iii)
termination of this Agreement.
(c) 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 not include a purchaser of the Securities from either
of the Underwriters merely because of such purchase.
(d) This Agreement shall be construed, interpreted and the rights
of the parties determined in accordance with the laws of the State of
New York without reference to its choice of law provisions.
(e) This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
27
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
AMERIKING, INC.
By:
--------------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
-------------------------------
Name:
Title:
JEFFERIES & COMPANY, INC.
By:
-------------------------------
Name:
Title:
28
<PAGE>
SCHEDULE I
Principal Amount
of Securities
Underwriters to be Purchased
- ------------ ----------------
Donaldson, Lufkin & Jenrette
Securities Corporation ............................... $
Jefferies & Company, Inc. ............................... $
------------
$100,000,000
===============================================================================
AMERIKING, INC.
----------------------------------------
______ UNITS
CONSISTING IN THE AGGREGATE OF
$30,000,000
___% SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2008
AND
____ SHARES OF COMMON STOCK
----------------------------------------
-------------------
UNDERWRITING AGREEMENT
DATED AS OF NOVEMBER ___, 1996
-------------------
Donaldson, Lufkin & Jenrette
Securities Corporation
===============================================================================
<PAGE>
November ___, 1996
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
140 Broadway New York, New York 10005
Ladies and Gentlemen:
AmeriKing, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell (the "Units Offering") _______ Units (the "Units"), consisting
in the aggregate of $30,000,000 aggregate liquidation preference 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 Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ").
Each Unit will consist of $________ aggregate liquidation preference of Senior
Preferred Stock and ________________ shares of Common Stock. 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") between the Company and Fleet National Bank, as Trustee (the
"Trustee"). The Units, the Senior Preferred Stock, the Common Stock and the
Exchange Debentures are sometimes collectively referred to herein as the
"Securities."
Concurrently with the Units Offering, the company is offering (the
"Notes Offering" and, together with the Unit Offering, the "Offerings")
$100,000,000 principal amount of its ___% Senior Notes due 2006 (the "Senior
Notes").
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, the
"Act"), a registration statement on Form S-1 (File No. 333-04261), 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 Offerings 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."
<PAGE>
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 the Units to DLJ,
and DLJ agrees to purchase the Units from the Company, at a purchase price of
$____ per Unit (the "Purchase Price"), plus accumulated dividends, if any, from
December 3, 1996, to the date of payment and delivery.
3. TERMS OF PUBLIC OFFERING. The Company is advised by you that you
propose (i) to make a public offering of the Units as soon after the effective
date of the Registration Statement as in your judgment is advisable and (ii)
initially to offer the Units upon the terms set forth in the Prospectus.
4. DELIVERY AND PAYMENT. Delivery to DLJ of, and payment for, the
Units shall be made at 10:00 a.m., Eastern Standard Time, on December 3, 1996,
or such other date as may be 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, New York, New York 10022. 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 Units, including the Senior Preferred Stock and
the Common Stock, shall be registered in such names and issued in such
denominations as you shall request no 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., Eastern Standard 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, against payment of the
Purchase Price therefor by wire transfer or certified or official bank check or
checks payable in same day funds to the order of the Company or as the Company
may direct.
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 the Registration
Statement 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
2
<PAGE>
effectiveness of the Registration Statement or of the suspension of
qualification of any 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 Section 5(e) 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 provide you, without charge, one signed copy of the
Registration Statement as first filed with the Commission and of each
amendment to it, including all exhibits, and to furnish to 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
Units 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
your counsel a prospectus is required by law to be delivered in
connection with sales by you or a dealer, to furnish to you and each
dealer as many copies of the Prospectus (and of any amendment or
supplement to the Prospectus) as you or such dealer may reasonably
request; provided, however, that in the event you are required to
deliver a prospectus nine months or more after the date hereof, the
Company promptly will prepare, at DLJ's expense, such amendment or
amendments to the Registration Statement and supplements or amendments
to the prospectus as may be necessary to comply with the requirements
of Section 10(a)(3) of the Act.
(f) If during the period specified in Section 5(e), any event
shall occur as a result of which, in the opinion of your counsel, 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
3
<PAGE>
a purchaser, not misleading, or if it is necessary to amend or
supplement the Prospectus to comply with any law, promptly (i) 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 (ii) to furnish to you and to
such dealers as you shall specify such number of copies of the
Prospectus as so amended or supplemented as you or such dealers may
reasonably request; provided, however, that in the event you are
required to deliver a prospectus nine months or more after the date
hereof, the Company promptly will prepare, at DLJ's expense, such
amendment or amendments to the Registration Statement and supplements
or amendments to the prospectus as may be necessary to comply with the
requirements of Section 10(a)(3) of the Act.
(g) Prior to any public offering of the Units, (i) to cooperate
with you and your counsel in connection with the registration or
qualification of the Securities for offer and sale by you and by
dealers under the state securities or Blue Sky laws of such
jurisdictions as you may request, (ii) to continue such qualification
in effect so long as required for distribution of the Securities and
(iii) to file such consents to service of process or other documents
as may be necessary to effect such registration or qualification;
provided that in no event shall the Company be obligated to qualify to
do business in any jurisdiction where it is not now so qualified, or
to take any action which would subject it to general service of
process in any jurisdiction where it is not so subject.
(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.
(i) So long as required by the Certificate of Designation, the
Indenture or the Exchange Act, to file reports pursuant to Section 13
or 15(d) of the Exchange Act, and, during the period of three years
following the date of this Agreement, to deliver to you, promptly upon
their becoming available, (i) copies of all current, regular and
periodic reports filed by the Company with any securities exchange or
with the Commission or any governmental authority succeeding to any of
the Commission's functions, and (ii) copies of each report or other
publicly available information of the Company mailed to the holders of
any Securities and such other publicly available information
concerning the Company and its subsidiaries as you may request.
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(j) Prior to the Closing Date, to furnish to you, as soon as they
have been prepared by the Company, a copy of any consolidated
financial statements of the Company for any period subsequent to the
period covered by the financial statements appearing in the
Registration Statement.
(k) To use the proceeds from the sale of the Units in the manner
specified in the Registration Statement (and any amendments or
supplements thereto) under the caption "Use of Proceeds."
(l) Not to voluntarily claim, and to resist actively any attempts
to claim, the benefit of any usury laws against the holders of the
Securities.
(m) 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 Section 5(e);
(ii) the printing and delivery of the Prospectus and all
amendments or supplements to the Prospectus during the period
specified in Section 5(e);
(iii) the printing and delivery of this Agreement, the
Indenture, the Certificate of Designation, the Securities, the
Preliminary and Supplemental Blue Sky Memoranda and all other
agreements, memoranda, correspondence and other documents printed
and delivered in connection herewith and with the Units Offering
(including, in each case, any disbursements of your counsel
relating to such printing and delivery);
(iv) the issuance and delivery by the Company of the Units;
(v) 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 your counsel relating to such registration or qualification
and memoranda relating thereto);
(vi) filings and clearance with the National Association of
Securities Dealers, Inc. in connection with the Units Offering;
(vii) furnishing such copies of the Registration Statement,
each preliminary prospectus and the Prospectus
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<PAGE>
(including all documents incorporated by reference therein) and
all amendments and supplements thereto as may be requested for
use in connection with the offering or sale of the Units by you
or by dealers to whom Units may be sold;
(viii) the rating of the Securities by rating agencies, if
any;
(ix) all fees and expenses (including fees and expenses of
counsel) of the Company in connection with approval of the
Securities by the Depository Trust Company for "book-entry"
transfer; and
(x) the performance by the Company of its other obligations
under this Agreement.
(n) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than a default by you) or if for any
reason the Company shall be unable or unwilling to perform its
obligations hereunder, the Company shall, except as otherwise agreed
by the parties hereto, reimburse you for the fees and expenses to be
paid or reimbursed by the Company pursuant to Section 5(m), and
reimburse you for all out-of-pocket expenses (including the fees and
expenses of your counsel) reasonably incurred by you or by dealers to
whom Units may be sold in connection with the transactions
contemplated by this Agreement.
(o) During the period beginning on the date of this Agreement and
continuing to and including the Closing Date, not to offer, sell,
contract to sell or otherwise dispose of any securities of the Company
or warrants to purchase securities of the Company substantially
similar to any of the Securities (other than (i) the Securities and
(ii) the Senior Notes), without your prior written consent.
(p) Not to distribute any offering material in connection with
the offering and sale of the Units other than the Registration
Statement, the Prospectus, and any preliminary prospectus.
(q) 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 you that:
(a) The Registration Statement has become effective, no stop
order suspending the effectiveness of the Registration
6
<PAGE>
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 Section 6(b) do
not apply to statements or omissions in the Registration Statement or
the Prospectus based upon information relating to you furnished to the
Company in writing by 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) Each of the Company and its subsidiaries (i) is duly
incorporated, validly existing as a corporation and in good standing
under the laws of its jurisdiction of incorporation, (ii) has full
corporate power and authority to carry on its business as it is
currently being conducted and to own, lease and operate its properties
and (iii) is duly qualified and in good standing as a foreign
corporation registered 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 condition
(financial or other), business, property, prospects, net worth or
results of operations of the Company and its subsidiaries taken as a
whole (a "Material Adverse Effect").
(e) (i) All of the outstanding shares of capital stock of the
Company and each of its subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable, are not and, as a
result of the Units Offering, will not be, subject to preemptive or
similar rights, (ii) except as described in the Prospectus, all shares
of the
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Company's subsidiaries' capital stock are owned by the Company,
directly or indirectly, free and clear of any security interest,
claim, lien or encumbrance and (iii) except as described in the
Prospectus, there are no outstanding rights, warrants or options to
acquire, or instruments convertible into or exchangeable for, any
capital stock or other equity interest in the Company or any of its
subsidiaries.
(f) Neither the Company nor any of its subsidiaries is (i) in
violation of its respective charter or bylaws or (ii) in default in
any material respect 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.
(g) None of (i) the execution, delivery or performance by the
Company of its obligations under this Agreement or the Indenture, (ii)
the adoption or performance by the Company of its obligations under
the Certificate of Designation, (iii) the issuance and sale of the
Units by the Company and (iv) the consummation by the Company of the
transactions described in the Prospectus under the caption "Use of
Proceeds," will conflict with or constitute a breach of any of the
terms or provisions of, or a default under, or result in the
imposition of a lien or encumbrance on any properties of the Company
or any of its subsidiaries, or an acceleration of indebtedness
pursuant to, (A) the charter or bylaws of the Company or any of its
subsidiaries, (B) any bond, debenture, note, indenture, 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 their
property is bound, the violation of which would reasonably be expected
to result in a Material Adverse Effect, or (C) any law or
administrative regulation applicable to the Company, any of its
subsidiaries or any of their assets or properties, or any judgment,
order or decree of any court or governmental agency or authority
entered in any proceeding to which the Company or any of its
subsidiaries was or is now a party or to which any of them or their
respective properties may be subject.
(h) No consent, approval, authorization or order of, or filing or
registration with, any regulatory body, administrative agency, or
other governmental agency (except as securities or Blue Sky laws of
the various states may require) that has not been made or obtained is
required for (i) the execution, delivery and performance of the
Company's obligations under this Agreement or the Indenture, (ii) the
adoption and performance of the Company's obligations under the
Certificate of Designation, (iii) the valid issuance and
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<PAGE>
sale of the Securities or (iv) the performance by the Company of the
transactions contemplated hereby or by the Certificate of Designation
or the Indenture. No consents or waivers from any person are required
to consummate the transactions contemplated by this Agreement, the
Certificate of Designation, the Indenture, the Prospectus or the
Registration Statement, other than such consents and waivers as have
been or will be obtained prior to the Closing Date.
(i) The Company has all necessary corporate power and authority
to enter into or adopt, as the case may be, and perform its
obligations under this Agreement, the Certificate of Designation and
the Indenture and to issue, sell and deliver the Units to
Underwriters.
(j) This Agreement has been duly authorized and validly executed
by the Company and (assuming the due execution and delivery thereof by
you) is a legally valid and binding obligation of the Company,
enforceable against it in accordance with its terms, except as the
enforceability thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which
affect the enforcement of creditors' rights generally, (ii) limited by
general principles of equity (whether considered in a proceeding at
law or in equity) and (iii) limited by securities laws prohibiting or
limiting the availability of, and public policy against,
indemnification or contribution.
(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.
(m) The Company has duly authorized the Indenture and, when
executed and delivered (assuming the due authorization, execution and
delivery thereof by the Trustee), the Indenture will be a legally
valid and binding obligation of the Company, enforceable against it in
accordance with its terms, except as the enforceability thereof may be
(i) subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement
of creditors' rights generally and (ii) limited by general principles
of equity (whether considered in a proceeding at law or in equity).
(n) The Company has duly authorized the Units and, when issued
and delivered to you on the Closing Date against payment therefor as
provided by this Agreement, the Units will conform to the description
thereof in the Prospectus.
(o) The Company has duly authorized the Senior Preferred Stock
and, when issued and delivered to you on the Closing
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<PAGE>
Date against payment therefor as provided by this Agreement, the
Senior Preferred Stock will be validly issued, fully paid,
non-assessable, will conform to the description thereof in the
Prospectus, and will be entitled to the rights, privileges and
preferences set forth in the Certificate of Designation, and the
issuance of such Senior Preferred Stock will not be subject to any
preemptive or similar rights.
(p) The Company has duly authorized the Common Stock and, when
issued and delivered to you against payment therefor as provided by
this Agreement, the Common Stock will be validly issued, fully paid
and nonassessable and will conform to the description thereof in the
Prospectus, and the issuance of such Common Stock will not be subject
to any preemptive or similar rights.
(q) The Company has duly authorized the Exchange Debentures and,
if and when issued and authenticated in accordance with the terms of
the Indenture and delivered in exchange for the Senior Preferred Stock
in accordance with the terms of the Certificate of Designation, the
Exchange Debentures will conform to the description thereof in the
Prospectus, and will be the legally valid and binding obligations of
the Company, enforceable against it in accordance with their terms,
except as the enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors' rights generally and
(ii) limited by general principles of equity (whether considered in a
proceeding at law or in equity).
(r) There is (i) no action, suit or proceeding before or by any
court, arbitrator or governmental agency, body or official, domestic
or foreign, now pending, or, to the knowledge of the Company,
threatened or contemplated to which the Company or any of its
subsidiaries is or may be a party or to which the business or property
of the Company or any of its subsidiaries is subject, (ii) no statute,
rule, regulation or order that has been enacted, adopted or issued by
any governmental agency or, to the best knowledge of the Company,
proposed by any governmental body and (iii) no injunction, restraining
order or order of any nature by a federal or state court of competent
jurisdiction to which the Company or any of its subsidiaries is or may
be subject issued that, in the case of clauses (i), (ii) and (iii)
above, (A) is required to be disclosed in the Registration Statement
or the Prospectus and that is not so disclosed, (B) might have a
Material Adverse Effect, (C) would interfere with or adversely affect
the issuance of the Securities or (D) in any manner draw into question
the validity of this Agreement, the Certificate of Designation, the
Indenture or the Securities.
(s) No holder of any security of the Company or any of its
subsidiaries has any right or, by reason of the execution
10
<PAGE>
or adoption, as the case may be, by the Company of this Agreement, the
Certificate of Designation or the Indenture or the consummation of the
transactions contemplated hereby or thereby, will have the right to
require registration of any security of the Company.
(t) 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.
(u) Neither the Company nor any of its subsidiaries is involved
in any material labor dispute nor, to the knowledge of the Company or
any of its subsidiaries, is any material labor dispute threatened
which, if such dispute were to occur, could have a Material Adverse
Effect.
(v) Neither the Company nor any of its subsidiaries has violated
any safety or similar law applicable to its business, 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 of 1974, as amended ("ERISA"), or the rules and regulations
promulgated thereunder, except for such instances of noncompliance
that, either singly or in the aggregate, could not have a Material
Adverse Effect.
(w) Each of the Company and its subsidiaries is in compliance
with all applicable existing federal, state, local and foreign laws
and regulations relating to the protection of human health or the
environment or imposing liability or standards of conduct concerning
any Hazardous Material (as defined below) (collectively,
"Environmental Laws"), except for such instances of noncompliance
that, either singly or in the aggregate, could not have a Material
Adverse Effect. The term "Hazardous Material" means (i) any "hazardous
substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (ii) any
"hazardous waste" as defined by the Resource Conservation and Recovery
Act of 1976, as amended, (iii) any petroleum or petroleum product,
(iv) any polychlorinated biphenyl and (v) any pollutant or contaminant
or hazardous, dangerous or toxic chemical, material, waste or
substance regulated under or within the meaning of any other
Environmental Law. There is no alleged liability, or, to the best
knowledge and information of the Company, potential liability
(including, without limitation, alleged or potential liability for
investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, or
penalties) of the Company or any of its subsidiaries arising out of,
based on, or resulting from (A) the presence or release into the
environment of any Hazardous Material at any location currently or
previously owned by the
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Company or any of its subsidiaries or at any location currently or
previously used or leased by the Company or any of its subsidiaries or
(B) any violation or alleged violation of any Environmental Law,
except in each case with respect to clauses (A) and (B), alleged or
potential liabilities that, singly or in the aggregate, could not have
a Material Adverse Effect.
(x) Each of the Company and its subsidiaries owns or possesses
the right to use the patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks and trade names
(collectively, "Intellectual Property") presently employed by it in
connection with the businesses it now operates, except where the
failure to own or possess such Intellectual Property could not, either
singly or in the aggregate, have a Material Adverse Effect, and
neither the Company nor any of its subsidiaries has received any
notice that its use of any Intellectual Property allegedly infringes
upon, or conflicts with, rights asserted by others, except for such
instances that, singly or in the aggregate, could not have a Material
Adverse Effect if an unfavorable decision, judgment, ruling or finding
is rendered against the Company or any of its subsidiaries.
(y) Except as set forth in the Prospectus, all tax returns
required to be filed by each of the Company and its subsidiaries in
any jurisdiction have been filed, and all material taxes (including,
but not limited to, withholding taxes, penalties and interest,
assessments, fees and other charges due or claimed to be due from any
taxing authority) have been paid other than those (i) being contested
in good faith and for which adequate reserves have been provided, or
(ii) currently payable without penalty or interest.
(z) Except as set forth in the Prospectus or that, singly or in
the aggregate, could not have a Material Adverse Effect, (i) each of
the Company and its subsidiaries has (A) such permits, licenses,
franchises and authorizations of governmental or regulatory
authorities ("Permits") as are necessary to own, lease and operate its
properties and to conduct its business as presently conducted, and (B)
fulfilled and performed all of its material obligations with respect
to the Permits, and (ii) no event has occurred that could allow, or
after notice or lapse of time could allow, revocation or termination
of any Permit or that could result in any other material impairment of
the rights granted to the Company or any of its subsidiaries under any
Permit, and the Company has no reason to believe that any governmental
body or agency is considering limiting, suspending or revoking any
Permit.
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(aa) Except as set forth in the Prospectus or that, singly or in
the aggregate, could not have a Material Adverse Effect, (i) each of
the Company and 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 Prospectus as being owned by it, (ii) each lease to
which the Company or any of its subsidiaries is a party is valid and
binding and no default has occurred or is continuing thereunder, and
(iii) each of the Company and its subsidiaries enjoys peaceful and
undisturbed possession under all such leases to which it is a party as
lessee.
(bb) Each of the Company and its subsidiaries maintains adequate
insurance for its businesses and the value of its properties
(including, without limitation, public liability insurance, third
party property damage insurance and replacement value insurance) and
all such insurance is outstanding and in force as of the date of this
Agreement.
(cc) The financial statements, together with the 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 respective dates
or for the respective periods to which they apply, and such financial
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.
The pro forma financial statements, together with the related
schedules and notes, forming part of the Registration Statement and
the Prospectus (and any amendment or supplement thereto) are, in all
material respects, accurately presented and prepared in good faith on
the basis of the assumptions described therein, and such assumptions
are reasonable and the adjustments used therein are appropriate to
give effect to the transactions and circumstances referred to therein.
(dd) Each of the Company and its subsidiaries maintains a system
of internal accounting controls sufficient to provide 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 accountability for
assets; and
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(iii) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate
action is taken with respect thereto.
(ee) Subsequent to the dates for which information is given in
the Registration Statement and the Prospectus and up to the Closing
Date, unless set forth in the Registration Statement and the
Prospectus:
(i) none of the Company or its subsidiaries has incurred any
liabilities or obligations, direct or contingent, which are
material, singly or in the aggregate, to the Company and its
subsidiaries taken as a whole, nor entered into any material
transactions not in the ordinary course of business;
(ii) there has not been any decrease in the Company's
capital stock or the capital stock of any of the Company's
subsidiaries or any increase in long-term indebtedness to meet
working capital requirements or any material increase in
short-term indebtedness of the Company or any of its subsidiaries
or any payment of or declaration to pay any dividends or any
other distribution with respect to the Company's or any of its
subsidiaries' capital stock, as the case may be; and
(iii) there has not been any event or series of events that
would have a Material Adverse Effect.
(ff) Prior to and after the issuance of the Securities and the
Senior Notes, (i) the present fair salable value of the assets of the
Company and its subsidiaries exceeded and will exceed the amount that
will be required to be paid on, or in respect of, the debts and other
liabilities (including contingent liabilities) of the Company and its
subsidiaries as they become absolute and matured, (ii) the assets of
the Company and its subsidiaries do not constitute and will not
constitute unreasonably small capital to carry out their businesses as
conducted or as proposed to be conducted, and (iii) the Company and
its subsidiaries do not intend to, or believe that they will, incur
debts or other liabilities beyond their ability to pay such debts and
liabilities as they mature. The Company does not intend to, and does
not intend to permit any of its subsidiaries to, incur debts or other
liabilities beyond their respective ability to pay such debts and
liabilities as they mature.
(gg) 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.
(hh) Deloitte & Touche LLP are independent public accountants
with respect to the Company as required by the Act.
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(ii) The Company has no direct or indirect subsidiaries other
than those listed on Exhibit 21 to the Registration Statement.
(jj) The execution and delivery of this Agreement and the
Indenture, the adoption of the Certificate of Designation and the sale
of the Units will not involve any prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Code.
(kk) The Company has complied with all provisions of Section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless DLJ and
each person, if any, who controls DLJ within the meaning of Section 15
of the Act or Section 20 of 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 DLJ furnished in writing to the Company by DLJ
expressly for use therein; provided, however, that the indemnification
contained in this Section 7(a) with respect to any preliminary
prospectus shall not inure to the benefit of DLJ (or to the benefit of
any person controlling DLJ) on account of any such loss, claim,
damage, liability or judgment (i) arising from the sale of the Units
by DLJ to any person if a copy of the Prospectus shall not have been
delivered or sent to such person, at or prior to the written
confirmation of such sale, and the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained
in such preliminary prospectus was corrected in the Prospectus,
provided that the Company has delivered the Prospectus to DLJ in
requisite quantity on a timely basis to permit such delivery or
sending or (ii) resulting from the use by DLJ of any registration
statement or prospectus, or any amendment or supplement thereto,
referred to in Section 5(e) when, under Section 10 hereof, DLJ was not
permitted to do so.
(b) In case any action shall be brought against DLJ or any person
controlling DLJ based upon any preliminary prospectus, the
Registration Statement or the Prospectus or
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<PAGE>
any amendment or supplement thereto and with respect to which
indemnity may be sought against the Company, DLJ 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. DLJ 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 reasonable fees and expenses of such counsel shall be at the
expense of DLJ or such controlling person unless (i) the employment of
such counsel has been specifically authorized in writing by the
Company, (ii) the Company has failed to assume the defense and employ
counsel or (iii) the named parties to any such action (including any
impleaded parties) include both DLJ or such controlling person and the
Company and DLJ 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 DLJ 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 DLJ and all such controlling persons, which
firm shall be designated in writing by DLJ, 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
the written consent of the Company but, if settled with the Company's
written consent, the Company agrees to indemnify and hold harmless DLJ
and any such controlling person from and against any loss or liability
by reason 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) DLJ agrees to indemnify and hold harmless the Company, its
directors, its officers who sign the Registration Statement and any
person controlling them within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act (collectively, the "Company Indemnified
Parties"), to the same extent as the foregoing indemnity from the
Company to DLJ but only with reference to information relating to DLJ
furnished in writing by DLJ expressly for use in the Registration
Statement, the Prospectus or any preliminary prospectus. In case any
action shall be brought against any Company
16
<PAGE>
Indemnified Party based on the Registration Statement, the Prospectus
or any preliminary prospectus in respect of which indemnity may be
sought against DLJ, DLJ shall have the rights and duties given to the
Company (except that if the Company shall have assumed the defense
thereof, DLJ 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 DLJ), and the
Company Indemnified Parties shall have the rights and duties given to
DLJ 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 DLJ on
the other hand from the offering of the Units 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 DLJ 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 DLJ shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Units (before deducting
expenses) received by the Company, and the total underwriting
discounts and commissions received by DLJ, bear to the total price to
the public of the Units, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of the Company and
DLJ 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 DLJ and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission.
The Company and DLJ agree that it would not be just and equitable
if contribution pursuant to this Section 7(d) were determined by pro
rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in the
immediately preceding paragraph. The losses, claims, damages,
liabilities or judgments of an indemnified party 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, DLJ
17
<PAGE>
shall not be required to contribute any amount in excess of the amount
by which the discounts and commissions received by it exceeds the
amount of any damages which DLJ 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.
(e) The Company hereby designates The Jordan Company, 9 West 57th
Street, New York, New York 10019, as its authorized agent, upon which
process may be served in any action, suit or proceeding which may be
instituted in any state or federal court in the State of New York by
DLJ or any, or person controlling DLJ asserting a claim for
indemnification or contribution under or pursuant to this Section 7,
and the Company will accept the jurisdiction of such court in such
action, and waive, to the fullest extent permitted by applicable law,
any defense based upon lack of personal jurisdiction or venue. A copy
of any such process shall be sent or given to the Company, at the
address for notices specified in Section 11(a) hereof.
(f) The indemnity and contribution agreements contained in this
Section 7 are in addition to any liability which the indemnifying
persons may otherwise have to the indemnified persons referred to
above.
8. CONDITIONS OF THE DLJ'S OBLIGATIONS. The obligations of DLJ to
purchase the Units 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 date
hereof and on the Closing Date, with the same force and effect as if
made on and as of the date hereof and the Closing Date, respectively.
The Company shall have performed or complied with all of the
agreements and satisfied all conditions to be performed, complied with
or satisfied by it on or prior to 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.),
Eastern Standard 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.
18
<PAGE>
(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 Act.
(d) (i) The Prospectus shall have been printed and copies
distributed to DLJ not later than 9:00 a.m., Eastern Standard Time, on
________________, 1996, or at such later date and time as DLJ may
approve in writing; and
(ii) no injunction, restraining order or order of any nature
by a federal or state court of competent jurisdiction shall have
been issued as of the Closing Date which would prevent the
issuance of the Units.
(e) (i) Since the date of the latest balance sheet included in
the Registration Statement and the Prospectus, there shall not have
been any event that had a Material Adverse Effect, or any development
involving a prospective change that could have a Material Adverse
Effect, whether or not arising in the ordinary course of business;
(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
change, in the capital stock or in the long-term debt of the
Company and its subsidiaries from that set forth in the
Registration Statement and the Prospectus;
(iii) the Company and its subsidiaries shall have no
material liability or obligation, direct or contingent, other
than those reflected in the Registration Statement and the
Prospectus; and
(iv) on the Closing Date you shall have received
certificates dated the Closing Date, signed on behalf of the
Company by the Chief Executive Officer and the Chief Financial
Officer of the Company, confirming all of the matters set forth
in Sections 8(a), (b), (c), (d) and (e) of this Agreement with
respect to the Company.
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel to you) dated the Closing Date, of
Mayer, Brown & Platt, counsel to the Company (provided that the
opinions with respect to subsidiaries of the Company incorporated in
the states of Colorado, Illinois, Michigan and Ohio will be provided
by Freeborn & Peters), to the effect that:
19
<PAGE>
(i) based on telephonic confirmation from the Commission,
the Registration Statement has become effective under the Act
and, to the knowledge of such counsel, no stop order suspending
its effectiveness has been issued and no proceedings for that
purpose are pending before, threatened or contemplated by the
Commission;
(ii) the Registration Statement (including any Registration
Statement filed under Rule 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;
(iii) each of the Company and its subsidiaries is duly
incorporated, validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has the
full corporate power and authority required to carry on its
business as it is currently being conducted and to own, lease and
operate its properties;
(iv) each of the Company and its subsidiaries is duly
qualified and in good standing as a foreign corporation
registered 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;
(v) all of the outstanding shares of capital stock of the
Company and each of its subsidiaries have been duly authorized
and validly issued, are fully paid and non-assessable, are not
subject to preemptive or similar rights and all shares of the
Company's subsidiaries' capital stock are owned, directly or
indirectly, by the Company, to the best of such counsel's
knowledge, free and clear of any security interest, claim, lien
or encumbrance;
(vi) to such counsel's knowledge, except as disclosed in the
Prospectus, there are no outstanding rights, warrants or options
to acquire, or instruments convertible into or exchangeable for,
any capital stock, or other equity interest, in the Company or
any of its subsidiaries;
(vii) neither the Company nor any of its subsidiaries is in
violation of its respective charter or bylaws and, to the
knowledge of such counsel 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,
20
<PAGE>
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;
(viii) none of (A) the execution, delivery or performance by
the Company of this Agreement or the Indenture, (B) the adoption
or performance by the Company of the Certificate of Designation,
(C) the issuance and sale of the Units by the Company and (D) the
consummation by the Company of the transactions described in the
Prospectus under the caption "Use of Proceeds," will conflict
with or constitute a breach of any of the terms or provisions of,
or a default under, or result in the imposition of a lien or
encumbrance on any properties of the Company or any of its
subsidiaries, or an acceleration of indebtedness pursuant to, (1)
the charter or bylaws of any of the Company or the Company's
subsidiaries, (2) any bond, debenture, note, indenture, mortgage,
deed of trust or other agreement or instrument known to such
counsel after due inquiry to which the Company or any of its
subsidiaries is a party or by which any of them or their property
is bound, or (3) to such counsel's knowledge, any law or
administrative regulation applicable to the Company, any of its
subsidiaries or any of their assets or properties, or any
judgment, order or decree of any court or governmental agency or
authority entered in any proceeding to which the Company or any
of its subsidiaries was or is now a party or to which any of them
or their respective properties may be subject and which is known
to such counsel;
(ix) no consent, approval, authorization or order of, or
filing or registration with, any regulatory body, administrative
agency, or other governmental agency (except as securities or
Blue Sky laws of the various states may require) that has not
been made or obtained is required for (A) the execution, delivery
and performance of this Agreement or the Indenture, (B) the
adoption or performance of the Certificate of Designation, (C)
the valid issuance and sale of the Securities or (D) the
performance by the Company of the transactions contemplated
hereby, by the Certificate of Designation or by the Indenture,
such as to which the failure to be obtained or made would not
reasonably be expected, either singly or in the aggregate, to
have a Material Adverse Effect;
(x) to such counsel's knowledge, no consents or waivers from
any person are required to consummate the transactions
contemplated by this Agreement, the
21
<PAGE>
Certificate of Designation or the Indenture, other than such
consents and waivers as have been or will be obtained prior to
the Closing Date;
(xi) the Company has all necessary corporate power and
authority to enter into and perform its obligations under this
Agreement, the Certificate of Designation and the Indenture, to
adopt and perform its obligations under the Certificate of
Designation and to issue, sell and deliver the Units to DLJ to be
sold by DLJ pursuant to this Agreement;
(xii) this Agreement has been duly authorized and validly
executed by the Company and (assuming the due execution and
delivery thereof by you) is a legally valid and binding
obligation of the Company, enforceable against it in accordance
with its terms, except as the enforceability thereof may be (A)
subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the
enforcement of creditors' rights generally, (B) limited by
general principles of equity (whether considered in a proceeding
at law or in equity) and (C) limited by securities laws
prohibiting or limiting the availability of, and public policy
against, indemnification or contribution.
(xiii) the Certificate of Designation has been duly
authorized by all necessary corporate and stockholder action and,
based on oral confirmation therefrom, has been filed with the
Secretary of State of the State of Delaware;
(xiv) the Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended;
(xv) the Company has duly authorized the Indenture and, when
executed and delivered (assuming due authorization, execution and
delivery of the Indenture by the Trustee), the Indenture will be
a legally valid and binding obligation of the Company,
enforceable against it in accordance with its terms, except as
the enforceability thereof may be (A) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar
laws in effect which affect the enforcement of creditors rights
generally and (B) limited by general principles of equity
(whether considered in a proceeding at law or in equity);
(xvi) the Company has duly authorized the Units and, when
issued and delivered to DLJ against payment therefor as provided
by this Agreement, the Units will conform to the description
thereof in the Prospectus;
22
<PAGE>
(xvii) the Company has duly authorized the Senior Preferred
Stock and, when issued and delivered to DLJ against payment
therefor as provided by this Agreement, will be validly issued,
fully paid and non-assessable, will conform to the description
thereof in the Prospectus, and will be entitled to the rights,
privileges and preferences set forth in the Certificate of
Designation, and the issuance of such Senior Preferred Stock is
not subject to any preemptive or similar rights;
(xviii) the Company has duly authorized the Common Stock
and, when issued and delivered to DLJ against payment therefor as
provided by this Agreement, the Common Stock will be validly
issued, fully paid and nonassessable and will conform to the
description thereof in the Prospectus, and the issuance of such
Common Stock is not subject to any preemptive or similar rights;
(xix) the Company has duly authorized the Exchange
Debentures and, when issued and authenticated in accordance with
the terms of the Indenture and delivered in exchange for the
Senior Preferred Stock in accordance with the terms of the
Certificate of Designation, the Exchange Debentures will conform
to the description thereof in the Prospectus, and will be the
legally valid and binding obligations of the Company, enforceable
against it in accordance with their terms, except as the
enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar
laws in effect which affect the enforcement of creditors' rights
generally and (ii) limited by general principles of equity
(whether considered in a proceeding at law or in equity);
(xx) to the knowledge of such counsel, after due inquiry,
there is (i) no action, suit or proceeding before or by any
court, arbitrator or governmental agency, body or official,
domestic or foreign, now pending, threatened or contemplated to
which the Company or any of its subsidiaries is or may be a party
or to which the business or property of the Company or any of its
subsidiaries is or may be subject, (ii) no statute, rule,
regulation or order that has been enacted, adopted or issued by
any governmental agency or proposed by any governmental body, or
(iii) no injunction, restraining order or order of any nature by
a federal or state court of competent jurisdiction applicable to
the Company or any of its subsidiaries has been issued that, in
the case of clauses (i), (ii) and (iii) above, (a) is required to
be disclosed in the Registration Statement or the Prospectus and
that is not so disclosed, (b) would interfere with or adversely
affect the issuance of the Units, or (c) might invalidate any
provision or the
23
<PAGE>
validity of this Agreement, the Certificate of Designation, the
Indenture or the Securities;
(xxi) to such counsel's knowledge, after due inquiry, no
holder of any security of the Company has any right to require
registration of any security of the Company;
(xxii) the statements under the captions "Description of
Securities," "Description of Certain Indebtedness," "Certain
Transactions," and "Certain Federal Income Tax Considerations" in
the Prospectus, as amended or supplemented, and Item 14 and,
assuming the accuracy of the representations and warranties of
the Company at the time of the transactions referred to therein,
which such counsel has no reason to believe are inaccurate, Item
15 of Part II of the Registration Statement, insofar as such
statements constitute a summary of legal matters, documents or
proceedings referred to therein, present fairly the information
called for with respect to such legal matters, documents or
proceedings;
(xxiii) 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.
In addition, such counsel shall state that it has participated in
conferences with certain officers and other representatives of the
Company, representatives of the Company's accountants, your
representatives and counsel to you, at which conferences the contents
of the Registration Statement and Prospectus and any amendments or
supplements thereto, and related matters were discussed, and, although
such counsel has not independently verified and is not passing upon
and assumes no responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
the Prospectus, and any amendment or supplement thereto, no facts have
come to such counsel's attention which led it to believe that the
Registration Statement as of the effective date or on the date of such
opinion contained or contains an untrue statement of a material fact
or omitted or omits to state a material fact necessary to make the
statements contained therein not misleading, and that the Prospectus,
as of the date thereof or on the date of such opinion, contained or
contains an untrue statement of a material fact or omitted or omits to
state a material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no view
with respect to the financial statements and data and related notes,
the financial statement schedules
24
<PAGE>
and other financial, statistical and accounting data included
in the Registration Statement and Prospectus).
(g) You shall have received on the Closing Date an opinion, dated
the Closing Date, of Latham & Watkins, counsel to you, in form and
substance reasonably satisfactory to you, and the Company shall have
provided Latham & Watkins such papers and information as it requests
to enable it to pass upon the matters contained in such opinion.
(h) You shall have received letters from Deloitte & Touche LLP,
independent public accountants, on the date hereof and on the Closing
Date, in form and substance satisfactory to you, with respect to the
financial statements and certain financial information contained in
the Registration Statement and the Prospectus.
(i) The Company shall have filed the Certificate of Designation
with the Secretary of State of the State of Delaware and you shall
have received evidence thereof satisfactory to you.
(j) The Company and the Trustee shall have entered into the
Indenture and you shall have received counterparts, conformed as
executed thereof.
(k) The Company shall have fully performed or complied with all
of the agreements contained in this Agreement and required to be
performed or complied with by the Company on or prior to the Closing
Date.
(l) On the Closing Date, the Notes Offering shall be consummated
on substantially the same terms as those set forth in the Registration
Statement and the Prospectus.
9. EFFECTIVE DATE OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the later of (i) the execution of this Agreement or (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:
(a) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any adverse change
or development involving a prospective adverse change which would
cause a Material Adverse Effect, on the earnings, affairs, or business
prospects of the Company or any of its subsidiaries, whether or not
arising in the ordinary course of business, which would, in your
judgment, make it
25
<PAGE>
impracticable to market the Units on the terms and in the manner
contemplated in the Prospectus;
(b) Any outbreak or escalation of hostilities or other national
or international calamity or crisis or material change in economic
conditions, if the effect of such outbreak, escalation, calamity,
crisis or change on the financial markets of the United States or
elsewhere would, in your judgment, be material and adverse and make it
impracticable to market the Units on the terms and in the manner
contemplated in the Prospectus;
(c) The suspension or material limitation of trading in
securities on the New York Stock Exchange, the American Stock Exchange
or the Nasdaq National Market or the limitation on prices for
securities on any such exchange or National Market System;
(d) 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 causes or will
cause a Material Adverse Effect;
(e) The declaration of a banking moratorium by either federal or
New York State authorities;
(f) 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; or
(g) Any of the Company's securities shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization, provided that in the case
of such "watch list" placement, termination shall be permitted only if
such placement would, in your judgment, make it impracticable or
inadvisable to market the Units or to enforce contracts for the sale
of the Units or materially impair the investment quality of any of the
Securities.
10. AGREEMENT OF DLJ.
DLJ agrees that, upon its receipt of any written notice from the
Company of the existence of any fact or the happening of any event that
requires the making of any additions to or changes in the Registration
Statement or the Prospectus or any amendment or supplement thereto in order
that such document will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances existing as of the date such
document was delivered, not misleading, DLJ shall forthwith discontinue
disposition of the Units pursuant to such document until (i) DLJ
26
<PAGE>
receives from the Company copies of an amended or supplemented document that
the Company states in writing may be used by DLJ or (ii) DLJ is advised in
writing by the Company that the use of such document may be resumed.
11. MISCELLANEOUS.
(a) Notices given pursuant to any provision of this Agreement
shall be addressed as follows: (i) if to the Company, to AmeriKing,
Inc., 2215 Enterprise Drive, Suite 1502, Westchester, Illinois 60154,
Attention: Chief Financial Officer, with a copy to Mayer, Brown &
Platt, 1675 Broadway, Suite 1900, New York, New York 10019, Attention:
James B. Carlson, and (ii) if to DLJ, to Donaldson, Lufkin & Jenrette
Securities Corporation, 140 Broadway, New York, New York 10005,
Attention: Syndicate Department and Compliance Department, with a copy
to Latham & Watkins, 885 Third Avenue, New York, New York 10022,
Attention: Philip E. Coviello, or in any case to such other address as
the person to be notified may have requested in writing.
(b) The respective indemnities, contribution agreements,
representations, warranties and other statements 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 such person, (ii) acceptance of
the Units and payment for them under this Agreement and (iii)
termination of this Agreement.
(c) Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company,
DLJ, 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 not include a purchaser of the Units from DLJ merely because of
such purchase.
(d) This Agreement shall be construed, interpreted and the rights
of the parties determined in accordance with the laws of the State of
New York without reference to its choice of law provisions.
(e) This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
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<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and DLJ.
Very truly yours,
AMERIKING, INC.
By:
--------------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
-------------------------------
Name:
Title:
28
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 of the Corporation,
duly adopting this Amended and Restated Certificate of Incorporation. In the
manner prescribed by Section 228(d), these resolutions were adopted by written
consent of the stockholders of the Corporation, duly adopting this Amended and
Restated Certificate of Incorporation and written notice was given to all
stockholders not executing such written consent.
3. Pursuant to the provisions of Section 103(d) of the GCL, this
Amended and Restated Certificate of Incorporation is to become effective upon
filing (the "Effective Date").
4. On November __, 1996, the stockholders of the Corporation approved
a Recapitalization Agreement, which included a 1,000-for-1 stock split of the
Corporation's Common Stock, (the "Stock Split").
5. The text of the Certificate of Incorporation (the "Certificate"),
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 six million nine hundred and seven thousand five hundred (6,907,500)
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) two million, six hundred and seven thousand five hundred
(2,607,500) 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 2,600,000 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, as and if 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 stockholders.
-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 such holder.
(d) Fractional Shares. Except as otherwise provided in this
Certificate 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, as and if 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 Non-Voting 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
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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 that was represented by the certificate
or certificates delivered to the Corporation in connection with
such conversion but that 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 issuing
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).
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(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 this
Certificate 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 to dividends and other
payments 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 any
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
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outstanding from and 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 any 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 any 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
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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
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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
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<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 i, iii,
and iv 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 i, iii and
iv 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 v 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 that are to be redeemed, shall be
mailed to each holder of record of
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<PAGE>
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,
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(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 a certificate of designation 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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(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 (including the dollar amount of any liquidation
preference);
(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.
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Except as otherwise provided in these Articles or by applicable law,
the Corporation shall have the right to issue fractional shares 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 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:
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(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.
(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
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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 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
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<PAGE>
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.
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 D. Aaseby
Title: Secretary
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==============================================================================
AMERIKING, INC.
Incorporated under the laws
of the State of Delaware
-------------------------
AMENDED AND RESTATED BY-LAWS
-------------------------
Effective as of November __, 1996
==============================================================================
<PAGE>
BY-LAWS
OF
AMERIKING, INC.
I.
OFFICES
Section A. The registered office of the Corporation shall be in the
City of Wilmington, County of New Castle, State of Delaware and the name and
address of its registered agent is The Corporation Trust Company, 1209 Orange
Street, Wilmington, Delaware. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation
may require.
II.
STOCKHOLDERS
Section A. Time and Place of Annual Meeting. The annual meeting of the
stockholders for the purpose of electing directors or for the transaction of
such other business as may properly come before the meeting shall be held on
such date as may be fixed by resolution of the Board of Directors adopted at
least ten days prior to the date so fixed, for the purpose of electing
directors and for the transaction of such other business as may properly come
before the meeting.
Section B. Time and Place of Special Meetings. Unless otherwise
prescribed by law or by the Certificate of Incorporation, Special Meetings of
Stockholders, for any purpose or purposes, may be called by either (i) the
Chairman or (ii) the President, and shall be called by any such officer at the
request in writing of 2 members of the Board of Directors or at the request in
writing of stockholders holding fifty percent (50%) of the Common Stock of the
Corporation issued and outstanding and entitled to vote generally in the
election of directors pursuant to the Certificate of Incorporation. Such
request shall state the purpose of the proposed meeting.
All special meetings of the stockholders shall be held at such place,
within or without the State of Delaware, as shall be designated by the Board of
Directors. In the absence of
<PAGE>
any such designation by the Board of Directors, each such meeting shall be held
at the principal office of the Corporation.
Section C. Notice of Meetings. Written notice of each meeting of the
stockholders stating the place, date and time of the meeting shall be given not
less than ten nor more than sixty days before the date of the meeting, to each
stockholder entitled to vote at such meeting. The notice of any special meeting
of stockholders shall state the purpose or purposes for which the meeting is
called.
Section D. Quorum. The holders of a majority of the shares issued and
outstanding of stock entitled to vote under the Certificate of Incorporation,
present in person or by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If a quorum is not present or
represented, the holders of the stock present in person or represented by proxy
at the meeting and entitled to vote thereat shall have power, by the
affirmative vote of the holders of a majority of such stock, to adjourn the
meeting to another time and/or place, without notice other than announcement at
the meeting, until a quorum shall be presented or represented. At such
adjourned meeting, at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section E. Voting. Unless otherwise required by law, the Certificate
of Incorporation or these By-Laws, any question brought before any meeting of
stockholders shall be decided by a majority of votes cast by holders of the
stock represented and entitled to vote thereon, with each such holder having
the number of votes per share and voting as a member of such classes of
stockholders as may be provided in the Certificate of Incorporation, unless the
question is one upon which, by express provision of law or of the Certificate
of Incorporation, a different vote is required, in which case such express
provision shall govern and control the decision of such question. Such votes
may be cast in person or by proxy but no proxy shall be voted on or after one
year from its date, unless such proxy provides for a longer period. The Board
of Directors, in its discretion, or the officer of the Corporation presiding at
a meeting of stockholders, in his discretion, may require that any votes cast
at such meeting shall be cast by written ballot.
Section F. Informal Action By Stockholders. Any action required to be
taken at a meeting of the stockholders, or any other action which may be taken
at a meeting of the stockholders, may be taken without a meeting if a consent
in writing, setting forth the action so taken, shall be signed by stockholders
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all members having a right
to vote thereon were present and voted. Prompt notice of the taking of the
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corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
Section G. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section H. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section G of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
III.
DIRECTORS
Section A. General Powers. The business and affairs of the Corporation
shall be managed and controlled by or under the direction of a Board of
Directors, which may exercise all such powers of the Corporation and do all
such lawful acts and things as are not by law or by the Certificate of
Incorporation or by these By-Laws directed or required to be exercised or done
by the stockholders.
Section B. Number and Election of Directors. The Board of Directors
shall consist of at least one (1) and no more than nine (9) members. Except as
provided in Section C of this Article, directors shall be elected by a
plurality of the votes cast at a meeting of the stockholders for the election
of Directors at which a quorum is present, and each director so elected shall
hold office until his successor is duly elected and qualified, or until his
earlier resignation or removal. Any director may resign at any time upon notice
to the Corporation. Directors need not be stockholders.
Section C. Vacancies. Except as provided in the Certificate of
Incorporation, vacancies and newly created directorships resulting from any
increase in the number of directors may be filled by a majority of the
Directors then in office though less than a quorum, and each Director so chosen
shall hold office until his successor is elected and
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<PAGE>
qualified or until his earlier resignation or removal. If there are no
Directors in office, then an election of Directors may be held in the manner
provided by law.
Section D. Place of Meetings. The Board of Directors may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section E. Regular Meetings. The Board of Directors shall hold a
regular meeting, to be known as the annual meeting, immediately following each
annual meeting of the stockholders. Other regular meetings of the Board of
Directors shall be held at such time and at such place as shall from time to
time be determined by the Board of Directors. No notice of regular meetings
need be given.
Section F. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman or the President or any two directors.
Special meetings shall be called by the Secretary on the written request of any
two directors. Two days written or telephonic notice of special meetings need
be given.
Section G. Quorum. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these By-Laws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business; provided that, a majority
of the directors (the "Jordan Directors") chosen by the Jordan Investors (as
defined in the Stockholders Agreement, dated as of September 1, 1994, by and
among the Corporation and certain of the Corporation's stockholders (as such
agreement amy be amended, supplemented, or modified from time to time, the
"Stockholders Agreement")), as provided in the Stockholders Agreement, also
must be present for a quorum to be constituted. The act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section H. Organization. The Chairman of the Board, if elected, shall
act as chairman at all meetings of the Board of Directors. If a Chairman of the
Board is not elected or, if elected, is not present, the President, or if the
President is not present, a Director chosen by a majority of the Directors
present, shall act as chairman at meetings of the Board of Directors.
Section I. Executive Committee. The Board of Directors, by resolution
adopted by a majority of the whole Board of Directors, may designate one or
more Directors to constitute an Executive Committee, to serve as such, unless
the resolution designating the Executive Committee is sooner amended or
rescinded by the Board of Directors, until the next annual meeting of the Board
of Directors or until their respective successors are designated. The Board of
Directors, by resolution adopted by a majority of the whole Board of Directors,
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<PAGE>
may also designate additional Directors as alternate members of the Executive
Committee to serve as members of the Executive Committee in the place and stead
of any regular member or members thereof who may be unable to attend a meeting
or otherwise unavailable to act as a member of the Executive Committee. In the
absence or disqualification of a member and all alternate members who may serve
in the place and stead of such member, the member or members thereof present at
any meeting and not disqualified from voting, whether or not such member or
members constitute a quorum, may unanimously appoint another Director to act at
the meeting in the place of any such absent or disqualified member.
Except as expressly limited by the General Corporation Law of the
State of Delaware or the Certificate of Incorporation, the Executive Committee
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation
between the meetings of the Board of Directors. The Executive Committee shall
keep a record of its acts and proceedings, which shall form a part of the
records of the Corporation in the custody of the Secretary, and all actions of
the Executive Committee shall be reported to the Board of Directors at the next
meeting of the Board.
Meetings of the Executive Committee may be called at any time by the
Chairman of the Board, the President or any two of its members. Two days
written or telephonic notice of meetings need be given. A majority of the
members of the Executive Committee shall constitute a quorum for the
transaction of business, provided that, a majority of the members designated by
the Jordan Investors, as provided in the Stockholders Agreement, also must be
present for a quorum to be constituted, and, except as expressly limited by
this section, the act of a majority of the members present at any meeting at
which there is a quorum shall be the act of the Executive Committee. Except as
expressly provided in this Section, the Executive Committee shall fix its own
rules of procedure.
Section J. Other Committees. The Board of Directors, by resolution
adopted by a majority of the whole Board, may designate one or more other
committees, each such committee to consist of one or more Directors. Except as
expressly limited by the General Corporation Law of the State of Delaware or
the Certificate of Incorporation, any such committee shall have and may
exercise such powers as the Board of Directors may determine and specify in the
resolution designating such committee. The Board of Directors, by resolution
adopted by a majority of the whole Board, also may designate one or more
additional Directors as alternate members of any such committee to replace any
absent or disqualified member at any meeting of the committee, and at any time
may change the membership of any committee or amend or rescind the resolution
designating the committee. In the absence or disqualification of a member or
alternate member of a committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not such member or members
constitute a quorum, may unanimously appoint another Director to act at the
meeting in the place of any such absent or disqualified member, provided that
the Director so appointed meets any qualifications stated in the resolution
designating the committee. Each committee shall keep a record of proceedings
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<PAGE>
and report the same to the Board of Directors to such extent and in such form
as the Board of Directors may require. Unless otherwise provided in the
resolution designating a committee, a majority of all of the members of any
such committee may select its Chairman, fix its rules or procedure, fix the
time and place of its meetings and specify what notice of meetings, if any,
shall be given, provided that any action taken by the committee is approved by
a majority of the members of the committee chosen by the Jordan Investors as
provided in the Stockholders Agreement.
Section K. Action without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section L. Attendance by Telephone. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, members of the Board of
Directors, or of any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section M. Compensation. The Board of Directors shall have the
authority to fix the compensation of directors, which may include their
expenses, if any, of attendance at each meeting of the Board of Directors or of
a committee.
Section N. Preferred Stock Directors. Notwithstanding the foregoing,
whenever the holders of one or more classes or series of Preferred Stock shall
have the right, voting separately as a class or series, to elect directors, the
election, term of office, filling of vacancies, removal and other features of
such directorships shall be governed by the terms of the resolution or
resolutions adopted by the Board of Directors pursuant to ARTICLE FOURTH of the
Certificate of Incorporation applicable thereto, and each director so elected
shall not be subject to the provisions of this Article III unless otherwise
provided therein.
IV.
OFFICERS
Section A. Enumeration. The officers of the Corporation shall be
chosen by the Board of Directors and may include a Chairman, Chief Executive
Officer, President, a Secretary, a Chief Financial Officer, a Managing Owner or
Managing Owners and a Managing Director or Managing Directors. The Board of
Directors may also elect one or more Vice Chairmen, one or more Senior or other
Vice Presidents, one or more Assistant
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<PAGE>
Secretaries and Assistant Chief Financial Officers and such other officers and
agents as it shall deem appropriate. Any number of offices may be held by the
same person. The officers of the Corporation need not be stockholders of the
Corporation.
Section B. Term of Office. The officers of the Corporation shall be
elected at the annual meeting of the Board of Directors and shall hold office
until their successors are elected and qualified. Any officer elected or
appointed by the Board of Directors may be removed at any time by the Board of
Directors. Any vacancy occurring in any office of the Corporation required by
this Article shall be filled by the Board of Directors, and any vacancy in any
other office may be filled by the Board of Directors.
Section C. Chairman. The Chairman of the Board shall perform such
duties as shall be assigned to him by the Board from time to time and shall
preside over meetings of the Board of Directors and stockholders unless another
officer is appointed or designated by the Board of Directors as Chairman of
such meeting.
Section D. Chief Executive Officer. The Chief Executive Officer shall
have general charge and supervision of the operation of the business and
affairs of the Corporation. The Chief Executive Officer may sign certificates
for shares of the Corporation, deeds, mortgages, bonds, contracts, or other
instruments, except when the signing and execution thereof have been expressly
delegated by the Board of Directors or by these By-laws to some other officer
or agent of the corporation or are required by law to be otherwise signed or
executed by some other officer or in some other manner. He or she shall from
time to time make such reports of the affairs of the Corporation as the Board
of Directors may require and shall perform such other duties as may from time
to time be assigned to him by the Board of Directors or the Chairman.
Section E. President. The President shall perform such duties and have
such other powers as may from time to time be prescribed by these By-Laws, the
Board of Directors, the Chairman or the Chief Executive Officer. In the event
of the death of the Chief Executive Officer or his or her inability to act, the
President, if any, shall perform the duties of the Chief Executive Officer,
except as may be limited by resolution of the Board of Directors, with all the
powers of and subject to all the restrictions upon the Chief Executive Officer.
Section F. Managing Owner. The Managing Owner or Owners for purposes
of the Franchise Agreements and regulations of the Burger King Corporation
shall be authorized by the Board of Directors to bind the Corporation in any
dealings with Burger King Corporation, or its affiliates and authorized
distributors and suppliers of the Corporation's restaurants and to direct any
actions necessary to ensure compliance with each Burger King Franchise
Agreement and related document the Corporation enters into with the Burger King
Corporation and any regulations of the Burger King Corporation. Unless
otherwise consented to by Burger King Corporation, any Managing Owner shall be
an individual who
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<PAGE>
holds at least 5% of the Corporation's outstanding voting Common Stock. The
Managing Owner or Owners shall appoint at least one Managing Director who shall
be approved by Burger King Corporation.
Section G. Managing Director. The Managing Director or Directors, for
purposes of the Franchise Agreements and regulations of the Burger King
Corporation, shall devote full time and best efforts to the supervision of the
Corporation's Burger King restaurants, shall, unless otherwise consented to by
Burger King Corporation, live in the vicinity of the restaurants subject to his
or her supervision, and shall attend training periodically pursuant to a
schedule prescribed by Burger King Corporation from time to time. A Managing
Director must be replaced within 60 days from date of termination of employment
with the corporation by a new Managing Director approved by Burger King
Corporation. A Managing Director, for this purpose, need not be a Director of
the Corporation.
Section H. Vice President. Any Vice President may sign, with the
Secretary or Assistant Secretary, certificates for shares of the corporation.
Vice Presidents shall have, to the extent authorized by the Chief Executive
Officer or the Board of Directors, the same powers as the Chief Executive
Officer to sign deeds, mortgages, bonds, contracts or other instruments. Vice
Presidents shall perform such other duties as from time to time may be assigned
to them by the Chief Executive Officer or by the Board of Directors.
Section I. The Secretary. The Secretary shall, to the extent
practicable, attend all meetings of the Board of Directors and all meetings of
the stockholders and shall record the minutes of all proceedings in a book to
be kept for that purpose. He or she may give, or cause to be given, notice of
all meetings of the stockholders and of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors, the
Chairman or the Chief Executive Officer, under whose supervision he or she
shall act. He shall keep in safe custody the seal of the Corporation and affix
the same to any duly authorized instrument requiring it and, when so affixed,
it may be attested by his or her signature or by the signature of the Chief
Financial Officer or, if appointed, an Assistant Secretary or an Assistant
Chief Financial Officer. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest such
affixing of the seal. He shall keep in safe custody the certificate books and
stockholder records, including registers of the post office address of each
stockholder and director, and such other books and records as the Board of
Directors may direct, and shall perform all other duties incident to the office
of Secretary and such other duties as from time to time may be assigned to him
or her by the Board of Directors, the Chairman or the Chief Executive Officer.
Section J. The Chief Financial Officer. The Chief Financial Officer
shall have the care and custody of the corporate funds and other valuable
effects, including securities, and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation, and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
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Directors. The Chief Financial Officer shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, taking proper vouchers
for such disbursements, and shall render to the Chairman, Chief Executive
Officer and directors, at the regular meetings of the Board of Directors, or
whenever they may require it, an account of all his or her transactions as
Chief Financial Officer and of the financial condition of the Corporation, and
shall perform all other duties incident to the office of Chief Financial
Officer and such other duties as from time to time may be assigned to him by
the Board of Directors, the Chairman or the Chief Executive Officer.
V.
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
Section A. Execution of Documents. The Board of Directors shall
designate, by either specific or general resolution, the officers, employees
and agents of the Corporation who shall have the power to execute and deliver
deeds, contracts, mortgages, bonds, debentures, checks, drafts and other orders
for the payment of money and other documents for and in the name of the
Corporation, and may authorize such officers, employees and agents to delegate
such power (including authority to redelegate) by written instrument to other
officers, employees or agents of the Corporation; and, unless so designated or
expressly authorized by these By-laws, no officer, employee or agent shall have
any power or authority to bind the Corporation by any contract or engagement,
to pledge its credit or to render it liable pecuniarily for any purpose or to
any amount.
Section B. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
or otherwise as the Board of Directors or Chief Financial Officer, or any other
officer of the Corporation to whom power in this respect shall have been given
by the Board of Directors, shall select.
Section C. Proxies in Respect of Stock or Other Securities of Other
Corporations. The Board of Directors shall designate the officers of the
Corporation who shall have authority from time to time to appoint an agent or
agents of the Corporation to exercise in the name and on behalf of the
Corporation the powers and rights which the Corporation may have as the holder
of stock or other securities in any other corporation, and to vote or consent
in respect of such stock or securities. Such designated officers may instruct
the person or persons so appointed as to the manner of exercising such powers
and rights, and such designated officers may execute or cause to be executed in
the name and on behalf of the Corporation and under its corporate seal or
otherwise, such written proxies, powers of attorney or other instruments as
they may deem necessary or proper in order that the Corporation may exercise
its said powers and rights.
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VI.
CERTIFICATES OF STOCK
Section A. Form. The shares of the Corporation shall be represented by
certificates. Certificates of stock in the Corporation, if any, shall be signed
by or in the name of the Corporation by the Chairman of the Board or the Chief
Executive Officer or a Vice President and by the Chief Financial Officer or an
Assistant Chief Financial Officer or the Secretary or an Assistant Secretary of
the Corporation. Where a certificate is countersigned by a transfer agent,
other than the Corporation or an employee of the Corporation, or by a
registrar, the signatures of the Chairman of the Board, the Chief Executive
Officer or a Vice President and the Chief Financial Officer or an Assistant
Chief Financial Officer or the Secretary or an Assistant Secretary may be
facsimiles. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, the certificate may be issued by the Corporation with the same effect
as if such officer, transfer agent or registrar were such officer, transfer
agent or registrar at the date of its issue. The Board of Directors may
authorize the issue of some or all of the shares of any or all of its classes
or series without certificates. Within a reasonable time after the issue or
transfer of shares without certificates, the Corporation shall send the
stockholder a written statement of the information required by law on the
certificates. The written statement shall include written notice of any
restrictions which may be imposed on the transferability of such shares.
Section B. Transfer. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate of
stock or uncertificated shares in place of any certificate therefor issued by
the Corporation to the person entitled thereto, cancel the old certificate and
record the transaction on its books.
Section C. Replacement. In case of the loss, destruction or theft of a
certificate for any stock of the Corporation, a new certificate of stock or
uncertificated shares in place of any certificate therefor issued by the
Corporation may be issued upon satisfactory proof of such loss, destruction or
theft and upon such terms as the Board of Directors may prescribe. The Board of
Directors may in its discretion require the owner of the lost, destroyed or
stolen certificate, or his legal representative, to give the Corporation a
bond, in such sum and in such form and with such surety or sureties as it may
direct, to indemnify the Corporation against any claim that may be made against
it with respect to a certificate alleged to have been lost, destroyed or
stolen.
Section D. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to express consent to
corporate action in writing without a
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meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty days nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
Section E. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law. The Corporation shall not be required to register any transfer of
shares made in violation of the Stockholders Agreement, or in violation of any
other agreement among a stockholder or investor in the Corporation and the
Corporation, or recognize as a holder of any such shares any transferee in such
a violative transaction.
VII.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section A. Indemnification.
(i) Third Party Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party
(including, without limitation as a witness) to any threatened,
pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or
informal, including all appeals (other than an action, suit or
proceeding by or in the right of the Corporation) by reason of the
fact that he or she is or was a director or officer of the Corporation
(and the Corporation, in the discretion of the Board of Directors, may
so indemnify a person by reason of the fact that he or she is or was
an employee or agent of the Corporation or is or was serving at the
request of the Corporation in any other capacity for or on behalf of
the Corporation), against reasonable expenses (including counsel
fees), judgments, decrees, fines, penalties and amounts paid in
settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if, in the case of
conduct in his or her official capacity with the corporation, he or
she acted in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the Corporation, and
in all other cases, he acted in good faith and was at least not
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opposed to the Company's best interests, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful, except that no indemnification shall be made in
respect to any claim, issue or matter as to which Indemnitee shall
have been finally adjudged to be liable for (i) negligence or
misconduct in the performance of his duty to the Corporation unless
and only to the extent that the court in which such action or suit was
brought, or any other court of competent jurisdiction, shall determine
upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses as such court shall
deem proper, or (ii) violating any of the terms or provisions of
Section 16 of the Securities Exchange Act of 1934, as amended, or any
of the rules or regulations promulgated thereunder. The termination of
any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall
not, of itself, create a presumption that the person did not act in
good faith or in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful. Notwithstanding the foregoing, the
Corporation shall be required to indemnify an officer or director in
connection with an action, suit or proceeding initiated by such person
only if such action, suit or proceeding was authorized by the Board of
Directors or a committee thereof. No indemnity shall be provided by
the Corporation for expenses that have been paid directly by an
insurance carrier under a policy of directors' and officers' liability
insurance maintained by the Company.
(ii) Actions By or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action or suit, including all appeals, by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact
that he or she is or was a director or officer of the Corporation (and
the Corporation, in the discretion of the Board of Directors, may so
indemnify a person by reason of the fact that he or she is or was an
employee or agent of the Corporation or is or was serving at the
request of the Corporation in any other capacity for or on behalf of
the Corporation), against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit if, in the case of
conduct in his or her official capacity with the corporation, he or
she acted in good faith and in a manner he reasonably believed to be
in or not opposed to the Corporation's best interests, and, with
respect to any criminal action or proceeding, had no reasonable cause
to believe his or her conduct was unlawful, except that no
indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been finally adjudged to be liable
for (i) negligence or misconduct in the performance of his or her duty
to the Corporation unless and only to the extent that the court in
which such action or suit was brought, or any other court of competent
jurisdiction, shall determine upon application that,
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despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as such court shall deem
proper or (ii) violating any of the terms or provisions of Section 16
of the Securities Exchange Act of 1934, as amended, or any of the
rules or regulations promulgated thereunder. Notwithstanding the
foregoing, the Corporation shall be required to indemnify an officer
or director in connection with an action, suit or proceeding initiated
by such person only if such action, suit or proceeding was authorized
by the Board of Directors or a committee thereof. No indemnity shall
be provided by the Corporation for expenses that have been paid
directly by an insurance carrier under a policy of directors' and
officers' liability insurance maintained by the Company.
(iii) Indemnify if Successful or Partially Successful. To the
extent that a director, officer, employee or agent of the Corporation
has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (i) and (ii) of
this Section, or in defense of any claim, issue or matter therein, he
or she shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection
therewith.
If a director, officer, employee or agent of the Corporation is
only partially successful in the defense, investigation, settlement or
appeal of any action, suit or proceeding referred to in subsections
(i) and (ii) of this Section, and as a result is not entitled to
indemnification by the Corporation for the total amount of the
expenses (including attorneys' fees), costs, judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred
by him or her, the Corporation shall nevertheless provide
indemnification to the extent he or she has been partially successful.
(iv) Standard of Conduct. Except in a situation governed by
subsection (iii) of this Section, any indemnification under
subsections (i) and (ii) of this Section (unless ordered by a court)
shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in
subsections (i) and (ii) of this Section. Such determination shall be
made (1) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the
stockholders, but shares owned by or voted under the control of
directors who are parties to the proceeding may not be voted on
determination. The determination required by clauses (1) and (2) of
this subsection (iv) may in either event be made by the written
consent of the majority required by each clause.
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(v) Advancement of Expenses. Expenses (including attorneys'
fees) of each officer and director hereunder indemnified actually and
reasonably incurred in defending any civil, criminal, administrative
or investigative action, suit or proceeding or threat thereof shall be
paid by the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of (i) an undertaking by or on
behalf of such person to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the
Corporation as authorized in the Article and (ii) a written
affirmation of such officer's or director's good faith belief that he
or she has performed his or her duty to the Corporation, upon request
by the Corporation and if required under applicable law. Such expenses
(including counsel fees) incurred by employees and agents may be so
paid upon the receipt of the aforesaid undertaking and such terms and
conditions, if any, as the Board of Directors deems appropriate.
(vi) Nonexclusivity. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article shall not
be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
law, by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in any such person's
official capacity and as to action in another capacity while holding
such office.
Section B. Insurance. The Corporation may 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 liability
asserted against him and incurred by him in any such capacity, or arising out
of such person's status as such, whether or not the Corporation would have the
power to indemnify him or her against such liability under the provisions of
the General Corporation Law of Delaware.
Section C. Definitions.
(i) For purposes of this Article, references to "the Corporation"
shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence
had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who
is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article
with respect to the resulting or surviving corporation as he or she
would have with respect to such constituent corporation if its
separate existence had continued.
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(ii) References to "other capacities" shall include serving as a
trustee or agent for any employee benefit plan; references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the
request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent
with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
or she reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have
acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Article.
(iii) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article shall, unless otherwise
provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
(iv) The right to indemnification conferred by this Article
shall be deemed to be a contract between the Corporation and each
person referred to herein until amended or repealed, but no amendment
to or repeal of these provisions shall apply to or have any effect on
the right to indemnification of any person with respect to any
liability or alleged liability of such person for or with respect to
any act or omission of such person occurring prior to such amendment
or repeal.
(v) A person shall be deemed to have acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Corporation, or, with respect to any
criminal action or proceeding, to have had no reasonable cause to
believe his or her conduct was unlawful, if his or her action is based
on the records or books of account of the Corporation or another
enterprise, or on information supplied to him or her by the officers
of the Corporation or another enterprise in the course of their
duties, or on the advice of legal counsel for the Corporation or
another enterprise or on information or records given or reports made
to the Corporation or another enterprise by an independent certified
public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term
"another enterprise" as used herein shall mean any other corporation
or any partnership, joint venture, trust, employee benefit plan or
other enterprise of which such person is or was serving at the request
of the Corporation as a director or executive officer. The provisions
of this subsection shall not be deemed to be exclusive or to limit in
any way the circumstances in which a person may be deemed to have met
the applicable standard of conduct set forth in Section A(i) or
Section A(ii) of this Article, as the case may be.
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VIII.
GENERAL PROVISIONS
Section A. Fiscal Year The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section B. Corporate Seal. The corporate seal shall be in such form as
may be approved from time to time by the Board of Directors. The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
Section C. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at such
person's entities address as it appears on the records of the Corporation, with
postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Written notice
may also be given personally or by telegram, telex or cable.
Section D. Waiver of Notice. Whenever any notice is required to be
given under law or the provisions of the Certificate of Incorporation or these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent to notice.
Section E. Resignations. Any director or any officer, whenever elected
or appointed, may resign at any time by serving written notice of such
resignation on the President or the Secretary, and such resignation shall be
deemed to be effective as of the close of business on the date said notice is
received by the President or Secretary. No formal action shall be required of
the Board of Directors or the stockholders to make any such resignation
effective.
IX.
AMENDMENTS
These By-Laws may be altered, amended or repealed or new By-Laws may
be adopted by the Board of Directors. The fact that the power to amend, alter,
repeal or adopt the By-Laws has been conferred upon the Board of Directors
shall not divest the stockholders of the same powers.
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X.
SUBJECT TO CERTIFICATE OF INCORPORATION
These By-Laws and the provisions hereof are subject to the terms and
conditions of the Certificate of Incorporation of the Corporation (including
any certificates of designations filed thereunder), and in the event of any
conflict between these By-Laws and the Certificate of Incorporation, the
Certificate of Incorporation shall control.
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AMERIKING, INC.
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AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
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Dated as of November ____, 1996
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<PAGE>
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of ______, 1996, is made by and among
AmeriKing, Inc., a Delaware corporation (the "Company"), BancBoston Investments
Inc., MCIT PLC, a corporation organized under the laws of England, the Jordan
Investors, the Management Stockholders, the Jaro Investors and the Osborn
Investors (each as defined in the Stockholders Agreement, dated as of September
1, 1994, as amended by the Consent and Amendment No. 1 to Stockholders
Agreement, dated as of November 30, 1994 and Waiver and Amendment No. 2 to
Stockholders Agreement, dated as of February 7, 1996 (as so amended, the
"Original Stockholders Agreement"), between the Company and certain of the
parties hereto.
W I T N E S S E T H:
WHEREAS, concurrent with the date hereof, the Company is consummating
concurrent public offerings (the "Offerings") of ___% Senior Notes due 2006 in
the aggregate principal amount of $100 million and Units consisting of Senior
Exchangeable Preferred Stock due 2008 with an aggregate liquidation preference
of $30 million and Common Stock; and
WHEREAS, the parties to the Original Stockholders Agreement desire to
make certain amendments to the Original Stockholders Agreement, as set forth
below.
WHEREAS, as of the date hereof and after giving effect to the
transactions contemplated hereby, the Stockholders will beneficially own the
shares of Stock as set forth in the Stockholder Schedule ("Stockholder
Schedule") attached hereto and the FNBB Affiliate or its designee will own
Warrants immediately exercisable to purchase the number of shares of Non-Voting
Common Stock set forth on the Stockholders Schedule; and
WHEREAS, the parties hereto also desire to restrict the sale,
assignment, transfer, encumbrance or other disposition of the shares of capital
stock of the Company, including issued and outstanding shares of Common Stock,
Class A Preferred Stock and Class B Preferred Stock that may be issued
hereafter, and to provide for certain rights and obligations in respect thereto
as hereinafter provided;
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE I
Certain Definitions
As used in this Agreement, the following terms shall have the
following respective meanings:
Affiliate shall mean with respect to any Person, (a) any Person which
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, or (b) any Person
who is a director or executive officer (i) of such Person, (ii) of any
Subsidiary of such Person, or (iii) of any Person described in clause (a)
above, or with respect to any Stockholder, the Company; provided, that any
Affiliate of a corporation shall be deemed an Affiliate of such corporation's
stockholders. For purposes of this definition, "control" of a Person shall mean
the power, direct or indirect, (i) to vote or direct the voting of more than 5%
of the outstanding shares of Voting Stock of such Person, or (ii) to direct or
cause the direction of the management and policies of such Person, whether by
contract or otherwise.
Agreement shall mean this Agreement as in effect on the date hereof
and as hereafter from time to time amended, modified or supplemented in
accordance with the terms hereof.
Bank of Boston shall mean The First National Bank of Boston, a
national banking association.
Board of Directors shall mean the Board of Directors of the Company,
as duly constituted in accordance with this Agreement, or any committee thereof
duly constituted in accordance with this Agreement, the By-laws and applicable
law and duly authorized to make the relevant determination or take the relevant
action. To the extent that the Board of Directors is required under this
Agreement to authorize or approve, or make a determination in respect of a
transaction between the Company, on the one hand, and a Stockholder, and/or a
Stockholder's Affiliates, on the other hand, the Board of Directors shall be
deemed to exclude such Stockholder, any of its Affiliates, and any of the
directors, officers, employees, agents or representatives of such Stockholder
and/or its Affiliates, who are members of the Board of Directors.
Burger King means The Burger King Corporation, a Florida corporation.
Burger King Regulations means the rules, regulations and requirements,
policies and procedures of Burger King as in effect from time to time, relating
to the Company and its subsidiaries, including but not limited to those set
forth in the Franchise
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Agreements, the Burger King Franchise Offering Circular (October 1995) or other
agreements between the Company and/or its subsidiaries, on the one hand, and
Burger King, on the other hand.
By-Laws shall mean the By-Laws of the Company as amended and in effect
on the date hereof and as hereafter further amended or restated in accordance
with the terms hereof and pursuant to applicable law.
Certificate of Incorporation shall mean the Amended and Restated
Certificate of Incorporation of the Company as in effect on the date hereof and
as hereafter from time to time amended, restated, modified or supplemented in
accordance with the terms hereof and pursuant to applicable law.
Class A Preferred Stock shall mean the Class A Preferred Stock, par
value $0.01 per share, consisting of two tranches, the Class A1 Preferred Stock
and the Class A2 Preferred Stock, ranking pari passu with each other, of the
Company.
Class B Preferred Stock shall mean the Class B Preferred Stock, par
value $0.01 per share, of the Company.
Closing Date shall mean the date on which the Offerings shall be
consummated.
Commission shall mean the Securities and Exchange Commission and any
successor commission or agency having similar powers.
Common Stock shall mean the Common Stock, the Non-Voting Common Stock
and shall include unless otherwise noted, the Warrant Stock.
Company shall have the meaning set forth in the preamble to this
Agreement.
Credit Agreement shall mean the Second Amended and Restated Revolving
Credit and Term Loan Agreement, dated February 7, 1996, by and among
Enterprises, the Company, the lenders thereto and Bank of Boston, as agent as
amended or otherwise modified from time to time.
Enterprises shall mean National Restaurant Enterprises, Inc., a
Delaware corporation.
Exchange Act shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal statute then in effect, and a reference to a
particular section thereof shall include a reference to the comparable section,
if any, of such similar Federal statute.
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Executive and Advisors Subscription Agreement shall mean the Executive
and Advisors Subscription Agreement, dated as of September 1, 1994, by and
among the investors listed on the signature pages thereto and the Company, as
amended from time to time.
First Offer Price shall have the meaning specified in Section 5.1(a).
FNBB Affiliate shall mean BancBoston Investments Inc.
Franchise Agreements shall mean the franchise agreements in effect
from time to time between Enterprises and its subsidiaries on the one hand, and
Burger King on the other hand.
GAAP shall mean generally accepted accounting principles in the United
States of America in effect from time to time, applied on a consistent basis
both as to classification of items and amounts.
Initial Public Offering shall mean the public offer and sale of Common
Stock of the Company for net proceeds to the Company from the sale of Common
Stock of at least $30 million, pursuant to a firm commitment underwritten offer
registered under the Securities Act.
Institutional Lender shall mean any bank, savings and loan
association, insurance company, or other institutional lender.
Jaro Investors shall mean Lawrence Jaro, the Persons so listed on the
Stockholder Schedule and any Permitted Transferee of any of them who becomes a
Stockholder in accordance with the terms hereof.
Jaro Proxy Agreement shall mean the Jaro Proxy Agreement, dated
September 1, 1994, between Lawrence Jaro and the signatories listed therein.
Jordan Investors shall mean JZCC, MCIT and the Persons listed on the
Schedule of Jordan Investors including the signatories to the Jordan Investors
Subscription Agreement, the Executive and Advisors Subscription Agreement and
any Permitted Transferee of any of them who becomes a Stockholder in accordance
with the terms hereof.
Jordan Investors Subscription Agreement shall mean the Jordan
Investors Subscription Agreement, dated September 1, 1994, between certain
Jordan Investors and the Company, as amended from time to time.
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Jordan Party shall have the meaning given to it in the MCIT Purchase
Agreement.
JZCC shall mean the Jordan/Zalaznick Capital Company, a New York
general partnership.
Letter Agreement shall mean the letter agreement, dated September 1,
1994, by and among MCIT and the Jordan Investors and attached as Exhibit I to
the MCIT Purchase Agreement.
Management Agreement shall mean the Management Consulting Agreement,
dated September 1, 1994, between TJC Management Corporation and the Company, as
amended by Amendment No. 1 to the Management Consulting Agreement, dated
February 7, 1996, and as such agreement may from time to time hereafter be
further amended, modified or supplemented in accordance with the terms hereof
and thereof.
Management Investors shall mean any officer or managerial employee of
the Company or any of its Subsidiaries or his or her Affiliates who holds any
shares of Common Stock from the Company in accordance with the Management
Subscription Agreement and this Agreement, and any Permitted Transferee of any
of such Persons who becomes a Stockholder in accordance with the terms hereof.
Management Stockholders shall mean Lawrence Jaro, William Osborn, Gary
Hubert, Joel Aaseby, Don Stahurski, Scott Vasatka.
Management Subscription Agreement shall mean the Management
Subscription Agreement, dated September 1, 1994, between the Company and each
Management Investor as amended, modified or supplemented in accordance with the
terms hereof and thereof.
Managing Underwriter shall have the meaning specified in Section
6.1(f).
MCIT shall mean MCIT PLC, a corporation organized under the laws of
the United Kingdom.
MCIT Purchase Agreement shall mean the Amended and Restated Purchase
Agreement, dated as of February 7, 1996, between the Company and MCIT, as
amended or supplemented from time to time.
Non-Voting Common Stock shall mean the Non-Voting Common Stock, par
value $.01 per share, of the Company.
Notice of Exercise shall have the meaning specified in Section 5.1(b).
Notice of Intention shall have the meaning specified in Section
5.1(a).
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Offered Shares shall have the meaning specified in Section 5.1.
Offerings shall have the meaning specified in the recitals.
Osborn Investors shall mean William Osborn, the Persons so listed on
the Stockholder Schedule and any Permitted Transferee of any of them who
becomes a Stockholder in accordance with the terms hereof.
Osborn Proxy Agreement shall mean the Osborn Proxy Agreement, dated
September 1, 1994, between William Osborn and the signatories listed therein.
Owner shall refer to each of Lawrence Jaro, William Osborn and Gary
Hubert and any other person who is designated an owner pursuant to applicable
Burger King Regulations.
Owner Selling Stockholder shall have the meaning specified in Section
4.3.
Permitted Transferee shall mean, (i) any Jordan Investor, the FNBB
Affiliate, or any Management Investor and (ii) those Persons to whom Transfers
of Common Stock and Preferred Stock are permitted to be made by them pursuant
to Section 4.2 and Article V hereof.
Person shall mean an individual or a corporation, association,
partnership, joint venture, organization, business, trust, or any other entity
or organization, including a government or any subdivision or agency thereof.
Preferred Stock shall mean the Class A Preferred Stock, Class B
Preferred Stock, Senior Exchangeable Preferred Stock and undesignated preferred
stock of the Company.
Public Distribution shall mean a Public Offering of Common Stock, at
the conclusion of which the aggregate number of shares of Common Stock that
have been sold to the public pursuant to one or more effective registration
statements under the Securities Act equals at least 25% of the shares of Common
Stock then outstanding (on a fully diluted basis), including without
limitation, the Warrant Stock, after giving effect to such sale.
Public Offering shall mean a public offering and sale of equity
securities of the Company pursuant to an effective registration statement under
the Securities Act.
Purchase and Sale Agreement shall mean the Purchase and Sale
Agreement, dated September 1, 1994, by and among the Company, Enterprises and
Burger King.
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Registrable Securities shall mean:
(a) all shares of Common Stock and Non-Voting Common Stock outstanding
on the date hereof but prior to the consummation of the Offerings, and all
shares of Common Stock issued or issuable upon (x) the conversion or exchange
of outstanding shares of NonVoting Common Stock in accordance with the
applicable provisions of the Certificate of Incorporation or this Agreement, or
(y) the conversion or exchange of the Warrant Stock; provided, however, that no
holder of shares of Non-Voting Common Stock shall have any registration rights
hereunder with respect to any shares of Non-Voting Common Stock, but only with
respect to shares of Common Stock into which such shares of Non-Voting Common
Stock shall be so exchanged or converted in connection with an effective
registration and sale under the Securities Act of such shares of Common Stock;
and, solely for purposes of Article VI of this Agreement, each holder of shares
of Non-Voting Common Stock and each holder of Warrants to purchase shares of
Non-Voting Common Stock that are to be converted into shares of Common Stock to
be sold in connection with such a registration shall be deemed to be the holder
of the shares of Common Stock into which such shares of Non-Voting Common Stock
shall be convertible; and
(b) any shares of capital stock issued or issuable by the Company in
respect of any shares of Common Stock referred to in the foregoing by way of a
stock dividend or stock split or in connection with a combination or
subdivision of shares, reclassification, recapitalization, merger,
consolidation or other reorganization of the Company.
As to any particular Registrable Securities that have been issued,
such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of under such registration statement, (ii) they shall have been
distributed to the public pursuant to Rule 144, (iii) they shall have been
otherwise transferred or disposed of, and new certificates therefor not bearing
a legend restricting further transfer shall have been delivered by the Company,
and subsequent transfer or disposition of them shall not require their
registration or qualification under the Securities Act or any similar state law
then in force, or (iv) they shall have ceased to be outstanding.
Registration Expenses shall mean any and all out-of-pocket expenses
incident to the Company's performance of or compliance with Article VI hereof,
including, without limitation, all Commission, stock exchange or National
Association of Securities Dealers, Inc. ("NASD") registration and filing fees,
all fees and expenses of complying with securities and blue sky laws (including
the reasonable fees and disbursements of underwriters'
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counsel in connection with blue sky qualifications and NASD filings), all fees
and expenses of the transfer agent and registrar for the Registrable
Securities, all printing expenses, the fees and disbursements of counsel for
the Company and of its independent public accountants, including the expenses
of any special audits and/or "cold comfort" letters required by or incident to
such performance and compliance, and one firm of counsel (other than house
counsel) retained by the FNBB Affiliate if holding Registrable Securities being
registered and one firm of counsel (other than house counsel) retained by the
Jordan Investors holding Registrable Securities being registered, but excluding
underwriting discounts and commissions and applicable transfer and documentary
stamp taxes, if any, which shall be borne by the seller of the securities in
all cases.
Requesting Holder shall have the meaning specified in Section 6.5.
Securities shall mean (i) any capital stock of the Company and (ii)
any instrument evidencing indebtedness of the Company or Enterprises to the
Jaro Investors or the Osborn Investors.
Securities Act shall mean, as of any date, the Securities Act of 1933,
as amended, or any similar Federal statute then in effect, and in reference to
a particular section thereof shall include a reference to the comparable
section, if any, of any such similar Federal statute and the rules and
regulations thereunder.
Securities Purchase Agreement shall mean the Securities Purchase
Agreement, dated as of November 30, 1994, between the Company and the FNBB
Affiliate.
Selling Investors shall have the meaning specified in Section 5.9.
Selling Stockholder shall have the meaning specified in Section
5.1(a).
Senior Exchangeable Preferred Stock shall mean the ___% Senior
Exchangeable Preferred Stock due 2008 issued by the Company in the Offerings.
Senior Preferred Stock shall mean any new class or series of Preferred
Stock of the Company that is senior in right of payment of dividends and
preference in liquidation to the Class A Preferred Stock and Class B Preferred
Stock; provided, Senior Preferred Stock shall not include the Senior
Exchangeable Preferred Stock.
Stock shall mean the Common Stock and the Preferred Stock.
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Stockholder shall mean any of the Jordan Investors, MCIT, the FNBB
Affiliate, the Management Investors, the Jaro Investors, the Osborn Investors,
holders of the Company's capital stock issued pursuant to the Stock Option
Agreement to any Permitted Transferee of any such Person who becomes a party to
or bound by the provisions of this Agreement in accordance with the terms
hereof.
Stock Option Agreements shall mean the Stock Option Agreements, dated
September 1, 1994, as amended, between the Company and each of Scott Vasatka
and Donald Stahurski.
Subsidiary shall mean as to any Person a corporation of which
outstanding shares of stock having ordinary voting power (other than stock
having such power only by reason of the happening of a contingency) to elect a
majority of the Board of Directors of such corporation are at the time owned,
directly or indirectly through one or more intermediaries, or both, by such
Person.
Transaction Documents shall mean this Agreement, the Recapitalization
Agreement, each of the agreements that are exhibits hereto and thereto, and all
agreements, instruments and documents contemplated hereby and thereby.
Underwritten Offering shall have the meaning given to it in Section
6.1(c).
Voting Stock shall mean capital stock of the Company of any class or
classes, the holders of which are ordinarily, in the absence of contingencies,
entitled to vote for the election of corporate directors (or Persons performing
similar functions).
Voting Stockholder shall mean a Stockholder who holds Voting Stock or
retains, by proxy or otherwise, the power to vote Voting Stock.
Warrant Stock shall mean and include all shares of common stock issued
or issuable pursuant to the Warrants and the Stock Option Agreement and all
references in this Agreement to outstanding Common Stock shall be deemed to
include all Warrant Stock whether or not issued and outstanding.
Warrants shall mean (i) the Warrant, immediately exercisable to
purchase 31.2801 shares of Non-Voting Common Stock, issued to the FNBB
Affiliate or its designee pursuant to the Credit Agreement and (ii) the
Warrant, immediately exercisable to purchase 81.0799 shares of Non-Voting
Common Stock, issued to the FNBB Affiliate, as such Warrants may from time to
time be amended, modified or supplemented in accordance with the terms hereof
and thereof.
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ARTICLE II
Management
Section 2.1 Conduct of Business.
(a) The parties hereto confirm that it is their intention that the
business and affairs of the Company shall be managed by its Board of Directors
in the best interests of the Company and its Subsidiaries taken as a whole. In
furtherance of the foregoing, the parties hereto agree that, after the date
hereof, except in the case of the transactions expressly contemplated by the
Transaction Documents, neither they, any of their Affiliates nor any Affiliates
of the Company will enter into any written or oral contract, agreement or other
arrangement to engage in business or enter into any transaction, or will engage
in business or enter into any transaction, with the Company or any of its
Subsidiaries unless the terms and provisions of such contract, agreement or
other arrangement or the terms on which such business or transaction is
conducted, as the case may be, are fair to the Company or such Subsidiary and
are substantially equivalent to terms that would have been obtained in an
arm's-length relationship other than as required in connection with the
execution, performance and delivery of the Transaction Documents.
Notwithstanding any of the above, the Company may pay to TJC Management
Corporation or another Affiliate of JZCC, investment banking fees in accordance
with and subject to the terms of the Management Agreement, and directors of the
Company, directors fees not to exceed in the aggregate an amount per year equal
to $120,000 per year.
(b) Unless otherwise authorized by a vote of at least 60% of the whole
Board of Directors, whether or not there shall be any vacancies on the Board of
Directors, the parties hereto shall cause the Company to conduct its business
substantially as that business is conducted on the date hereof and shall not
conduct any other business.
(c) The parties hereto shall cause the Company to conduct its business
and affairs in all material respects in compliance with all Burger King
Regulations.
Section 2.2 Registration of Common Stock. In the event of a Public
Offering of the Company's Common Stock, each Voting Stockholder shall, at a
meeting convened for the purpose of amending the Certificate of Incorporation,
vote to increase the number of authorized shares of Common Stock and Non-Voting
Common Stock and, if necessary, increase the number of issued and outstanding
shares of Common Stock and Non-Voting Common Stock, whether by stock split,
stock dividend or otherwise, or change in
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its par value, as recommended by a majority of the members of the Board of
Directors in order to facilitate such Public Offering.
Section 2.3 Certificate of Incorporation; No Conflict with Agreement.
Each Voting Stockholder shall vote his shares of Voting Stock, and shall take
all actions necessary, to ensure that the Certificate of Incorporation and
By-Laws do not, at any time, conflict with the provisions of this Agreement.
ARTICLE III
Corporate Governance and Issuance of Senior Preferred Stock
Section 3.1 Board of Directors.
(a) The Stockholders hereby agree that at all times after the Closing
Date, the Board of Directors of the Company shall consist of not less than
seven members, including the individuals described in this Section 3.1(a). The
Voting Stockholders shall take all actions necessary to elect, or to cause the
Board of Directors to approve and appoint, the designees described below to be
members of the Board of Directors, and such other members as may be selected by
the holders of Voting Stock from time to time outstanding:
(i) four individuals, designated by the beneficial owners of the
majority of the shares of Common Stock beneficially owned by the
Jordan Investors ("Jordan Directors"); and
(ii) three individuals designated by the holders of a majority of
the shares of Common Stock beneficially owned by the Management
Stockholders; provided, that such individuals have executed employment
agreements with the Company, and that such employment agreements
remain in full force and effect ("Management Directors").
(b) Each Voting Stockholder hereby agrees to vote all shares of Voting
Stock owned or held of record by such Stockholder at each annual or special
meeting of Stockholders of the Company at which directors of the Company are to
be elected, in favor of, or to take all actions by written consent in lieu of
any such meeting as are necessary to cause, the election as members of the
Board of Directors of those individuals described in Section 3.1(a) in
accordance with, and to otherwise effect the intent of, the provisions of
Section 3.1(a).
Section 3.2 Vacancies. In the event that a vacancy is created on the
Board of Directors at any time by the death, disability, retirement,
resignation or removal of any member of
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the Board of Directors, or for any other reason there shall exist or occur any
vacancy on the Board of Directors, each Voting Stockholder hereby agrees to
take such actions as will result in the election or appointment as a director
of an individual designated or elected to fill such vacancy and serve as a
director by the Stockholders that had designated or elected (pursuant to
Section 3.1) the director whose death, disability, retirement, resignation or
removal resulted in such vacancy on the Board of Directors (in the manner set
forth in Section 3.1). In the interim from the time the vacancy is created
until a new director is elected, if the vacancy is for a Jordan Director, the
remaining Jordan Directors may appoint a replacement to act as a director until
a new director is duly elected, and if the vacancy is for a Management
Director, the remaining Management Directors may appoint a replacement to act
as a director until a new director is duly elected.
Section 3.3 Covenant to Vote. Each Voting Stockholder hereby agrees to
take all actions necessary to call, or cause the Company and the appropriate
officers and directors of the Company to call, an annual meeting (and when
circumstances so require, a special meeting) of Stockholders of the Company and
to vote all shares of Voting Stock owned or held of record by such Voting
Stockholder at any such meeting and at any other annual or special meeting of
stockholders in favor of, or take all actions by written consent in lieu of any
such meeting as may be necessary to cause, the election as members of the Board
of Directors of those individuals so designated in accordance with, and to
otherwise effect the intent of, this Article III. In addition, each Voting
Stockholder agrees to vote the shares of Voting Stock owned by such Stockholder
upon any other matter arising under this Agreement submitted to a vote of the
Stockholders in such a manner as to implement the terms of this Agreement. In
addition, each Voting Stockholder is aware of the terms of the Letter
Agreement.
Section 3.4 Issuance of Senior Preferred Stock. The Company shall not
issue shares of a class of Senior Preferred Stock with an aggregate liquidation
preference (including all issuances of Senior Preferred Stock after the date
hereof) in excess of $15,000,000 without the consent of the holders of a
majority of the Class A Preferred Stock and the Class B Preferred Stock then
outstanding, voting together as a single class.
ARTICLE IV
Transfers of Stock
Section 4.1 Restrictions on Transfer. Each Stockholder agrees that
such Stockholder will not, directly or indirectly,
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offer, sell, transfer, assign or otherwise dispose of (or make any exchange,
gift, assignment or pledge of) (collectively, for purposes of Articles IV and V
hereof only, a "transfer") any Securities or Warrants, as the case may be,
except (a) as provided in Section 4.2; (b) in accordance with Article V; (c) an
exchange of Common Stock of one class for Common Stock of another class in
accordance with Section 8.1(b); (d) a conversion of Common Stock of one class
into Common Stock of another class pursuant to the Certificate of
Incorporation; (e) the exercise of Warrants; (f) pursuant to the Management
Subscription Agreement; or (g) with regard to any pledge, hypothecation or
charge by MCIT. In addition to the other restrictions noted in this Article IV,
each Stockholder agrees that it will not, directly or indirectly, transfer any
of its Securities or Warrants except as permitted under the Securities Act and
other applicable securities laws.
Section 4.2 Exceptions to Restrictions. The provisions of Section 4.1
and Article V (other than Section 5.8) shall not apply to any of the following
transfers:
(a) (i) From JZCC to the Jordan Investors or any Jordan Party, (ii)
from any of the Jordan Investors or any Jordan Party to any of the other Jordan
Investors, (iii) from any Jordan Investor or any Jordan Party to any Trust
solely for such Jordan Investor's or such Jordan Party's benefit or the benefit
of such Jordan Investor's or such Jordan Party's spouse or children (as the
case may be); provided, that such Jordan Investor or such Jordan Party acts as
trustee and retains the sole power to direct the voting and disposition of such
shares; and provided, further, that in the case referred to in clause (iii),
each such Person including any such trust (each a "Permitted Transferee", shall
execute a counterpart of and become a party to this Agreement and shall agree
in a writing in form and substance satisfactory to the Company to be bound and
becomes bound by the terms of this Agreement.
(b) (i) From any Management Investor to such Management Investor's
spouse or children, (ii) from any Management Investor to any trust solely for
such Management Investor's benefit or the benefit of such Management Investor's
spouse or children, (iii) from any Jaro Investor to such Jaro Investor's spouse
or children, (iv) from any Jaro Investor to any trust solely for the benefit of
such Jaro Investor's spouse or children, (v) from any Osborn Investor to such
Osborn Investor's spouse or children or (vi) from any Osborn Investor to any
trust solely for the benefit of such Osborn Investor's spouse or children;
provided, that, in each case referred to above, such Management Investor, Jaro
Investor or Osborn Investor, as the case may be, acts as trustee and retains
the sole power to direct the voting and disposition of such Securities; and
provided, further that each such Person
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including any such trust (each a "Permitted Transferee") shall execute a
counterpart of and become a party to this Agreement and shall agree in a
writing in form and substance satisfactory to the Company to be bound and
becomes bound by the terms of this Agreement as a Stockholder.
(c) from the FNBB Affiliate, to any of its respective affiliates, the
Jordan Investors or any Institutional Lender.
(d) From any Stockholder to any Affiliate of the Company, or pursuant
to a merger or consolidation involving the Company or a sale of all or
substantially all of the outstanding shares of Common Stock.
(e) Pursuant to the provisions of the Credit Agreement, including any
pledge of stock or foreclosure on that pledge.
(f) Pursuant to a Public Offering or an open market sale following a
Public Offering in accordance with Rule 144 of the Commission.
(g) Transfers by the Jordan Investors or the Jordan Parties of
Preferred Stock, including donations to charitable organizations.
Section 4.3 Burger King Authorization. Other than (i) as set forth in
Section 4.1(c), (d), (e) or (f), (ii) as set forth in Section 4.2(a), (b), (c),
(d) or (g); provided, that, with respect to Section 4.2(b), the transfer of
Stock by either Lawrence Jaro or William Osborn do not result in either Mr.
Jaro or Mr. Osborn holding less than 5% of the Company's Voting Stock, (iii)
transfers of Securities other than Voting Stock, and (iv) transfers that would
not result in a "Change of Control" (as defined in the MCIT Purchase
Agreement), the Company and each Stockholder agree and acknowledge that any
issuance or transfer of Stock must be authorized by Burger King in accordance
with the terms and conditions set forth in the Franchise Agreement and the
Burger King Regulations.
If at any time any Owner who is a Stockholder shall desire to transfer
Securities or Warrants owned by him or it (such Stockholder desiring to
transfer shares of such Stock or Warrants being referred to herein as an "Owner
Selling Stockholder"), then such Owner Selling Stockholder shall deliver
written notice of its desire to transfer such Securities or Warrants,
accompanied by a copy of a proposal relating to such sale, to each of Burger
King and to the Company, setting forth such Owner Selling Stockholder's desire
to make such sale, the number and the class of shares of Securities or Warrants
proposed to be transferred and other terms applicable thereto.
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Upon receipt of the notice referred to above, the Company will use its
best efforts to cause Burger King to consent to the transfer proposal.
Notwithstanding the foregoing, any Owner who is a Stockholder acknowledges,
agrees and consents to any and all stop transfer restrictions placed on their
Securities and Warrants prior to the Company's receipt of Burger King's consent
to the transfer and the satisfaction of all applicable agreements, rules and
regulations regarding the transfer or conveyance of the Securities and
Warrants.
Section 4.4 Endorsement of Certificates.
(a) Upon the execution of this Agreement, in addition to any other
legend which the Company may deem advisable under the Securities Act and
certain state securities laws, all Warrants and certificates representing
shares of issued and outstanding Common Stock shall be endorsed at all times
prior to any Public Distribution as follows:
THIS CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE ONLY UPON
COMPLIANCE WITH, THE PROVISIONS OF A STOCKHOLDERS AGREEMENT, DATED
SEPTEMBER 1, 1994, AMONG THE COMPANY AND ITS STOCKHOLDERS, AS AMENDED;
SUBSCRIPTION AGREEMENTS, DATED SEPTEMBER 1, 1994, AMONG THE COMPANY
AND CERTAIN INVESTORS THEREIN, AS AMENDED AND THE TERMS AND CONDITIONS
OF FRANCHISE AND OTHER AGREEMENTS WITH BURGER KING CORPORATION.
REFERENCE IS MADE TO SUCH AGREEMENTS AND THE RESTRICTIVE PROVISIONS OF
THE CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE COMPANY. COPIES OF
THE ABOVE REFERENCED AGREEMENTS ARE ON FILE AT THE OFFICE OF THE
COMPANY AT THE JORDAN COMPANY, 9 WEST 57TH STREET, NEW YORK, NEW YORK
10019.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN
EXEMPTION FROM REGISTRATION, UNDER SAID ACT.
(b) Except as otherwise expressly provided in this Agreement, all
Warrants and certificates representing shares of Stock hereafter issued to or
acquired by any of the Stockholders or their successors hereto (including,
without limitation, all certificates representing shares of Common Stock
hereafter issued upon conversion of shares of Non-Voting Common Stock) shall
bear the legends set forth above, and the Warrants and shares of Stock
represented by such certificates shall be subject to the applicable provisions
of this Agreement. The obligations of each party hereto shall be binding upon
each transferee to whom Securities or Warrants are transferred by any party
hereto, whether or not such transfer is permitted under the terms of this
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Agreement, except for transfers pursuant to a Public Offering. Prior to
consummation of any transfer, except for transfers pursuant to a Public
Offering, such party shall cause the transferee to execute an agreement in form
and substance reasonably satisfactory to the other parties hereto, providing
that such transferee shall fully comply with the terms of this Agreement.
Prompt notice shall be given to the Company and each Stockholder by the
transferor of any transfer (whether or not to a Permitted Transferee) of any
Securities or Warrants.
Section 4.5 Improper Transfer. Any attempt to transfer or encumber any
shares of Securities or Warrants not in accordance with this Agreement shall be
null and void and neither the Company nor any transfer agent of such securities
shall give any effect to such attempted transfer or encumbrance in its stock
records.
ARTICLE V
Rights of First Offer;
New Securities; Tag Along Sales
Section 5.1 Transfers by a Stockholder.
(a) Except for sales of securities contemplated by Article VI hereof,
transfers permitted by Sections 4.1, 4.2 and 4.3, transfers of Preferred Stock
and transactions subject to Section 5.9, if at any time any Stockholder shall
desire to sell any Stock or Warrants owned by him or it (such Stockholder
desiring to sell shares of such Stock or Warrants being referred to herein as a
"Selling Stockholder"), then such Selling Stockholder shall deliver written
notice of its desire to sell such Stock or Warrants (a "Notice of Intention"),
accompanied by a copy of a proposal relating to such sale (the "Sale
Proposal"), to each of the other Stockholders and to the Company, setting forth
such Selling Stockholder's desire to make such sale (which shall be for cash
only), the number and class of shares of Stock or Warrants proposed to be
transferred (the "Offered Securities") and the price at which such Selling
Stockholder proposes to sell the Offered Securities (the "First Offer Price")
and other terms applicable thereto.
(b) Upon receipt of the Notice of Intention, the Company and the other
Stockholders shall then have the right to purchase at the First Offer Price and
on the other terms specified in the Sale Proposal all or, subject to Section
5.1(d), any portion of the Offered Securities in the following order of
priority: (i) if the Selling Stockholder is a Management Investor, the other
Management Investors shall have the first right to purchase the Offered
Securities pro rata among those Management Investors so
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electing on the basis of the respective number of shares of Common Stock or
Warrants owned or held as trustee by such Management Investors (or in such
other proportions as such Management Investors may agree), then the Company
shall have the second right to purchase the Offered Securities, and thereafter,
the Jordan Investors shall have the right to purchase the Offered Securities
pro rata among those of the Jordan Investors so electing on the basis of the
respective numbers of shares of Common Stock or Warrants owned by such Jordan
Investors (or in such other proportion as such Jordan Investors may agree) and
thereafter, the other Stockholders (excluding the Management Investors) shall
have the right to purchase the Offered Securities pro rata among the
Stockholders (excluding the Management Investors) so electing on the basis of
the respective numbers of shares of Common Stock or Warrants owned by such
Stockholders (or in such other proportion as such other Stockholders may
agree); (ii) if the Selling Stockholder is a Jordan Investor, the other Jordan
Investors shall have the first right to purchase the Offered Securities pro
rata among those of the Jordan Investors so electing on the basis of the
respective numbers of shares of Common Stock or Warrants owned by such Jordan
Investors (or in such other proportion as such Jordan Investors may agree), and
thereafter, the Company shall have the right to purchase the Offered Securities
and thereafter, all other Stockholders shall have the right to purchase the
Offered Securities pro rata among the Stockholders so electing to purchase on
the basis of the respective numbers of shares of Common Stock (including
Warrant Stock) owned by such Stockholders (or in such other proportion as such
other stockholders may agree); and (iii) if the Selling Stockholder is the FNBB
Affiliate, or MCIT, the Jordan Investors shall have the first right to purchase
the Offered Securities pro rata among those of the Jordan Investors so electing
on the basis of the respective numbers of shares of Common Stock (including
Warrant Stock) owned by such Jordan Investors (or in such other proportion as
such Jordan Investors may agree), and thereafter, the Company shall have the
right to purchase the Offered Securities and thereafter, all other Stockholders
shall have the right to purchase the Offered Securities pro rata among the
Stockholders so electing on the basis of the respective numbers of shares of
Common Stock (including Warrant Stock) owned by such Stockholders (or in such
other proportion as such other Stockholders may agree). The rights of the
Stockholders and the Company pursuant to this Section 5.1(b) shall be
exercisable by the delivery of notice to the Selling Stockholder (the "Notice
of Exercise"), within 30 calendar days from the date of delivery of the Notice
of Intention. The Notice of Exercise shall state the total number of shares of
the Offered Securities such Stockholder (or the Company) is willing to purchase
without regard to whether or not other Stockholders purchase any shares of the
Offered Securities. A copy of such Notice of Exercise shall also be delivered
by each
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Stockholder to the Company and each other Stockholder. The rights of the
Stockholders and the Company pursuant to this Section 5.1(b) shall terminate if
unexercised 30 calendar days after the date of delivery of the Notice of
Intention.
Notwithstanding the foregoing, no Management Investor, other than
Lawrence Jaro, William Osborn, Gary Hubert or Joel Aaseby shall be entitled to
purchase any shares of Common Stock or Warrants hereunder unless such shares
shall concurrently be duly assigned, transferred and delivered to the trustee
of the Jaro Voting Trust or Osborn Voting Trust and such shares shall
thereafter be subject to the Jaro or Osborn Voting Trust Agreement.
(c) In the event that the Stockholders or the Company exercise their
rights to purchase any or all of the Offered Securities in accordance with
Section 5.1(b), then the Selling Stockholder must sell the Offered Securities
to such Stockholders (or, as the case may be, the Company) within 30 calendar
days from the date of delivery of the Notice of Exercise received by the
Selling Stockholder.
(d) Notwithstanding the foregoing provisions of this Section 5.1,
unless the Selling Stockholder shall have consented to the purchase of less
than all of the Offered Securities, no Stockholder or Stockholders nor the
Company may purchase any Offered Securities hereunder unless all of the Offered
Securities are to be so purchased.
(e) For purposes of this Article V, any Person who has failed to give
notice of the election of an option hereunder within the specified time period
will be deemed to have waived its rights on the day after the last day of such
period.
(f) Each Stockholder agrees and acknowledges that the Company may
purchase or acquire Common Stock pursuant to Section 5.1(b) hereof, and
approves such purchases and acquisitions, and waives any objection or claim
relating thereto, whether against the Company, the Board of Directors or
otherwise.
Section 5.2 Transfer of Offered Shares to Third Parties. If all
notices required to be given pursuant to Section 5.1 have been duly given and
the Stockholders and the Company do not exercise their respective options to
purchase all of the Offered Securities at the First Offer Price and the Selling
Stockholder does not desire to sell less than all the Offered Securities or if
with the consent of the Selling Stockholder the other Stockholders and the
Company purchase less than all of the Offered Securities pursuant to the
provisions hereof, then in either such event the Selling Stockholder shall have
the right, subject to compliance by the Selling Stockholder with the
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provisions of Section 4.3 and Section 4.4(b) hereof, for a period of 120
calendar days from the earlier of (i) the expiration of the option period
pursuant to Section 5.1 with respect to such Sale Proposal or (ii) the date on
which such Selling Stockholder receives notice from the other Stockholders and
the Company that they will not exercise in whole or in part the options granted
pursuant to Section 5.1, to sell to any third party which is not an Affiliate
of, or related by consanguinity or marriage to, the Selling Stockholder the
Offered Securities remaining unsold at a price of not less than 95% of the
First Offer Price, and on the other terms specified in the Sale Proposal.
Section 5.3 Purchase of Offered Shares. The consummation of any
purchase and sale pursuant to Section 5.1 shall take place on such date, not
later than 30 calendar days after the expiration of the option period pursuant
to Section 5.1 with respect to such option, as the Selling Stockholder shall
select. Prior to the consummation of any sale pursuant to Section 5.1, the
Selling Stockholder shall comply with Section 4.3 and Section 4.4(b) hereof.
Upon the consummation of any such purchase and sale, the Selling Stockholder
shall deliver certificates evidencing the Offered Securities sold duly
endorsed, or accompanied by written instruments of transfer in form
satisfactory to the purchaser duly executed by the Selling Stockholder free and
clear of any liens, against delivery of the First Offer Price, payable in the
manner specified in Section 5.1(a).
Section 5.4 Waiting Period with Respect to Subsequent Transfers. In
the event that the Stockholders and the Company do not exercise their options
to purchase all of the Offered Securities, and the Selling Stockholder shall
not have sold the remaining Offered Securities to a third party for any reason
before the expiration, as applicable, of the 120-day period described in
Section 5.2, then such Selling Stockholder shall not give another Notice of
Intention pursuant to Section 5.1 for a period of 90 calendar days after the
last day of such 120-day period.
Section 5.5 Right of First Refusal for New Securities.
(a) The Company hereby grants to each of the Stockholders a right of
first refusal to purchase shares of any New Securities (as defined below) which
the Company may, from time to time, propose to issue and sell. Such right of
first refusal shall allow each Stockholder to purchase a pro rata portion of
the shares of Common Stock, Preferred Stock or Warrants as may be included in
the New Securities proposed to be issued, determined with reference to the
aggregate number of outstanding shares of Common Stock (including all Warrant
Stock) or Preferred Stock (as the case may be) held by such Stockholder before
the proposed
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issuance of New Securities. In the event a Stockholder does not purchase any or
all of its pro rata portion of New Securities, the remaining Stockholders shall
have the right to purchase such unpurchased New Securities or respective pro
rata portion until all of the New Securities are purchased or until no other
Stockholder desires to purchase any more New Securities. The right of first
refusal granted hereunder shall terminate if unexercised within 30 calendar
days after receipt of the notice described in Section 5.5(c) below.
(b) "New Securities" shall mean any authorized but unissued shares,
and any treasury shares, of capital stock of the Company and all rights,
options or warrants to purchase capital stock, and securities of any type
whatsoever that are, or may become, convertible into capital stock; provided,
however, that the term "New Securities" does not include (i) securities issued
upon conversion of shares of Non-Voting Common Stock into Common Stock, in
accordance with the Certificate of Incorporation and this Agreement; (ii)
securities issued pursuant to the acquisition of another corporation by the
Company by merger, purchase of all or substantially all of the assets or other
reorganization whereby the Company shall become the owner of more than 50% of
the voting power of such corporation; (iii) shares of Common Stock issued in
connection with any stock split or stock dividend of the Company; (iv) any
borrowings, direct or indirect, from financial institutions or other Persons by
the Company, whether or not presently authorized, including any type of loan or
payment evidenced by any type of debt instrument, and any capital stock issued
in connection with such borrowings (other than a borrowing from a Jordan
Party), including warrants, options or other rights to purchase capital stock,
provided that such borrowings are not convertible into or exchangeable for
capital stock of the Company; (v) shares of Common Stock issued pursuant to any
Public Offering; (vi) Warrant Stock; (vii) shares of Preferred Stock issued and
paid as dividends on outstanding Preferred Stock or (viii) shares of capital
stock or rights, options or warrants to purchase capital stock to be issued to
employees of the Company or its Subsidiaries, provided, that no more than two
percent (2%) of the outstanding capital stock on February 7, 1996 shall be
available for issuances after such date.
(c) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Stockholder written notice of its intention,
describing the class and number of shares of Common Stock or Preferred Stock
(as the case may be) it intends to issue as New Securities, the purchase price
therefor (which shall be payable solely in cash) and the terms upon which the
Company proposes to issue the same. Each Stockholder shall have 30 calendar
days from the date such notice is given to determine whether to purchase all or
any portion of
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the Stockholder's pro rata share of such New Securities for the purchase price
and upon the terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
Notwithstanding the provisions of this Section 5.5, no Jaro Investor or Osborn
Investor, other than Lawrence Jaro or William Osborn shall be entitled to
purchase any shares of Common Stock hereunder unless such shares shall
concurrently be made subject to the provisions of Section 8.3, as the case may
be.
Section 5.6 Legally Binding Obligation; Power of Attorney; Personal
Rights.
(a) Subject to Section 5.1(a), making a written offer, giving or
failing to give written notice within the stated period, accepting an offer or
making a decision or election, in each case as provided in Section 5.1 or 5.2,
shall create a legally binding obligation to buy or sell, or an obligation not
to buy or sell, as the case may be, the subject Common Stock as provided in
such Section 5.1 or 5.2.
(b) Subject to Section 5.1(a), each holder of Common Stock hereby
appoints JZCC as an attorney-in-fact for such holder with the power to execute
such documents and take such other actions to provide for the transfer of
Common Stock owned by such holder in accordance with this Article V. JZCC is
hereby authorized (i) to transfer such Common Stock on the books of the Company
at the direction and without regard to the surrender of certificates or
instruments representing such Common Stock held by such holder, and (ii) to
place on all certificates or instruments representing Common Stock a legend
reflecting this authority to transfer such Common Stock.
Section 5.7 Right to Join in Sale.
(a) Anything in this Agreement to the contrary notwithstanding, if any
Stockholder or group of Stockholders proposes, in a single transaction or a
series of transactions during any six-month period (other than transfers to a
Permitted Transferee pursuant to Section 4.2 and transactions subject to
Section 5.9 and transactions pursuant to Section 8 of the Management
Subscription Agreement) to sell, dispose of or otherwise transfer 5% or more of
the outstanding Common Stock and Warrant Stock or, if less than such amount, in
the case of any Stockholder which owns Common Stock or Warrant Stock on the
date hereof, 50% or more of its initial holdings of such interests in Common
Stock or Warrant Stock, as the case may be (each a "Disposing Stockholder"),
such person or group shall refrain from effecting such transaction unless,
prior to the consummation thereof, each other Stockholder, including a Warrant
Stock
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holder, shall have been afforded the opportunity to join in such sale of Common
Stock or Warrant Stock on a pro rata basis, as hereinafter provided.
(b) Prior to consummation of any proposed sale, disposition or
transfer of shares of Common Stock or Warrant Stock described in Section
5.7(a), the Disposing Stockholder shall cause the person or group that proposes
to acquire such shares (the "Proposed Purchaser") to offer (the "Purchase
Offer") in writing to each other Stockholder to purchase shares of Common Stock
or Warrant Stock owned by such Stockholder (regardless of whether the shares of
Common Stock or Warrant Stock proposed to be sold by the Disposing Stockholders
are the same class as the shares of Common Stock or Warrant Stock owned by such
Stockholders), such that the number of shares of such Common Stock or Warrant
Stock so offered to be purchased from such Stockholder shall be equal to the
product obtained by multiplying the total number of shares of such Common Stock
or Warrant Stock then owned by such Stockholder by a fraction, the numerator of
which is the aggregate number of shares of Common Stock and Warrant Stock
proposed to be purchased by the Proposed Purchaser from all Stockholders
(including the Disposing Stockholder or Stockholders) and the denominator of
which is the aggregate number of shares of Common Stock and Warrant Stock or
shares of Common Stock underlying the Warrants then outstanding. Such purchase
shall be made at the highest price per share and on such other terms and
conditions as the Proposed Purchaser has offered to purchase shares of Common
Stock or Warrant Stock to be sold by the Disposing Stockholder or Stockholders.
Each Stockholder shall have 20 calendar days from the date of receipt of the
Purchase Offer in which to accept such Purchase Offer, and the closing of such
purchase shall occur within 30 calendar days after such acceptance or at such
other time as such Stockholder and the Proposed Purchaser may agree. The number
of shares of Common Stock or Warrants to be sold to the Proposed Purchaser by
the Disposing Stockholder or Stockholders shall be reduced by the aggregate
number of shares of Common Stock or Warrant Stock purchased by the Proposed
Purchaser from the other Stockholders pursuant to the acceptance by them of
Purchase Offers in accordance with the provisions of this Section 5.7(b). In
the event of any sale of Warrant Stock pursuant to this Section 5.7, to the
extent that Warrant Stock consists of unexercised Warrants, such sale may be
made either by sale of all or a part of the relevant Warrant, or by exercise of
the Warrant and sale of the applicable Warrant Stock. In the event that a sale
or other transfer subject to this Section 5.7 is to be made to a Proposed
Purchaser who is not a Stockholder, the Disposing Stockholder shall notify the
Proposed Purchaser that the sale or other transfer is subject to this Section
5.7 and shall ensure that no sale or other transfer is consummated without the
Proposed Purchaser first complying with this Section 5.7. It
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shall be the responsibility of each Disposing Stockholder to determine whether
any transaction to which it is a party is subject to this Section 5.7.
Section 5.8 Retention and Sale of Control.
Notwithstanding any other provisions of this Agreement to the
contrary, but subject to the last sentence of this Section 5.8, prior to the
completion of a Public Distribution, except with the specific prior written
consent of the FNBB Affiliate and MCIT, the Jordan Investors shall not effect
or permit any sale or other disposition of Common Stock or Warrants, or cause
or permit any merger, consolidation or other transaction involving the Company
to take place or enter into or permit the Company to enter into any agreement,
arrangement, commitment or understanding with respect to the foregoing, if
immediately after giving effect to such sale, disposition, merger,
consolidation or other transaction, a "Change of Control" (as defined in the
MCIT Purchase Agreement) would occur. For purposes of this Section 5.8, the
term "Jordan Investors" shall not include any Permitted Transferee of any such
Persons other than Permitted Transferees referred to in Section 4.2(b) hereof.
Section 5.9 Take Along.
If at any time both (i) Jordan Investors owning interests representing
a majority of the shares of Common Stock or Warrants beneficially owned by the
Jordan Investors and (ii) the FNBB Affiliate (such Jordan Investors and the
FNBB Affiliate being referred to in this Section 5.9 as the "Selling
Investors") shall determine to sell or exchange (in a business combination or
otherwise) two-thirds or more of their aggregate shares of Common Stock or
Warrants in a bona fide arm's-length transaction to a third party in which the
same price per share shall be payable in respect of all shares of any class of
the Common Stock or Warrants, then, upon the written request of such Selling
Investors, each other Jordan Investor, each Management Investor, each Jaro
Investor and each Osborn Investor shall be obligated to, and shall, if so
requested by such third party, (a) sell, transfer and deliver or cause to be
sold, transferred and delivered to such third party, all shares of Common Stock
or Warrants owned by them at the same price per share (irrespective of class)
and on the same terms as are applicable to the Selling Investors, and (b) if
stockholder approval of the transaction is required, vote his, her or its
shares of Voting Stock in favor thereof. The provisions of Sections 5.1 through
5.4, inclusive, and Section 5.7 shall not apply to any transactions to which
this Section 5.9 applies.
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ARTICLE VI
Registration Rights
Section 6.1 Demand Registrations.
(a) At any time and from time to time after the earlier of September
1, 1998 or the effectuation of an Initial Public Offering by the Company,
holders of a majority of the shares of Stock held by the Jordan Investors
(other than MCIT) and the FNBB Affiliate may request in writing that the
Company effect the registration under the Securities Act of all or part of such
holders' Registrable Securities, specifying in the request the number and type
of Registrable Securities to be registered by each such holder and the intended
method of disposition thereof (such notice is hereinafter referred to as a
"Holder Request"). Upon receipt of such Holder Request, the Company will
promptly give written notice of such requested registration to all other
holders of Registrable Securities, which other holders shall have the right to
include the Registrable Securities held by them in such registration and
thereupon the Company will, as expeditiously as possible, use its best efforts
to effect the registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by such requesting Stockholders; and
(ii) all other Registrable Securities which the Company has been
requested to register by any other holder thereof by written request
given to the Company within 30 calendar days after the giving of such
written notice by the Company (which request shall specify the
intended method of disposition of such Registrable Securities), all to
the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities
so to be registered;
provided, however, that the Company shall not be obligated to file a
registration statement relating to any Holder Request under this
Section 6.1(a):
(x) unless the Company shall have received requests for such
registration with respect to at least 15% of the shares of Common
Stock then outstanding (including all Warrant Stock) with respect
to the first Holder Request, and unless the Company shall have
received requests for such registration with respect to 10% of
the shares of Common Stock then outstanding with respect to each
Holder Request under this Section 6 thereafter;
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(y) other than a registration statement on Form S-3 or a
similar short form registration statement, within a period of 12
months after the effective date of any other registration
statement relating to any registration request under this Section
6.1(a) that was not effected on Form S-3 (or any similar short
form); or
(z) within a nine-month period immediately following the
effective date of a registration previously effected by the
Company pursuant to this Section 6.1;
provided, further, however, that the Company may postpone for not more
than 90 calendar days, on one occasion only with respect to each
request for registration made under this Section 6.1(a), the filing or
effectiveness of a registration statement under this Section 6.1(a) if
the Company and a majority of the Jordan Investors agree that such
registration might reasonably be expected to have an adverse effect on
any proposal or plan by the Company to engage in any acquisition of
assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or similar transaction; provided, that in
such event, the holders of Registrable Securities initiating the
request for such registration will be entitled to withdraw such
request, and if such request is withdrawn such registration will not
count as one of the permitted registrations under this Section 6.1. In
any event, the Company will pay all Registration Expenses in
connection with any registration initiated under this Section 6.1.
(b) Intentionally Omitted.
(c) Notwithstanding the foregoing provisions of Section 6.1 (a) the
Company shall not be obligated to effect more than one registration pursuant to
this Section 6.1 at the request of a majority of the Jordan Investors, in any
twelve month period, in each case through a firm commitment underwriting
through a nationally recognized underwriter (an "Underwritten Offering").
(d) If the Company proposes to effect a registration requested
pursuant to this Section 6.1 by the filing of a registration statement on Form
S-3 (or any similar short-form registration statement), the Company will comply
with any request by the Managing Underwriter (as defined in Subsection (g),
below) to effect such registration on another permitted form if such Managing
Underwriter advises the Company that, in its opinion, the use of another form
of registration statement is of material importance of such proposed offering.
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(e) A registration requested pursuant to Section 6.1.(a) will not be
deemed to have been effected unless it has become effective; provided, that if
after it has become effective, the offering of Registrable Securities pursuant
to such registration is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or court,
such registration will be deemed not to have been effected.
(f) The Company will pay all Registration Expenses in connection with
each of the registrations of Registrable Securities effected by it pursuant to
this Section 6.1.
(g) The Company shall have the right, with the approval of the Jordan
Investors to select the investment banker (or investment bankers) that shall
manage the offering (collectively, the "Managing Underwriter").
(h) In connection with any offering pursuant to this Section 6.1, the
only shares that may be included in such offering are (i) Registrable
Securities, and (ii) shares of authorized but unissued Common Stock that the
Company elects to include in such offering ("Company Securities").
(i) If in connection with any Underwritten Offering pursuant to this
Section 6.1. the Managing Underwriter shall advise the Company that, in its
judgment, the number of shares proposed to be included in such offering should
be limited due to market conditions, then the Company will promptly so advise
each holder of Registrable Securities that has requested registration, and
shares shall be excluded from such offering in the following order until such
limitation has been met:
(A)
(1) Company Securities, if any, shall be excluded until all of
the Company Securities shall have been so excluded, and,
thereafter,
(2) until the Jordan Investors shall have included in such
offering the lesser of (i) 25% of the aggregate amount of
Securities held by the Jordan Investors as of February 7,
1996 (such amount as adjusted for stock splits,
recapitalizations and similar events and reduced by the
amount of Securities previously sold by the Jordan Investors
pursuant to Section 6.1 or 6.2 ) and (ii) the total amount
of Registrable Securities requested by the Jordan Investors
to be included in such offering, the Registrable Securities
requested to be included in such offering pursuant to
Section 6.1(a) by Persons shall be excluded pro rata, based
on the respective number of Registrable
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Securities as to which registration has been so requested by
such Persons, and, thereafter,
(3) the Registrable Securities requested to be included in such
offering pursuant to Section 6.1(a) by Persons other than
the FNBB Affiliate shall be excluded pro rata, based on the
respective number of Registrable Securities as to which
registration has been so requested by such Persons.
(j) If any shares of Common Stock requested to be included in a sale
pursuant to this Section 6.1. shall not be outstanding but shall be issuable
upon conversion of shares of Non-Voting Common Stock which are outstanding,
then the FNBB Affiliate and the Company shall take all actions necessary in
order to convert such shares of Non-Voting Common Stock into shares of Common
Stock in order to effect such sale.
Section 6.2 Piggyback Registrations.
(a) If the Company at any time proposes to register any of its equity
securities under the Securities Act (other than a registration on Form S-4 or
S-8 or any successor or similar forms thereto and other than pursuant to a
registration under Section 6.1.), whether or not for sale for its own account,
on a form and in a manner that would permit registration of Registrable
Securities for sale to the public under the Securities Act, it will give
written notice to all the holders of Registrable Securities promptly of its
intention to do so, describing such securities and specifying the form and
manner and the other relevant facts involved in such proposed registration
(including, without limitation, (x) whether or not such registration will be in
connection with an underwritten offering of Registrable Securities and, if so,
the identity of the Managing Underwriter and whether such offering will be
pursuant to a "best efforts" or "firm commitment" underwriting and (y) the
price (net of any underwriting commissions, discounts and the like) at which
the Registrable Securities are reasonably expected to be sold). Upon the
written request of any such holder delivered to the Company within 30 calendar
days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company will use best efforts to
effect the registration under the Securities Act of all of the Registrable
Securities that the Company has been so requested to register; provided,
however, that:
(i) If, at any time after giving such written notice of its
intention to register any securities and prior to the effective date
of the registration statement filed in
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connection with such registration, the Company shall determine for any
reason not to register such securities, the Company may, at its
election, give written notice of such determination to each holder of
Registrable Securities who made a request as hereinabove provided and
thereupon the Company shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights, of the Jordan
Investors and the FNBB Affiliate to request that such registration be
effected as a registration under Section 6.1.
(ii) If such registration involves an Underwritten Offering, all
holders of Registrable Securities requesting to be included in the
Company's registration must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and conditions
as apply to the Company.
No registration effected under this Section 6.2 shall relieve the Company of
its obligation to effect registration upon request under Section 6.1.
(b) The Company shall not be obligated to effect any registration of
Registrable Securities under this Section 6.2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange
offers, dividend reinvestment plans of stock option or other employee benefit
plans.
(c) The Registration Expenses incurred in connection with each
registration of Registrable Securities requested pursuant to this Section 6.2.
shall be paid by the Company.
(d) If in connection with any Underwritten Offering pursuant to this
Section 6.2. the Managing Underwriter shall advise the Company that, in its
judgment, the number of shares proposed to be included in such offering should
be limited due to market conditions, then the Company shall exclude shares from
such offering in the following order until such limitation has been met:
(1) until the Jordan Investors shall have included in such offering
the lesser of (i) 25% of the aggregate amount of Securities held
by the Jordan Investors as of February 7, 1996 (such amount as
adjusted for stock splits, recapitalizations and similar events
and reduced by the amount of Securities previously sold by the
Jordan Investors pursuant to Section 6.1 or 6.2 ) and (ii) the
total amount of Registrable Securities
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requested by the Jordan Investors to be included in such
offering, the Registrable Securities requested to be included in
such offering shall be excluded pro rata, based on the respective
number of Registrable Securities as to which registration has
been so requested by such Persons, and, thereafter
(2) the Registrable Securities requested to be included in such
offering by Persons other than the FNBB Affiliate shall be
excluded pro rata, based on the respective number of Registrable
Securities as to which registration has been so requested by such
Persons.
(e) In connection with any Underwritten Offering with respect to which
holders of Registrable Securities shall have requested registration pursuant to
this Section 6.2, the Company shall have the right to select the Managing
Underwriter with respect to the offering; provided, that such Managing
Underwriter is reasonably acceptable to the holders of a majority of the
Registrable Securities requested to be sold in such Underwritten Offering.
(f) If any shares of Common Stock requested to be included in a sale
pursuant to this Section 6.2. shall not be outstanding but shall be issuable
upon conversion of shares of Non-Voting Common Stock which are outstanding,
then the FNBB Affiliate and the Company shall take all actions necessary in
order to convert such shares of Non-Voting Common Stock into shares of Common
Stock in order to effect such sale.
Section 6.3 Registration Procedures.
(a) If and whenever the Company is required to use its best efforts to
effect or cause the registration of any Registrable Securities under the
Securities Act as provided in Section 6.1 or 6.2, the Company will, as
expeditiously as possible:
(i) Prepare and, in any event within 90 calendar days after the
end of the period within which requests for registration may be given
to the Company, file with the Commission a registration statement with
respect to such Registrable Securities and use its best efforts to
cause such registration statements to become and remain effective;
provided, that in the case of a registration provided for in Section
6.1. or 6.2, before filing a registration statement or prospectus or
any amendments or supplements thereof, the Company will furnish to the
counsel selected by the Jordan Investors copies of all such documents
proposed to be filed, which documents will be subject to the review of
such counsel; and, provided, further, that the Company may discontinue
any registration of its securities that is being
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effected pursuant to Section 6.2 at any time prior to the effective
date of the registration statement relating thereto.
(ii) Prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such
registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for
a period as may be requested by the Jordan Investors not exceeding
nine months and to comply with the provisions of the Securities Act
with respect to the disposition of all Common Stock covered by such
registration statement during such period in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement.
(iii) Furnish to each holder of Registrable Securities covered by
the registration statement and to each underwriter, if any, of such
Registrable Securities, such number of copies of a prospectus and
preliminary prospectus for delivery in conformity with the
requirements of the Securities Act, and such other documents, as such
Person may reasonably request, in order to facilitate the public sale
or other disposition of the Registrable Securities.
(iv) Use its best efforts to register or qualify such
Registrable Securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as each
seller shall reasonably request, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
seller to consummate the disposition of the Registrable Securities
owned by such seller, in such jurisdictions, except that the Company
shall not for any such purpose be required (A) to qualify to do
business as a foreign corporation in any jurisdiction where, but for
the requirements of this Section 6.3(a)(iv), it is not then so
qualified, or (B) to subject itself to taxation in any such
jurisdiction, or (C) to take any action which would subject it to
general or unlimited service of process in any such jurisdiction where
it is then so subject.
(v) Use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities.
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(vi) Immediately notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in Section 6.3(a)(ii), if the
Company becomes aware that the prospectus included in such
registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing, and, at the request of any such seller, deliver a reasonable
number of copies of an amended or supplemental prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include 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 not
misleading in the light of the circumstances then existing.
(vii) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make generally
available to its security holders, in each case as soon as
practicable, but not later than 45 calendar days after the close of
the period covered thereby (90 calendar days in case the period
covered corresponds to a fiscal year of the Company), an earnings
statement of the Company which will satisfy the provisions of Section
11(a) of the Securities Act.
(viii) Use its best efforts in cooperation with the underwriters
to list such Registrable Securities on each securities exchange as
they may reasonably designate.
(ix) In the event the offering is an Underwritten Offering, use
its best efforts to obtain a "cold comfort" letter from the
independent public accountants for the Company in customary form and
covering such matters of the type customarily covered by such letters
as (i) the Jordan Investors or (ii) the sellers of a majority of any
class of such Registrable Securities (excluding shares being sold by
the Jordan Investors) reasonably request.
(x) Execute and deliver all instruments and documents
(including in an Underwritten Offering an underwriting agreement in
customary form) and take such other actions and obtain such
certificates and opinions as (i) the Jordan Investors or (ii) sellers
of a majority of any class of such Registrable Securities (excluding
shares being sold by the Jordan Investors) reasonably request in order
to effect an underwritten public offering of such Registrable
Securities.
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(b) Each holder of Registrable Securities will, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 6.3(a)(vi), forthwith discontinue disposition of the Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 6.3(a)(vi).
(c) If a registration pursuant to Section 6.1 or 6.2 involves an
Underwritten Offering, each holder of Registrable Securities agrees, whether or
not such holder's Registrable Securities are included in such registration, not
to effect any public sale or distribution, including any sale pursuant to Rule
144 under the Securities Act, of any Registrable Securities, or of any security
convertible into or exchangeable or exercisable for any Registrable Securities
(other than as part of such Underwritten Offering), without the consent of the
Managing Underwriter, during a period commencing seven calendar days before and
ending 90 calendar days (or such lesser number as the Managing Underwriter
shall designate) after the effective date of such registration.
(d) If a registration pursuant to Section 6.1 or 6.2 involves an
Underwritten Offering, the Company agrees, if so required by the Managing
Underwriter, not to effect any public sale or distribution of any of its equity
or debt securities, as the case may be, or securities convertible into or
exchangeable or exercisable for any of such equity or debt securities, as the
case may be, during a period commencing seven calendar days before and ending
90 calendar days after the effective date of such registration, except for such
Underwritten Offering or except in connection with a stock option plan, stock
purchase plan, savings or similar plan, or an acquisition, merger or exchange
offer.
(e) If a registration pursuant to Section 6.1 or 6.2 involves an
Underwritten Offering, any holder of Registrable Securities requesting to be
included in such registration may elect, in writing, prior to the effective
date of the registration statement filed in connection with such registration,
not to register such securities in connection with such registration, unless
such holder has agreed with the Company or the Managing Underwriter to limit
its rights under this Section 6.3.
(f) It is understood that in any Underwritten Offering in addition to
any shares of Common Stock (the "initial shares") the underwriters have
committed to purchase, the underwriting agreement may grant the underwriters an
option to purchase up to a number of additional shares of authorized but
unissued shares of Common Stock (the "option shares") equal to 15% of the
initial
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shares (or such other maximum amount as the NASD may then permit), solely to
cover over-allotments. Shares of Common Stock proposed to be sold by the
Company and the other sellers shall be allocated between initial shares and
option securities as agreed or, in the absence of agreement, pursuant to
Section 6.1(i) or 6.2(d), as the case may be. The number of initial shares and
option shares to be sold by requesting holders shall be allocated pro rata
among all such holders on the basis of the relative number of shares of
Registrable Securities each such holder has requested to be included in such
registration.
(g) Notwithstanding anything in this Article VI to the contrary, in
lieu of converting any share of Non-Voting Common Stock into Common Stock prior
to or simultaneously with the filing or the effectiveness of any registration
statement filed pursuant to this Article VI, the holder of such Non-Voting
Common Stock may sell such Non-Voting Common Stock to the underwriter of the
offering being registered upon the undertaking of such underwriter to convert
such Non-Voting Common Stock before making any distribution pursuant to such
registration statement and to include the Common Stock issued upon such
conversion among the securities being offered pursuant to such registration
statement.
Section 6.4 Indemnification.
(a) In the event of any registration of any securities of the Company
under the Securities Act pursuant to Section 6.1 or 6.2, the Company will, and
it hereby agrees to, indemnify and hold harmless, to the extent permitted by
law, each seller of any Registrable Securities covered by such registration
statement, its directors and officers or general and limited partners, each
other Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such seller or any such
underwriter within the meaning of the Securities Act, as follows:
(i) against any and all loss, liability, claim, damage or expense
whatsoever arising out of or based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration
statement (or any amendment or supplement thereto), including all
documents incorporated therein by reference, or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
arising out of an untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or prospectus
(or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein not misleading;
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(ii) against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense reasonably incurred by them in
connection with investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under subparagraph (i) or (ii) above;
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any such seller or underwriter expressly for use in the preparation
of any registration statement (or any amendment thereto) or any preliminary
prospectus or prospectus (or any amendment or supplement thereto); and
provided, further, that the Company will not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within
the meaning of the Securities Act, under the indemnity agreement in this
Section 6.4(a) with respect to any preliminary prospectus or final prospectus
or final prospectus as amended or supplemented, as the case may be, to the
extent that any such loss, claim, damage or liability of such underwriter or
controlling Person results from the fact that such underwriter sold Registrable
Securities to a Person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the final prospectus or of the
final prospectus as then amended or supplemented, whichever is most recent, if
the Company has previously furnished copies thereof to such underwriter. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such seller or any such director, officer, general or
limited partner, investment advisor or agent, underwriter or controlling Person
and shall survive the transfer of such securities by such seller.
(b) The Company may require, as a condition to including any
Registrable Securities in any registration statement filed in
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accordance with Section 6.1 or 6.2, that the Company shall have received an
undertaking reasonably satisfactory to it from the prospective seller of such
Registrable Securities or any underwriter, to indemnify and hold harmless (in
the same manner and to the same extent as set forth in Section 6.4(a)) the
Company with respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary, final or
summary prospectus contained therein, or any amendment or supplement, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such seller or underwriter specifically stating that
it is for use in the preparation of such registration statement, preliminary,
final or summary prospectus or amendment or supplement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling Person and
shall survive the transfer of such securities by such seller. In that event,
the obligations of the Company and such sellers pursuant to this Section 6.4
are to be several and not joint; provided, however, that with respect to each
claim pursuant to this Section, the Company shall be liable for the full amount
of such claim, and each such seller's liability under this Section 6.4 shall be
limited to an amount equal to the net proceeds (after deducting the
underwriting discount and expenses) received by such seller from the sale of
Registrable Securities held by such seller pursuant to this Agreement.
(c) Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding involving a
claim referred to in this Section 6.4, such indemnified party will, if a claim
in respect thereof is to be made against an indemnifying party, give written
notice to such indemnifying party of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under this
Section 6.4, except to the extent (not including any such notice of an
underwriter) that the indemnifying party is actually prejudiced by such failure
to give notice. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim (in which case the indemnifying party shall not be liable for the
fees and expenses of more than one firm of counsel for a majority of the
sellers of Registrable Securities and one firm of counsel selected by the
Jordan Investors, or more than one firm of counsel for the underwriters in
connection with any one action or separate but similar or related actions), the
indemnifying party will be entitled to participate in and to assume the defense
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thereof, jointly with any other indemnifying party similar notified, to the
extent that it may wish with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal
or other expenses subsequently incurred by such indemnifying party in
connection with the defense thereof.
(d) The Company and each seller of Registrable Securities shall
provide for the foregoing indemnity (with appropriate modifications) in any
underwriting agreement with respect to any required registration or other
qualification of securities under any federal or state law or regulation of any
governmental authority.
Section 6.5 Contribution. In order to provide for just and equitable
contribution in circumstances under which the indemnity contemplated by Section
6.4 is for any reason not available, the parties required to indemnify by the
terms thereof shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Company, any seller of Registrable Securities and one or more
of the underwriters, except to the extent that contribution is not permitted
under Section 11(f) of the Securities Act. In determining the amounts which the
respective parties shall contribute, there shall be considered the relative
benefits received by each party from the offering of the Registrable Securities
(taking into account the portion of the proceeds of the offering realized by
each), the parties' relative knowledge and access to information concerning the
matter with respect to which the claim was asserted, the opportunity to correct
and prevent any statement or omission and any other equitable considerations
appropriate under the circumstances. The Company and each Person selling
securities agree with each other that no seller of Registrable Securities shall
be required to contribute any amount in excess of the amount such seller would
have been required to pay to an indemnified party if the indemnity under
Section 6.4(b) were available. The Company and each such seller agree with each
other and the underwriters of the Registrable Securities, if requested by such
underwriters, that it would not be equitable if the amount of such contribution
were determined by pro rata or per capita allocation (even if the underwriters
were treated as one entity for such purpose) or for the underwriters' portion
of such contribution to exceed the percentage that the underwriting discount
bears to the initial public offering price of the Registrable Securities. For
purposes of this Section 6.5, each Person, if any, who controls an underwriter
within the meaning of Section 15 of the Securities Act shall have the same
rights to contribution as such underwriter, and each director and each
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officer of the Company who signed the registration statement, and each Person,
if any, who controls the Company or a seller of Registrable Securities within
the meaning of Section 15 of the Securities Act shall have the same rights to
contribution as the Company or a seller of Registrable Securities, as the case
may be.
Section 6.6 Rule 144. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company covenants that it will file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder (or, if the Company is not required to
file such reports, it will, upon the request of any holder of Registrable
Securities, make publicly available other information), and it will take such
further action as any holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable such holder to sell
shares of Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (i) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with such
requirements.
ARTICLE VII
Termination
Section 7.1 Certain Terminations.
(a) The provisions of Articles III, IV and V shall terminate on the
date on which any of the following events first occurs: (i) a Public
Distribution, (ii) a merger or consolidation of the Company with or into
another Person that is not an Affiliate of the Company, as a result of which
the Stockholders own less than 65% of the outstanding shares of Voting Stock of
the surviving or resulting corporation, (iii) the sale or other disposition in
compliance with Section 2.1 of all or substantially all the assets of the
Company to a Person that is not an Affiliate of the Company, or (iv) ten years
from the date of this Agreement.
(b) The provisions of Section 8.3 shall terminate ten years from the
date of this Agreement.
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(c) Notwithstanding the foregoing, this Agreement shall in any event
terminate with respect to any Stockholder when such Stockholder no longer owns
any Securities or Warrants.
ARTICLE VIII
Miscellaneous
Section 8.1 Other Covenants.
(a) For so long as any Stockholder holds in the aggregate 5% or more
of the Common Stock then outstanding, such Stockholder may upon reasonable
prior notice visit and inspect the properties of the Company and each
Subsidiary of the Company and examine and copy (at their own expense) their
books of record and account, and discuss their affairs, finances and accounts
with their officers and their current and prior independent public accountants
all at such reasonable times as such Stockholder or Stockholders may desire.
All materials and information obtained pursuant to this Section 8.1(a) shall be
kept confidential by the Stockholders and shall not be disclosed to any third
party (other than to their Affiliates) unless expressly agreed to by the
Company or as required pursuant to applicable law, in connection with judicial
or arbitral proceedings or upon request of any governmental or regulatory
authority.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the FNBB Affiliate may, at any time and from time to time, exchange
any number of shares of Non-Voting Common Stock held by them for an equal
number of shares of Common Stock; provided, however, that immediately after
giving effect to any such exchange, the aggregate number of shares of Common
Stock held by the FNBB Affiliate shall not exceed 4.99% of the aggregate number
of shares of Common Stock then outstanding. Such exchange shall be effected in
each case by the delivery by the FNBB Affiliate of certificates representing
such shares, duly endorsed or accompanied by duly executed stock powers, to the
Company at its principal office, together with written notice stating the
number of such shares to be so exchanged, whereupon the Company shall issue to
the FNBB Affiliate new certificates representing a number of shares of Common
Stock equal to the number of shares of Non-Voting Common Stock so exchanged,
which shares of Common Stock when so issued shall be duly and validly issued,
fully paid and non-assessable. The Company shall at all times reserve a
sufficient number of shares of its authorized but unissued Common Stock to
permit compliance with the provisions of this Section 8.1(b). Any shares of
Non-Voting Common Stock acquired by the Company in exchange for shares of
Common Stock pursuant to this Section 8.1(b) shall be cancelled and retired.
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Section 8.2 Financial Information; List of Stockholders.
(a) The Company agrees to furnish to each Stockholder, for so long as
such Stockholder holds any Common Stock, Preferred Stock or Warrant as soon as
available the following financial statements and other information:
(i) copies of the consolidated and consolidating balance sheets
of the Company and its Subsidiaries as of the end of the first, second
and third quarterly accounting periods, and of the related
consolidated and consolidating statements of income and retained
earnings and cash flows for such accounting period and for the portion
of the fiscal year ended with the last day of such accounting period,
all in reasonable detail and stating in comparative form the
consolidated and consolidating figures as of the end of and for the
corresponding date and period in the previous fiscal year, all
certified by its chief financial officer as complete and correct and
as presenting fairly the information contained therein in accordance
with the same accounting practices used in preparing the audited
financial statements for the fiscal year most recently ended required
to be delivered by paragraph (ii) below, subject to recurring
non-material changes resulting from year-end audit adjustments,
absence of the notes required by GAAP and year end accruals; and
(ii) copies of the consolidated and consolidating balance sheets
of the Company and its Subsidiaries as of the end of each fiscal year,
and of the related consolidated and consolidating statements of income
and retained earnings and cash flows for such fiscal year, all in
reasonable detail and stating in comparative form the respective
consolidated and consolidating figures as of the end of and for the
previous fiscal year, and, in the case of such consolidated
statements, accompanied by a report thereon of independent certified
public accountants of recognized national standing selected by the
Company and acceptable to Stockholders (the "Accountants"), which
report shall be unqualified as to going concern and scope of audit and
shall state that such consolidated financial statements present fairly
the consolidated financial position of the Company and its
Subsidiaries as at the dates indicated and their consolidated income
and retained earnings and cash flows for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years
(except for such changes with which the Accountants shall concur) and
that the examination by such Accountants in connection with such
consolidated financial statements has been made in accordance with
generally accepted auditing standards; and
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(iii) copies of any proxy statements, financial statements and
reports as the Company or its Subsidiaries shall send or make
available generally to any of their security holders, and copies of
all regular and periodic reports and of all registration statements
(other than on Form S-8 or Form 701 or a similar form) which the
Company or its Subsidiaries may file with the Securities and Exchange
Commission or with any securities exchange.
(b) The Company agrees to furnish to any Stockholder holding in the
aggregate 5% or more of the Common Stock then outstanding, any other
information, including without limitation financial statements and computations
relating to the performance of this Agreement and/or the affairs of the Company
or its Subsidiaries that any such Stockholder may from time to time reasonably
request and which is capable of being obtained, produced or generated without
undue effort or expense by the Company or such Subsidiary or of which any of
them has knowledge (including, without limitation, a brief statement containing
a management discussion and analysis of the financial condition of the Company
and its Subsidiaries and describing the results of operations and significant
events relating to the Company and Subsidiaries for any fiscal period; copies
of all minutes of meetings of Board of Directors; copies of all information
furnished to stockholders at or in connection with all meetings of stockholders
of the Company, a copy of all information furnished to members of the Board of
Directors of the Company, and a copy of a list of shareholders of the Company).
(c) Not less than 30 calendar days after the end of each fiscal year
of the Company, and from time to time upon the request of any Jordan Investor,
the Company shall provide to such Jordan Investor a list of all stockholders of
the Company indicating the respective numbers of shares owned of Common Stock
or Preferred Stock, as the case may be, by them.
(d) The Company agrees to provide all information and make any filings
reasonably requested by any Stockholder that are required by Section 1202 of
the Internal Revenue Code of 1986, as amended, so long as such information and
filings do not have an adverse effect in respect of the Company's business,
operations, results, tax positions, conditions or prospects.
Section 8.3 Covenants of the Jaro and Osborn Investors.
(a) Each of the Osborn Investors hereby appoints William Osborn as
their proxy pursuant to the Osborn Proxy Agreement, with full power of
substitution, to represent and vote, in his sole discretion, all Securities
which they would be entitled to vote at any annual or special meeting of the
Company's stockholders and to execute and deliver, in his sole discretion,
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any written consent by the holders of the Company's Securities in which they
would be entitled to join. Each of the Osborn Investors acknowledges and agrees
that such proxy is coupled with an interest and cannot be terminated or revoked
until the termination of this Agreement. Any transfer of Securities by the
foregoing persons to a Permitted Transferee will be subject to this proxy and
conditioned upon the Company's receipt of a proxy, in form and substance
identical to this proxy, from such Permitted Transferee. In the event that
William Osborn is no longer employed by Enterprises, the Osborn Investors
hereby agree that this proxy may be exercised by a majority of the Management
Directors. Each of the Osborn Investors agrees to execute and deliver to the
Company any instruments or documents which they may reasonably request in order
to effectuate this proxy.
(b) Each of the Jaro Investors hereby appoints Lawrence Jaro as their
proxy pursuant to the Jaro Proxy Agreement, with full power of substitution, to
represent and vote, in his sole discretion, all Securities which they would be
entitled to vote at any annual or special meeting of the Company's stockholders
and to execute and deliver, in his sole discretion, any written consent by the
holders of the Company's Securities in which they would be entitled to join.
Each of the Jaro Investors acknowledges and agrees that such proxy is coupled
with an interest and cannot be terminated or revoked until the termination of
this Agreement. Any transfer of Securities by the foregoing persons to a
Permitted Transferee will be subject to this proxy and conditioned upon the
Company's receipt of a proxy, in form and substance identical to this proxy,
from such Permitted Transferee. In the event that Lawrence Jaro is no longer
employed by Enterprises, the Jaro Investors hereby agree that this proxy may be
exercised by a majority of the Management Directors. Each of the Jaro Investors
agrees to execute and deliver to the Company any instruments or documents which
they may reasonably request in order to effectuate this proxy.
Section 8.4 RIGHT OF SETOFF. EACH OF THE JARO INVESTORS AND THE OSBORN
INVESTORS (EACH A "SETOFFEE") ACKNOWLEDGES AND AGREES THAT THE COMPANY MAY, IN
ADDITION TO ANY OTHER RIGHTS OR REMEDIES AVAILABLE TO IT UNDER THE JARO
PURCHASE AGREEMENT AND THE OSBORN PURCHASE AGREEMENT, RESPECTIVELY, AND IN ITS
SOLE DISCRETION, SET OFF ITS INDEMNIFICATION RIGHTS AGAINST PAYMENTS OR AMOUNTS
OWED BY THE COMPANY TO A JARO INVESTOR OR AN OSBORN INVESTOR, RESPECTIVELY, IN
RESPECT OF THEIR SECURITIES RECEIVED PURSUANT TO THE JARO PURCHASE AGREEMENT OR
OSBORN PURCHASE AGREEMENT, PROVIDED THAT INDEMNIFICATION CLAIMS IN THE
AGGREGATE SHALL BE LIMITED TO THE CONSIDERATION RECEIVED BY A JARO INVESTOR OR
AN OSBORN INVESTOR AND THAT THE COMPANY'S RIGHT TO SETOFF SHALL BE APPLIED TO
THE FOLLOWING PAYMENTS IN ORDER: (I) ANY PRINCIPAL AND THEN INTEREST PAYMENTS
THE COMPANY MAY OWE A SETOFFEE PURSUANT TO ANY OF ITS NOTES, AS DEFINED IN THE
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MANAGEMENT SUBSCRIPTION AGREEMENT; (II) ANY PREFERRED STOCK DIVIDEND,
LIQUIDATION OR REDEMPTION PAYMENT THE COMPANY MAY OWE A SETOFFEE; (III) ANY
COMMON STOCK DIVIDEND, LIQUIDATION OR REDEMPTION PAYMENT THE COMPANY MAY OWE A
SETOFFEE AND THEN (IV) CASH TO THE EXTENT THE CASH RECEIVED PURSUANT TO SUCH
ASSET PURCHASE AGREEMENT HAS NOT BEEN DISTRIBUTED BY THE JARO INVESTOR TO ITS
SHAREHOLDERS AND LIMITED BY THE AMOUNT, IF ANY, THAT THE JARO INVESTOR OR
OSBORN INVESTOR HAS PAID FEDERAL OR STATE TAXES THEREIN OR HAS RECEIVED A
NOTICE OR CLAIM ASSESSING ADDITIONAL TAX LIABILITIES UPON THE JARO INVESTOR OR
OSBORN INVESTOR AS A RESULT OF NON-COMPLIANCE WITH SECTION 351 AND THE RULES
REGARDING THE INSTALLMENT NOTE REGULATIONS UNDER THE INTERNAL REVENUE CODE OF
1986, AS AMENDED. ANY PERSONAL LIABILITY OF AN INDIVIDUAL JARO INVESTOR OR
OSBORN INVESTOR SHALL BE LIMITED TO THE EXTENT THE JARO INVESTOR OR OSBORN
INVESTOR PERSONALLY RECEIVED STOCK OR CASH PURSUANT TO THE JARO PURCHASE
AGREEMENT OR THE OSBORN PURCHASE AGREEMENT, OR ACQUIRED SUCH STOCK OR CASH IN A
DISTRIBUTION OR DIVIDEND, NET OF FEDERAL AND STATE INCOME TAXES AS PROVIDED IN
THE PRECEDING SENTENCE. THE COMMON STOCK SHALL BE VALUED AT FAIR MARKET VALUE
(AS DEFINED IN THE MANAGEMENT SUBSCRIPTION AGREEMENT) FOR PURPOSE OF
DETERMINING THE REDEMPTION VALUE OF THE COMMON STOCK.
Section 8.5 Successors and Assigns. Except as otherwise provided
herein, all of the terms and provisions of this Agreement shall be binding
upon, shall inure to the benefit of and shall be enforceable by the respective
successors and assigns of the parties hereto. No Stockholder may assign any of
its rights hereunder to any Person other than a transferee that has complied
with the requirements of Sections 4.2 and 5.3 (if applicable) as provided
therein in all respects. The Company may not assign any of its rights hereunder
to any Person other than an Affiliate of the Company. If any transferee of any
Stockholder shall acquire any Securities or Warrants, in any manner, whether by
operation of law or otherwise, such shares shall be held subject to all of the
terms of this Agreement, and by taking and holding such shares such Person
shall be entitled to receive the benefits of and be conclusively deemed to have
agreed to be bound by and to comply with all of the terms and provisions of
this Agreement.
Section 8.6 Amendment and Modification; Waiver of Compliance;
Conflicts.
(a) This Agreement may be amended only by a written instrument duly
executed by (i) the holders of a majority of the shares of capital stock held
by the Jordan Investors, (ii) to the extent required under Section 11.8 under
the Credit Agreement, or if such proposed amendment would materially adversely
affect the rights of the FNBB Affiliate under this Agreement, the FNBB
Affiliate, and (iii) to the extent that such proposed amendment
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would materially adversely affect the rights of the Management Investors under
this Agreement as a group, the holders of a majority of the shares of Voting
Stock owned by the Management Investors or which may be voted, pursuant to the
provisions of Section 8.3, by either Lawrence Jaro, William Osborn or a
majority of the Management Directors. In the event of the amendment or
modification of this Agreement in accordance with its terms, the Stockholders
shall cause the Board of Directors of the Company to meet within 30 calendar
days following such amendment or modification or as soon thereafter as is
practicable for the purpose of adopting any amendment to the Certificate of
Incorporation and By-Laws of the Company that may be required as a result of
such amendment or modification to this Agreement, and, if required, proposing
such amendments to the Stockholders entitled to vote thereon, and the
Stockholders agree to vote in favor of such amendments.
(b) Except as otherwise provided in this Agreement, any failure of any
of the parties to comply with any obligation, covenant, agreement or condition
herein may be waived by the party entitled to the benefits thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
(c) In the event of any conflict between the provisions of this
Agreement and the provisions of any other agreement, the provisions of this
Agreement shall govern and prevail.
Section 8.7 Notices. Any notice, request, claim, demand, document and
other communication hereunder to any party shall be effective upon receipt (or
refusal of receipt) and shall be in writing and delivered personally or sent by
telex or telecopy (with such telex or telecopy confirmed promptly in writing
sent by first class mail), or first class mail, or other similar means of
communication, as follows:
(i) If to the Company or any Jordan Investor, addressed to the
Company or to such Jordan Investor c/o The Jordan Company, 9 West 57th
Street, New York, New York 10019, Attention: Richard Caputo; or
(ii) If to a Stockholder other than the Jordan Investors, to the
address of such Stockholder set forth in the stock records of the
Company.
or, in each case, to such other address or telex or telecopy number as such
party may designate in writing to each Stockholder
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and the Company by written notice given in the manner specified herein.
All such communications shall be deemed to have been given, delivered
or made when so delivered by hand or sent by telex (answer back received) or
telecopy, or five business days after being so mailed.
Section 8.8 Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part hereof
contain the entire agreement among the parties hereto with respect to the
subject transactions contemplated hereby and supersede all prior oral and
written agreements and memoranda and undertakings among the parties hereto with
regard to this subject matter. The Company represents to the Stockholders that
the rights granted to the holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted or obligations accepted under any
other agreement (including the Certificate of Incorporation) to which the
Company is a party. Neither the Company nor any Subsidiary of the Company will
hereafter enter into any agreement with respect to its equity or debt
securities which is inconsistent with the rights granted to the holders of
Registrable Securities or any Stockholder under this Agreement without
obtaining the prior written consent of the Stockholder or holder of Registrable
Securities whose rights would be thereby affected.
Section 8.9 Injunctive Relief. The Stockholders acknowledge and agree
that a violation of any of the terms of this Agreement will cause the
Stockholders irreparable injury for which an adequate remedy at law is not
available. Therefore, the Stockholders agree that the Company and each
Stockholder shall be entitled to an injunction, restraining order or other
equitable relief from any court of competent jurisdiction, restraining any
Stockholder from committing any violations of the provisions of this Agreement.
Section 8.10 Inspection. For so long as this Agreement shall be in
effect, this Agreement shall be made available for inspection by any
Stockholder at the principal executive offices of the Company.
Section 8.11 Headings. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
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Section 8.12 Recapitalizations, Exchanges, Etc., Affecting the Common
Stock; New Issuances.
(a) The provisions of this Agreement shall apply, to the full extent
set forth herein with respect to the Common Stock and the Preferred Stock and
to any and all equity or debt securities of the Company or any successor or
assign of the Company (whether by merger, consolidation, sale of assets, or
otherwise) which may be issued in respect of, in exchange for, or in
substitution of, such equity or debt securities and shall be appropriately
adjusted for any stock dividends, splits, reverse splits, combinations,
reclassifications, recapitalizations, reorganizations and the like occurring
after the date hereof.
(b) In the event that the Company enters into an agreement providing
for the merger or consolidation of the Company with another entity or for an
exchange of the equity securities of such entities pursuant to which
Stockholders of the Company would be entitled to receive equity securities of
the surviving or any other corporation, the Company shall cause such agreement
to provide that any holder of shares of Non-Voting Common Stock shall be
entitled to receive non-voting equity securities of such surviving or other
corporation convertible into voting equity securities in the same manner as the
Non-Voting Common Stock.
Section 8.13 Ratification of Prior Acts of Board of Directors of
Company; Right to Negotiate. Each of the Stockholders hereby adopts, ratifies
and confirms all of the actions heretofore taken by the Board of Directors in
all respects, including, without limitation, in respect of the Offerings and
the transactions contemplated thereby. Nothing in this Agreement (apart from
Article V hereof) shall be deemed to restrict or prohibit the Company from
purchasing Stock from any Stockholder at any time upon such terms and
conditions and at such price as may be mutually agreed upon between the Company
and such Stockholder, whether or not at the time of such purchase circumstances
exist which specifically grant the Company the right to purchase, or such
Stockholder the right to sell, Stock pursuant to the terms of this Agreement.
Section 8.14 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT
OF ANY BREACH OF THIS AGREEMENT BY A STOCKHOLDER, THE COMPANY WOULD BE
IRREPARABLY HARMED AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT,
IN ADDITION TO ANY OTHER REMEDY TO WHICH IT MAY BE ENTITLED AT LAW OR IN
EQUITY, THE COMPANY SHALL BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS
MAY BE APPROPRIATE. EACH PARTY AGREES THAT JURISDICTION AND VENUE WILL BE
PROPER IN CHICAGO, ILLINOIS AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON
CONVENIENS. EACH
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PARTY WAIVES PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND
COMPLAINT COMMENCING AN ACTION OR PROCEEDING SHALL BE PROPERLY SERVED AND SHALL
CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE
PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE PROVIDED BY
THE LAWS OF THE STATE OF ILLINOIS OR THE UNITED STATES. THE CHOICE OF FORUM SET
FORTH IN THIS SECTION 8.14 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF
ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY ACTION UNDER THIS
AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE JURISDICTION.
Section 8.15 ARBITRATION. SUBJECT TO THE RIGHT OF THE COMPANY TO
PURSUE INJUNCTIVE RELIEF PURSUANT TO SECTION 8.15, ANY DISPUTE BETWEEN OR AMONG
THE PARTIES TO THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS
NEGOTIATION, EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT
OR DEALING OR ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT
LIMITATION ANY CLAIM UNDER THE SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, ANY OTHER STATE OR FEDERAL LAW RELATING TO SECURITIES OR
FRAUD OR BOTH, THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS
AMENDED, OR FEDERAL OR STATE COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED
EXCLUSIVELY PURSUANT TO, ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION
SHALL TAKE PLACE IN CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE
LAW OF THE STATE OF ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS
OF LAW PURSUANT TO SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON
THE PARTIES, SUBJECT TO CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9
U.S.C. ss.ss. 1 ET SEQ. ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A
COURT OF RECORD.
Section 8.16 No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against any person.
Section 8.17 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 8.18 Obligations Under the MCIT Purchase Agreement.
(a) The Company, the Jordan Investors and each Jordan Party hereby
agree to use their best efforts to refrain from exercising their voting rights
as required by the Abstention Letter (as defined in the MCIT Purchase
Agreement) for so long as such letter is in full force and effect.
-46-
<PAGE>
(b) The Company will use its best efforts to fulfill the terms and
conditions of the Preemption Letter (as defined in the MCIT Purchase Agreement)
for so long as such letter is in full force and effect.
-47-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the date first above written.
AMERIKING, INC.
By:
-------------------------------
Name:
Title:
MCIT PLC
By:
-------------------------------
Name:
Title:
BANCBOSTON INVESTMENTS, INC.
By:
-------------------------------
Name:
Title:
JORDAN INVESTORS:
Jordan/Zalaznick Capital Company
By:
-------------------------------
Name:
General Partner
Leucadia Investors, Inc.
By:
-------------------------------
Name:
Title:
John W. Jordan, II Revocable Trust
----------------------------------
John W. Jordan, II
Trustee
-48-
<PAGE>
----------------------------------
David W. Zalaznick
----------------------------------
Jonathan F. Boucher
----------------------------------
John R. Lowden
----------------------------------
Adam E. Max
John M. Camp Profit Sharing Plan
By:
-------------------------------
John M. Camp
Trustee
----------------------------------
John M. Camp
----------------------------------
A. Richard Caputo, Jr.
James E. Jordan, Jr. Profit Sharing Plan
and Trust
By:
-------------------------------
James E. Jordan, Jr.
Trustee
Paul Rodzevik Profit Sharing Plan and
Trust
By:
-------------------------------
Paul Rodzevik
Trustee
-49-
<PAGE>
MANAGEMENT STOCKHOLDERS:
----------------------------------
Lawrence Jaro
----------------------------------
William Osborn
----------------------------------
Gary Hubert
----------------------------------
Joel Aaseby
----------------------------------
Don Stahurski
----------------------------------
Scott Vasatka
JARO INVESTORS:
Tabor Restaurants Associates, Inc.
By:
-------------------------------
Lawrence Jaro
President
Jaro Enterprises, Inc.
By:
-------------------------------
Lawrence Jaro
President
-50-
<PAGE>
Jaro Restaurants Associates, Inc.
By:
-------------------------------
Lawrence Jaro
President
JB Restaurants, Inc.
By:
-------------------------------
Lawrence Jaro
President
OSBORN INVESTORS:
Osburger, Inc.
By:
-------------------------------
William Osborn
President
Castleking, Inc.
By:
-------------------------------
William Osborn
President
White-Osborn Restaurants, Inc.
By:
-------------------------------
William Osborn
President
-51-
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
Page
RECITALS.................................................................. 1
ARTICLE I
Certain Definitions
Affiliate........................................................ 2
Agreement........................................................ 2
Bank of Boston................................................... 2
Board of Directors............................................... 2
Burger King...................................................... 2
Burger King Regulations.......................................... 2
By-Laws ........................................................ 3
Certificate of Incorporation..................................... 3
Class A Preferred Stock ......................................... 3
Class B Preferred Stock ......................................... 3
Closing Date .................................................... 3
Commission ...................................................... 3
Common Stock .................................................... 3
Company ........................................................ 3
Credit Agreement................................................. 3
Enterprises...................................................... 3
Exchange Act .................................................... 3
Executive and Advisors Subscription Agreement.................... 4
First Offer Price ............................................... 4
FNBB Affiliate................................................... 4
Franchise Agreements............................................. 4
GAAP ........................................................ 4
Initial Public Offering ......................................... 4
Institutional Lender ............................................ 4
Jaro Investors................................................... 4
Jaro Proxy Agreement............................................. 4
Jordan Investors................................................. 4
Jordan Investors Subscription Agreement ......................... 4
Jordan Party..................................................... 5
JZCC ........................................................ 5
Letter Agreement................................................. 5
Management Agreement ............................................ 5
Management Investors ............................................ 5
Management Stockholders.......................................... 5
Management Subscription Agreement ............................... 5
Managing Underwriter............................................. 5
MCIT ........................................................ 5
MCIT Purchase Agreement.......................................... 5
Non-Voting Common Stock.......................................... 5
<PAGE>
Page
Notice of Exercise .............................................. 5
Notice of Intention ............................................. 5
Offered Shares .................................................. 6
Offerings........................................................ 6
Osborn Investors................................................. 6
Osborn Proxy Agreement........................................... 6
Owner ........................................................ 6
Owner Selling Stockholder........................................ 6
Permitted Transferee............................................. 6
Person ........................................................ 6
Preferred Stock.................................................. 6
Public Distribution ............................................. 6
Public Offering.................................................. 6
Purchase and Sale Agreement...................................... 6
Registrable Securities .......................................... 7
Registration Expenses ........................................... 7
Requesting Holder ............................................... 8
Securities....................................................... 8
Securities Act .................................................. 8
Securities Purchase Agreement.................................... 8
Selling Investors ............................................... 8
Selling Stockholder ............................................. 8
Senior Exchangeable Preferred Stock.............................. 8
Senior Preferred Stock........................................... 8
Stock ........................................................ 8
Stock Option Agreements.......................................... 9
Subsidiary ...................................................... 9
Transaction Documents............................................ 9
Underwritten Offering ........................................... 9
Voting Stock .................................................... 9
Voting Stockholder .............................................. 9
Warrant Stock.................................................... 9
Warrants ........................................................ 9
ARTICLE II
Management
2.1 Conduct of Business.............................................. 10
2.2 Registration of Common Stock..................................... 10
2.3 Certificate of Incorporation; No Conflict with
Agreement........................................................ 11
ARTICLE III
Corporate Governance and Issuance of Senior Preferred Stock
3.1 Board of Directors............................................... 11
3.2 Vacancies........................................................ 11
-ii-
<PAGE>
Page
3.3 Covenant to Vote................................................. 12
3.4 Issuance of Senior Preferred Stock............................... 12
ARTICLE IV
Transfers of Stock
4.1 Restrictions on Transfer......................................... 13
4.2 Exceptions to Restrictions....................................... 13
4.3 Burger King Authorization........................................ 14
4.4 Endorsement of Certificates...................................... 15
4.5 Improper Transfer................................................ 16
ARTICLE V
Rights of First Offer;
New Securities; Tag Along Sales
5.1 Transfers by a Stockholder....................................... 16
5.2 Transfer of Offered Shares to Third Parties...................... 18
5.3 Purchase of Offered Shares....................................... 19
5.4 Waiting Period with Respect to Subsequent Transfers.............. 19
5.5 Right of First Refusal for New Securities........................ 19
5.6 Legally Binding Obligation; Power of Attorney; Personal
Rights.............................................. 21
5.7 Right to Join in Sale............................................ 21
5.8 Retention and Sale of Control.................................... 23
5.9 Take Along....................................................... 23
ARTICLE VI
Registration Rights
6.2 Piggyback Registrations.......................................... 27
6.3 Registration Procedures.......................................... 29
6.4 Indemnification.................................................. 33
6.5 Contribution..................................................... 36
6.6 Rule 144......................................................... 37
ARTICLE VII
Termination
7.1 Certain Terminations............................................. 37
ARTICLE VIII
Miscellaneous
-iii-
<PAGE>
Page
8.1 Other Covenants.................................................. 38
8.2 Financial Information; List of Stockholders...................... 39
8.3 Covenants of the Jaro and Osborn Investors....................... 41
8.4 RIGHT OF SETOFF.................................................. 41
8.5 Successors and Assigns........................................... 42
8.6 Amendment and Modification; Waiver of Compliance;
Conflicts........................................... 43
8.7 Notices.......................................................... 43
8.8 Entire Agreement................................................. 44
8.9 Injunctive Relief................................................ 44
8.10 Inspection....................................................... 44
8.11 Headings......................................................... 45
8.12 Recapitalizations, Exchanges, Etc., Affecting the
Common Stock; New Issuances......................... 45
8.13 Ratification of Prior Acts of Board of Directors of
Company; Right to Negotiate......................... 45
8.14 LITIGATION....................................................... 45
8.15 ARBITRATION...................................................... 46
8.16 No Strict Construction........................................... 46
8.17 Counterparts..................................................... 46
8.18 Obligations Under the MCIT Purchase Agreement.................... 47
-iv-
AMENDMENT NO. 1
TO
COMMON STOCK PURCHASE WARRANTS
THIS AMENDMENT NO. 1 TO COMMON STOCK PURCHASE WARRANTS (This
"Amendment No. 1"), dated as of [November 27], 1996, is made by AmeriKing, Inc.
(formerly NRE Holdings, Inc.), a Delaware corporation (the "Company"), pursuant
to the terms set forth in the Common Stock Purchase Warrants, dated February 7,
1996, issued by the Company for the benefit of the Warrantholders (the
"Warrants"). Capitalized terms not defined herein shall have the meaning
ascribed to them in the Warrant.
W I T N E S S E T H:
WHEREAS, for value received, the Company issued the Warrants to the
Warrantholders subject to the terms and conditions set forth in the Warrant;
and
WHEREAS, the Company wishes to amend the Warrants by cancelling
Section 18 and adding a new section in lieu of that shall provide for the
termination of the Warrants pursuant to the terms and conditions as set forth
herein; and
WHEREAS, Section 21 of the Warrants requires the written consent of
the Holders of all Series Warrants at the time outstanding of any amendment to
the termination date of the Series Warrants;
NOW, THEREFORE, in consideration of the terms and conditions set forth
herein and for other good and valuable consideration, the receipt and
sufficiency which are hereby acknowledged, the Company agrees, subject to the
written consent of the Holders of all Series Warrants, that, from and after the
date hereof, the Warrants be, and hereby is, amended as follows:
A G R E E M E N T:
SECTION 1. Amendment. Effective as of the date hereof, Section 18.3 of
the Warrants shall be deleted in its entirety and replaced with the following:
"18.3 Upon the occurrence of a Special Call Event, the
Company shall be entitled to repurchase Securities of the Holder
representing Seventy-One and 72/100 (71.72) Shares (as such
number may be adjusted pursuant to Section 10)."
<PAGE>
SECTION 2. Effective Date. This Amendment No. 1 shall take effect on
the date hereof; provided, that in the event a closing of the Offerings at
which the Subordinated Notes are paid in full along with any Applicable
Prepayment Premium (the "Closing") does not occur within five (5) Business Days
of the date hereof, this Amendment No. 1 shall be deemed void and shall be of
no further force and effect.
SECTION 3. Waiver of Notice. PMI hereby waives any applicable notice
requirements in connection with the repurchase of the Warrants at Closing.
SECTION 4. Effect of this Amendment No. 1 on the Other Terms of the
Warrant. Except as expressly amended and modified herein, all other terms of
the Warrant shall remain in full force and effect as originally made and
entered into by the parties thereto.
SECTION 5. Governing Law. This Amendment No. 1 shall be governed by
and construed in accordance with the laws of the State of New York (excluding
provisions relating to choice of law).
SECTION 6. 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 Amendment No. 1.
SECTION 7. 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-
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Amendment No. 1 to
be executed as of the date first written above.
AMERIKING, INC.
By:
-------------------------------
Name: A. Richard Caputo, Jr.
Title: Vice President
The undersigned hereby consents to the foregoing Amendment No. 1 as of
the date first written above.
PMI MEZZANINE FUND, L.P.,
a Delaware limited partnership
By: Pacific Mezzanine Investors, L.L.C.
a Delaware limited liability company,
its General Partner
By:
-------------------------------
Name:
Title:
-3-
L&W DRAFT OF 11/24/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMERIKING, INC.
- --------------------------------------------------------------------------------
__% SENIOR NOTES DUE 2006
- --------------------------------------------------------------------------------
-------------------------------
INDENTURE
DATED AS OF ________, 1996
-------------------------------
FLEET NATIONAL BANK
Trustee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
<S> <C> <C>
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.......................................................... 15
SECTION 1.05. INCORPORATION OF BURGER KING AGREEMENT......................................... 15
ARTICLE 2
THE SENIOR NOTES
SECTION 2.01. FORM AND DATING................................................................ 15
SECTION 2.02. EXECUTION AND AUTHENTICATION................................................... 16
SECTION 2.03. REGISTRAR AND PAYING AGENT..................................................... 16
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST............................................ 17
SECTION 2.05. HOLDER LISTS................................................................... 17
SECTION 2.06. TRANSFER AND EXCHANGE.......................................................... 17
SECTION 2.07. REPLACEMENT SENIOR NOTES....................................................... 20
SECTION 2.08. OUTSTANDING SENIOR NOTES....................................................... 20
SECTION 2.09. TREASURY SENIOR NOTES.......................................................... 20
SECTION 2.10. TEMPORARY SENIOR NOTES......................................................... 21
SECTION 2.11. CANCELLATION................................................................... 21
SECTION 2.12. DEFAULTED INTEREST............................................................. 21
SECTION 2.13. RECORD DATE.................................................................... 21
SECTION 2.14. CUSIP NUMBER................................................................... 22
ARTICLE 3
OPTIONAL REDEMPTION AND MANDATORY OFFERS TO PURCHASE
SECTION 3.01. NOTICES TO TRUSTEE............................................................. 22
SECTION 3.02. SELECTION OF SENIOR NOTES 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. SENIOR NOTES 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 SENIOR NOTES........................................................ 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............................................................ 31
i
<PAGE>
SECTION 4.07. LIMITATION ON INCURRENCE OF INDEBTEDNESS....................................... 31
SECTION 4.08. LIMITATION ON TRANSACTIONS WITH AFFILIATES..................................... 32
SECTION 4.09. LIMITATION ON LIENS............................................................ 33
SECTION 4.10. COMPLIANCE WITH LAWS, TAXES.................................................... 33
SECTION 4.11. LIMITATION ON DIVIDENDS AND OTHER PAYMENT
RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES................................................................... 33
SECTION 4.12. MAINTENANCE OF OFFICE OR AGENCIES.............................................. 34
SECTION 4.13. CHANGE OF CONTROL.............................................................. 34
SECTION 4.14. LIMITATION ON ASSET SALES...................................................... 35
SECTION 4.15. LIMITATION ON GUARANTEES OF COMPANY
INDEBTEDNESS BY RESTRICTED SUBSIDIARIES........................................ 36
SECTION 4.16. DESIGNATION OF RESTRICTED AND NON-RESTRICTED
SUBSIDIARIES................................................................... 37
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER OR CONSOLIDATION........................................................ 37
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.............................................. 38
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.............................................................. 38
SECTION 6.02. ACCELERATION................................................................... 40
SECTION 6.03. OTHER REMEDIES................................................................. 40
SECTION 6.04. WAIVER OF PAST DEFAULTS........................................................ 40
SECTION 6.05. CONTROL BY MAJORITY............................................................ 41
SECTION 6.06. LIMITATION ON SUITS............................................................ 41
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............................................... 42
SECTION 6.10. PRIORITIES..................................................................... 42
SECTION 6.11. UNDERTAKING FOR COSTS.......................................................... 42
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.............................................................. 43
SECTION 7.02. RIGHTS OF TRUSTEE.............................................................. 44
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE................................................... 44
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 ..................................................45
SECTION 7.07. COMPENSATION AND INDEMNITY .....................................................45
SECTION 7.08. REPLACEMENT OF TRUSTEE .........................................................46
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC................................................46
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION ..................................................47
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST
THE COMPANY ....................................................................47
ARTICLE 8
ii
<PAGE>
DISCHARGE OF INDENTURE
SECTION 8.01. DISCHARGE OF LIABILITY ON SENIOR NOTES;
DEFEASANCE..................................................................... 47
SECTION 8.02. CONDITIONS TO DEFEASANCE....................................................... 48
SECTION 8.03. APPLICATION OF TRUST MONEY..................................................... 49
SECTION 8.04. REPAYMENT TO THE COMPANY....................................................... 49
SECTION 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS........................................... 49
SECTION 8.06. REINSTATEMENT.................................................................. 49
ARTICLE 9
AMENDMENTS
SECTION 9.01. AMENDMENTS AND SUPPLEMENTS PERMITTED WITHOUT
CONSENT OF HOLDERS............................................................. 50
SECTION 9.02. AMENDMENTS AND SUPPLEMENTS REQUIRING CONSENT
OF HOLDERS..................................................................... 50
SECTION 9.03. COMPLIANCE WITH TIA............................................................ 51
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.............................................. 51
SECTION 9.05. NOTATION ON OR EXCHANGE OF SENIOR NOTES........................................ 52
SECTION 9.06. TRUSTEE PROTECTED.............................................................. 52
SECTION 9.07. PAYMENT FOR CONSENTS........................................................... 52
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT CONTROLS................................................... 52
SECTION 10.02. NOTICES........................................................................ 52
SECTION 10.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.................................... 53
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT...................................................................... 54
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR
OPINION........................................................................ 54
SECTION 10.06. RULES BY TRUSTEE AND AGENTS.................................................... 54
SECTION 10.07. LEGAL HOLIDAYS................................................................. 54
SECTION 10.08. NO RECOURSE AGAINST OTHERS..................................................... 54
SECTION 10.09. COUNTERPARTS................................................................... 55
SECTION 10.10. VARIABLE PROVISIONS............................................................ 55
SECTION 10.11. GOVERNING LAW.................................................................. 55
SECTION 10.12. NO ADVERSE INTERPRETATION OF OTHER
AGREEMENTS..................................................................... 55
SECTION 10.13. SUCCESSORS..................................................................... 55
SECTION 10.14. SEVERABILITY................................................................... 55
SECTION 10.15. TABLE OF CONTENTS, HEADINGS, ETC............................................... 55
</TABLE>
iii
This Indenture, dated as of ______________, 1996, is between
AmeriKing, Inc., a Delaware corporation (the "Company"), and Fleet National
Bank, 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
<PAGE>
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 Investments, Inc. 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 11, 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.
"Intercreditor Agreement" means the Agreement, dated the date of this
Indenture, among the Trustee, the Company and its Subsidiaries, 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 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
2
<PAGE>
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
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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 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,
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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 and 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.
"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.
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"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 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 Obligation) provided, however, that Equity Interests will not
include any Incentive Arrangements or obligations or payments thereunder.
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"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 Debentures" means the Company's __% Subordinated
Exchange Debentures Due 2008.
"Executive Employment Agreements" means the Employment
Agreements, effective as of September 1, 1994 or, in the case of
William C. Osborn, the date of issuance of the Senior Notes,
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.
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"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.
"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.
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"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 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
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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.
"Offerings" means the offer and sale of the Senior Notes and the Units
consisting of $30,000,000 aggregate liquidation preference of Senior Preferred
Stock and ___ shares of Common Stock as contemplated by the Prospectuses.
"Officer" means, with respect to any Person, the Chairman of the
Board, 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' Certificates, means a certificate signed by two
Officers.
"Opinion of Counsel" means an opinion from legal counsel that 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
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
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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 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 NonRestricted 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.
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"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 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
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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) 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 $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) 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 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
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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.
"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 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
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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.
"Prospectuses" means the Prospectuses, dated _____ 1996,
relating to the Company's Offerings.
"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
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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.
"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
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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 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.C. 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, effective
September 1, 1994, between the Company and TJC Management
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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.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C> <C> <C>
"Acceleration Notice" 6.02
"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
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"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
"Senior Notes" Preamble
"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:
(a) a term has the meaning assigned to it herein;
(b) an accounting term not otherwise defined herein has the
meaning assigned to it under GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the
plural include the singular; and
(e) 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 Intercreditor Agreement. The
Senior Notes shall be subject to the terms of the Intercreditor 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
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Senior Note shall be dated the date of its authentication. The Senior Notes
shall be in denominations of $1,000 and integral multiples thereof.
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
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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 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
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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 Section 312(a) of the TIA. 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:
(i) to register the transfer of the Definitive Senior Notes;
or
(ii) to exchange such Definitive Senior Notes for an equal
principal amount of Definitive Senior Notes 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 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
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<PAGE>
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.
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<PAGE>
(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 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.
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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.
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.
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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 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.
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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.
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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 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:
(a) the redemption date;
(b) 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;
(c) 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
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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;
(d) the name and address of the Paying Agent;
(e) 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;
(f) 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;
(g) the paragraph of the Senior Notes pursuant to which
the Senior Notes called for redemption are being
redeemed; and
(h) 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
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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.
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-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
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2001 ......................................______%
2002 ......................................______%
2003 ......................................______%
2004 and thereafter.........................100.00%
(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.
(c) Notwithstanding the foregoing, the restrictions on optional
redemptions described herein do not limit the Company's right to separately
make open market, privately negotiated or other purchases of Senior Notes from
time to time.
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
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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.
(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 Excess Proceeds from such Asset Sale, (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 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.
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(g) With respect to any Offer, if the Company deposits prior to 10
a.m. Eastern Standard 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 on the Senior Notes 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. Eastern Standard 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 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
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with the Trustee, within 15 days after it would have been required to file with
the Commission under the Exchange Act, 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.
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, 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
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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 a Restricted Subsidiary or to the
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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, 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
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 from the issue or sale of Capital Stock 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
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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 NonRestricted 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(a) 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 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 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;
(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
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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 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 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 Prospectuses; (xii) in
the event that the Company elects to issue the Exchange Debentures in exchange
for the Senior Preferred Stock, any cash
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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 Senior 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, 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 under 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
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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 to the Trustee: (i) a resolution of the Board of
Directors stating that the Board of Directors (including a majority of the
disinterested directors, if any) has, in good
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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 Prospectuses.
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 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.
SECTION 4.10. COMPLIANCE WITH LAWS, TAXES.
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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 noncompliance 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) or (iii) hereof and clauses (i),
(v), (vi), (vii), (ix), (x) or (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) or (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
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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 14 Wall Street, 8th Floor, Window #2, New York, New York
10005, 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 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. The
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Company shall furnish such notice to the Trustee, within five Business Days
after notice of an Offer is mailed to all Holders of Senior Notes, pursuant to
the procedures described in Section 3.08. 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
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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 as defined herein.
(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 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, by lot or by a method
that complies with the requiremetns of any stock exchange on which the Senior
Notes are listed and that the Trustee considers fair and appropriate.
(f) Upon completion of an Asset Sale 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
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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.
(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.
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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 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
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 Forma 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.
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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;
(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
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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.
(b) A Default or Event of 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) A Default or Event of Default under Section 6.01(a)(vi) or (vii)
will result in the Senior Notes becoming due and payable without further action
or notice.
(d) 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.
(e) 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 aggregate principal amount of the then outstanding Senior
Notes may declare all Senior
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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"). 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 aggregate 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.
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.
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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
aggregate 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
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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.
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.
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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.
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
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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.
(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.
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(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.
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
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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 May 15 beginning with May 15, 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.
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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 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:
(a) the Trustee fails to comply with Section 7.10
hereof;
(b) 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;
(c) a Custodian or public officer takes charge of the
Trustee or its property; or
(d) 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
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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.
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
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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 (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 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:
(a) the Company irrevocably deposits in trust (the
defeasance trust") with the Trustee money or U.S.
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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;
(b) 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;
(c) since the Company's irrevocable deposit provided for in
Section 8.02(1) hereof, 91 days have passed;
(d) no Default has occurred and is continuing on the date of
such deposit and after giving effect to it;
(e) the deposit does not constitute a default under any
other agreement binding on the Company;
(f) 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;
(g) 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;
(h) 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
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<PAGE>
times as would have been the case if such covenant
defeasance had not occurred; and
(i) 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.
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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 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 the 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.
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<PAGE>
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 aggregate 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 aggregate 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.
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
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<PAGE>
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 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.
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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:
67
<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:
Fleet National Bank
777 Main Street
Hartford, Connecticut 065115
Attention: Corporate Trust Administration
Telecopier No.: (860) 986-7920
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.
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<PAGE>
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.
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:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) 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;
(c) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary
to enable him or her to express an informed opinion as to
whether or not such covenant or condition has been complied
with; and
(d) 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.
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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, stockholder or Subsidiary 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 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.
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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.
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Dated as of _______, 1996 AMERIKING, INC.
By:______________
Name:
Title:
Dated as of __________, 1996 FLEET NATIONAL BANK
as Trustee
By:________________________
Name:
Title:
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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, 55 Water Street, New York,
New York ("DTC"), 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 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 on the Senior Notes 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 canceled 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. Fleet National Bank (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
A-3
<PAGE>
by reference to the Trust Indenture Act of 1939 (15 U.S.C. 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.
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:
<TABLE>
<CAPTION>
Year Percentage
--------------- -------------
<S> <C>
2001...............................................................................................%
2002...............................................................................................%
2003...............................................................................................%
2004 and thereafter.........................................................................100.000%
</TABLE>
(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 (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
A-4
<PAGE>
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 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.
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
A-5
<PAGE>
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 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
A-6
APITAL PRINTING SYSTEMS]
<PAGE>
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,
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. 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.
15. 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.
16. 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.
17. AUTHENTICATION. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an
authenticating agent.
18. 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).
19. 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
A-7
<PAGE>
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.
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
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<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:
- ---------------------------------------
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<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:
- ---------------------------------------
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<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 Signature of
Amount of Amount of Amount of authorized
decrease in increase in this Global officer of
Principal Principal Senior Note Trustee or
Date of Amount of Amount of following Senior Note
Exchange this Global this Global such decrease Custodian
Senior Note Senior Note (or increase)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
----- ----- ----- ----- -----
- --------
2 This should be included only if the Senior Note is issued in
global form.
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</TABLE>
===============================================================================
AMERIKING, INC.
--------------------------------------------------------
__% SUBORDINATED EXCHANGE DEBENTURES DUE 2008
--------------------------------------------------------
-------------------------------
INDENTURE
DATED AS OF ________, 1996
-------------------------------
FLEET NATIONAL BANK
Trustee
===============================================================================
<PAGE>
TABLE OF CONTENTS
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.......................................... 15
SECTION 1.04. RULES OF CONSTRUCTION.................................. 15
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........................... 16
SECTION 2.03. REGISTRAR AND PAYING AGENT............................. 16
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.................... 17
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........................... 21
SECTION 2.10. TEMPORARY EXCHANGE DEBENTURES.......................... 21
SECTION 2.11. CANCELLATION........................................... 21
SECTION 2.12. DEFAULTED INTEREST..................................... 22
SECTION 2.13. RECORD DATE............................................ 22
SECTION 2.14. CUSIP NUMBER........................................... 22
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.................................. 23
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................... 25
SECTION 3.07. OPTIONAL REDEMPTION PROVISIONS......................... 25
SECTION 3.08. MANDATORY PURCHASE PROVISIONS.......................... 25
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF EXCHANGE DEBENTURES......................... 27
SECTION 4.02. COMMISSION REPORTS..................................... 27
SECTION 4.03. COMPLIANCE CERTIFICATE................................. 28
SECTION 4.04. STAY, EXTENSION AND USURY LAWS......................... 29
SECTION 4.05. LIMITATION ON RESTRICTED PAYMENTS...................... 29
SECTION 4.06. CORPORATE EXISTENCE.................................... 31
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SECTION 4.07. LIMITATION ON INCURRENCE OF
INDEBTEDNESS........................................... 31
SECTION 4.08. LIMITATION ON TRANSACTIONS WITH
AFFILIATE.............................................. 32
SECTION 4.09. LIMITATION ON LIENS.................................... 33
SECTION 4.10. COMPLIANCE WITH LAWS, TAXES............................ 33
SECTION 4.11. LIMITATION ON DIVIDENDS AND OTHER
PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES................................ 33
SECTION 4.12. MAINTENANCE OF OFFICE OR AGENCIES...................... 34
SECTION 4.13. CHANGE OF CONTROL...................................... 35
SECTION 4.14. LIMITATION ON ASSET SALES.............................. 35
SECTION 4.15. LIMITATION ON GUARANTEES OF COMPANY
INDEBTEDNESS BY RESTRICTED
SUBSIDIARIES........................................... 36
SECTION 4.16. DESIGNATION OF RESTRICTED AND NON-
RESTRICTED SUBSIDIARIES................................ 37
SECTION 4.17. SENIOR SUBORDINATED DEBT............................... 38
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER OR CONSOLIDATION................................ 38
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED...................... 38
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT...................................... 39
SECTION 6.02. ACCELERATION........................................... 40
SECTION 6.03. OTHER REMEDIES......................................... 41
SECTION 6.04. WAIVER OF PAST DEFAULTS................................ 41
SECTION 6.05. CONTROL BY MAJORITY.................................... 41
SECTION 6.06. LIMITATION ON SUITS.................................... 41
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT................... 42
SECTION 6.08. COLLECTION SUIT BY TRUSTEE............................. 42
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM....................... 42
SECTION 6.10. PRIORITIES,............................................ 43
SECTION 6.11. UNDERTAKING FOR COSTS.................................. 43
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE...................................... 43
SECTION 7.02. RIGHTS OF TRUSTEE...................................... 44
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE........................... 45
SECTION 7.04. TRUSTEE'S DISCLAIMER................................... 45
SECTION 7.05. NOTICE TO HOLDERS OF DEFAULTS AND EVENTS
OF DEFAULT............................................. 45
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.......................... 45
SECTION 7.07. COMPENSATION AND INDEMNITY............................. 46
SECTION 7.08. REPLACEMENT OF TRUSTEE................................. 46
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC....................... 47
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.......................... 47
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<PAGE>
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS
AGAINST THE COMPANY.................................... 47
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. DISCHARGE OF LIABILITY ON EXCHANGE
DEBENTURES;DEFEASANCE.................................. 48
SECTION 8.02. CONDITIONS TO DEFEASANCE............................... 48
SECTION 8.03. APPLICATION OF TRUST MONEY............................. 49
SECTION 8.04. REPAYMENT TO THE COMPANY............................... 50
SECTION 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS................... 50
SECTION 8.06. REINSTATEMENT.......................................... 50
ARTICLE 9
AMENDMENTS
SECTION 9.01. AMENDMENTS AND SUPPLEMENTS PERMITTED
WITHOUT CONSENT OF HOLDERS............................. 50
SECTION 9.02. AMENDMENTS AND SUPPLEMENTS REQUIRING
CONSENT OF HOLDERS..................................... 51
SECTION 9.03. COMPLIANCE WITH TIA.................................... 52
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS...................... 52
SECTION 9.05. NOTATION ON OR EXCHANGE OF EXCHANGE
DEBENTURES............................................. 52
SECTION 9.06. TRUSTEE PROTECTED...................................... 53
SECTION 9.07. PAYMENT FOR CONSENTS................................... 53
ARTICLE 10
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE............................... 53
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY................... 53
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR
INDEBTEDNESS........................................... 54
SECTION 10.04. ACCELERATION OF SECURITIES............................. 54
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.................... 55
SECTION 10.06. NOTICE BY COMPANY...................................... 55
SECTION 10.07. SUBROGATION............................................ 55
SECTION 10.08. RELATIVE RIGHTS........................................ 56
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY
COMPANY................................................ 56
SECTION 10.10. DISTRIBUTION OR NOTICE TO
REPRESENTATIVE......................................... 56
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT..................... 56
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.................. 57
SECTION 10.13. AMENDMENTS............................................. 57
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS........................... 57
SECTION 11.02. NOTICES................................................ 57
iii
<PAGE>
SECTION 11.03. COMMUNICATION BY HOLDERS WITH OTHER
HOLDERS................................................ 58
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT.............................................. 58
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR
OPINION................................................ 59
SECTION 11.06. RULES BY TRUSTEE AND AGENTS............................ 59
SECTION 11.07. LEGAL HOLIDAYS,........................................ 59
SECTION 11.08. NO RECOURSE AGAINST OTHERS............................. 59
SECTION 11.09. COUNTERPARTS........................................... 59
SECTION 11.10. VARIABLE PROVISIONS.................................... 60
SECTION 11.11. GOVERNING LAW.......................................... 60
SECTION 11.12. NO ADVERSE INTERPRETATION OF OTHER
AGREEMENTS............................................. 60
SECTION 11.13. SUCCESSORS............................................. 60
SECTION 11.14. SEVERABILITY........................................... 60
SECTION 11.15. TABLE OF CONTENTS, HEADINGS, ETC....................... 60
iv
<PAGE>
This Indenture, dated as of , 1996, is between AmeriKing, Inc., a
Delaware corporation (the "Company"), and Fleet National Bank, 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 Non-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
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<PAGE>
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 Investments, Inc. 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 11, 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.
"Intercreditor Agreement" means the Agreement, dated the date of this
Indenture, among the Trustee, the Company and its Subsidiaries 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 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
2
<PAGE>
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) 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 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,
3
<PAGE>
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 Disqualified 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 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
4
<PAGE>
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 and 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
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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 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 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
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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 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, or, in the case of William C. Osborn, the
date of issuance of the Senior Notes, 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
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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 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.
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"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
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 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
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<PAGE>
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.
"Offerings" means the offer and sale of the Senior Notes and the Units
consisting of $30,000,000 aggregate liquidation preference of Senior Preferred
Stock and ___ shares of Common Stock as contemplated by the Prospectuses.
"Officer" means, with respect to any Person, the Chairman of the
Board, 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.
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"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means an opinion from legal counsel that 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 business, or other Indebtedness in respect of 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), (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 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,
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<PAGE>
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
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
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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
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(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 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
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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.
"Prospectuses" means the Prospectus, dated _________________, 1996,
relating to the Offerings.
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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 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 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 Exchange Debenture Issue Date, and (ii) any other Subsidiary of
the Company formed, acquired or existing after the Exchange Debenture Issue
Date 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 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 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.
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"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.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date hereof.
"TJC Agreement" means the Management Consulting Agreement, effective
September 1, 1994, 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
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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
"Acceleration Notice"....................................................6.02
"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
"Exchange Debentures" .............................................. Preamble
"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.
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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 Intercreditor Agreement. The
Exchange Debentures shall be subject to the terms of the Intercreditor
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
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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).
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
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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
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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 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
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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.
(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
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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.
(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.
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(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 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
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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
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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.
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.
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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 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
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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 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
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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,
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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 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
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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 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:
Year
Percentage
2001...................................._____%
2002................................... _____%
2003...................................._____%
2004 and thereafter.......................100%
(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 thereon to the redemption date, with the net
proceeds of an Equity Offering; such redemption shall occur within 60 days of
the date of the closing of 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 of Exchange
Debentures 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
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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 from such Asset
Sale, (ii) 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
(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.
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(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 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. Eastern Standard 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. Eastern Standard
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
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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 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 semi-annually.
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 would have been required to file with the Commission under the
Exchange Act, 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
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"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.
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, 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 Sections 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
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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 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, 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 Section 4.07(a) of this Indenture; or
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(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 from the issue or sale of
Capital Stock or other Equity Interests of the Company subsequent to the
Preferred Stock Issue Date (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 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(a) 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
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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
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
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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; (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
Prospectuses; 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.
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
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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 AFFILIATE.
(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
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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 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
Section 4.07 hereof; or (vii) payments
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and transactions in connection with the Offerings and the application of the
net proceeds therefrom as described under "Use of Proceeds" in the
Prospectuses.
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 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.
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) or (iii) hereof and clauses (i),
(v), (vi), (vii), (ix), (x) or (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
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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 Exchange Debenture Issue Date; (G) any Refinancing
Indebtedness permitted under Section 4.07(b) hereof and clauses (i), (v), (vi),
(vii), (ix), (x) or (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 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.
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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 14 Wall Street, 8th Floor, Window #2, New York, New York
10005, 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 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
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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 (as defined herein).
(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 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."
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(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 by lot or by a method that complies with the requirements of any stock
exchange on which the Senior Notes are listed and that the Trustee considers
fair and appropriate.
(f) Upon completion of an Asset Sale 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
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Subsidiary is (A) 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 (B) Subordinated Indebtedness, the guarantee
for the Exchange Debentures 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.
(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 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.
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(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.
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 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
this Indenture and the Exchange Debentures; (iii) immediately after such
Disposition, no
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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 Forma 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 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;
(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
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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:
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(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.
(b) A Default or Event of 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 to be due and payable immediately 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").
Upon such declaration, the principal of, premium, if any, and any accrued and
unpaid interest on, all
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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 Notice 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 Notice of Acceleration of the Exchange
Debentures because an Event of Default under Section 6.01(a)(iv) hereof has
occurred and is continuing, such Notice 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 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.
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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.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
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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.
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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 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
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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.
(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.
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(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.
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.
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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 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 May 15 beginning with May 15, 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
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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 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.
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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.
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.
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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 (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.
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(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;
(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
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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
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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 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 the 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.
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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 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
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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.
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
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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
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solicitation documents relating to such consent, waiver or agreement.
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.
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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 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.
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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 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.
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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 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
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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.
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:
Fleet National Bank
777 Main Street
Hartford, Connecticut 06115
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Attention: Corporate Trust Administration
Telecopier No.: (860) 986-7920
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 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
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(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 or she
has made such examination or investigation as is necessary to
enable him or her 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 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, stockholder or Subsidiary 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
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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.
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
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part hereof, and shall in no way modify or restrict any of the terms or
provisions hereof.
[NEXT PAGE IS THE SIGNATURE PAGE]
79
<PAGE>
Dated as of ______, 1996 AMERIKING, INC.
By:
Name:
Title:
Dated as of _______, 1996 FLEET NATIONAL BANK
as Trustee
By:
Name:
Title:
80
<PAGE>
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:
FLEET NATIONAL BANK
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.
A-3
<PAGE>
3. PAYING AGENT AND REGISTRAR. Fleet National Bank (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.C. 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 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
A-4
<PAGE>
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 (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."
(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 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.
A-5
<PAGE>
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 subordination shall not be amended or
modified without the written consent of the holders of all Senior Indebtedness.
A-6
<PAGE>
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,
stockholder or Subsidiary of the Company shall have any
A-7
<PAGE>
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 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:
A-8
<PAGE>
AmeriKing, Inc.
2215 Enterprise Drive, Suite-1502
Westchester, Illinois 60154
Attention: Chief Financial Officer
A-9
<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-10
<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-11
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE EXCHANGE DEBENTURES2
The following exchanges of a part of this Global Exchange Debenture
for Definitive Exchange Debentures have been made:
Principal
Amount of
this Global Signature
Amount of Amount of Exchange of
decrease in increase in Debenture authorized
Principal Principal following officer of
Amount of Amount of such Trustee or
this Global this Global decrease Exchange
Date of Exchange Exchange (or Debenture
Exchange Debenture Debenture increase) Custodian
- -------- ----------- ------------ ----------- ---------
- --------------
2 This should be included only if the Senior Note is issued in global form.
A-12
AMERIKING, INC.
_______________, 1996
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 November 18, 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 $25.00 per share, consisting of up to 2,000,000 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
1,200,000 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 $25.00 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 series of Preferred Stock of the Company existing on the
date hereof and each other class of capital stock or series of Preferred Stock
of the Company 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
<PAGE>
of the Company as "Junior Securities"). The Senior Preferred Stock shall, with
respect to dividend 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 Senior Preferred Stock Issue Date, 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, dividends 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. 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 __________, 2001 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 _____________, 2001,
dividends shall be paid only in cash. 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 shall
increase at the rate of ____% per annum, compounded quarterly, 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 dividends on Junior
Securities paid in additional shares 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.
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(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,
$25.00 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) After payment of the full amount of the liquidation preferences
and all accumulated and unpaid dividends to which they are entitled, the
holders of shares of the Senior Preferred Stock shall not be entitled to
any further participation in any distribution of assets of the Company.
(iii) 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
Date immediately prior to the Redemption Date to the Redemption Date) (the
"Optional Redemption Price"), if
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redeemed during the 12-month period beginning on _________ of each of the
years indicated below:
Year Percentage
2001 ....................................................... %
2002 ....................................................... %
2003 ....................................................... %
2004 and thereafter......................................... 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 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 (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 60 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 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 cash or
declared and a sum set apart sufficient for such cash payment on the
Redemption Date, on the outstanding shares of the Senior Preferred Stock.
(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
(subject to contractual and other restrictions with respect thereto and to
the legal availability of funds therefor) 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
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for the period 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,
the 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.
(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
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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 authorize or 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 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
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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, in any
such case, 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. Subject to
Section (f)(iii)(B) below, 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 (2) in the event such right arises 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
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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.
(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: (1) there shall be no contractual impediments to
such exchange; (2) 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); (3) 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
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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; (4) the Exchange Debenture Indenture and the Trustee
shall have been qualified under the Trust Indenture Act of 1939, as
amended; (5) 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 (6) 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 (1), (2), (3) and (4). 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 (1) through (6) 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.
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, the 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 (1) through (6) above are satisfied, the Company shall
issue Exchange Debentures in exchange for the Senior Preferred Stock as
provided in the next paragraph.
(B) Upon any exchange pursuant to paragraph (g)(i)(A), Exchange
Debentures shall be issued in exchange for Senior Preferred Stock, in
registered form without coupons, in an amount equal to the liquidation
preference thereof, plus an amount in cash equal to 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
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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 on the Exchange
Date, dividends shall cease to accrue on the outstanding shares of Senior
Preferred Stock and all of 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 "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.
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(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.
(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 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.
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<PAGE>
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
(b) all dividends on the Senior Preferred Stock payable on Dividend
Payment Dates after ______________, 2001, 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 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
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<PAGE>
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 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
14
<PAGE>
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.
(iv) 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 Designation, 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.
"BBI Note" means the promissory note in the aggregate principal amount
of $600,000 issued by the Company to BancBoston Investments Inc. and its
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.
15
<PAGE>
"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 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 Disqualified 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 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
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<PAGE>
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
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, or prior to, the mandatory redemption date of the Senior Preferred
Stock or the maturity date 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.
"Exchange Date" means a date on which shares of Senior Preferred Stock
are exchanged by the Company for Exchange Debentures.
17
<PAGE>
"Executive Employment Agreements" means the Employment Agreements,
effective as of September 1, 1994 (and, the case of William C. Osborn, the
Senior Preferred Stock Issue Date), 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 (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).
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<PAGE>
"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
Senior 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 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.
"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.
"Offerings" means the Units 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 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.
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<PAGE>
"Prospectus" means the Prospectus, dated _____________, 1996, relating
to the offering and placement of the Units, consisting of $30,000,000
liquidation preference of the Senior Preferred Stock and ________ shares of
Common Stock, par value $.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.
"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
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.
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"Units Offering" means the offer and sale of Units, consisting of
$30,000,000 liquidation preference of the Senior Preferred Stock and ______
shares of Common Stock of the Company as contemplated by the Prospectus.
"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.
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<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, on the date and
year first above written.
AMERIKING, INC.
By:
--------------------------------
Name:
Title:
Attest:
By:
-------------------------------
Name:
Title:
(corporate seal)
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 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:
<PAGE>
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
"Common 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-
<PAGE>
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-
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 into a single class of common stock and
(ii) the reclassified common stock has been split 1,000-for-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, the parties
agree that the Management Subscription Agreement shall be amended as follows:
(a) Exhibit 1 to the Management Subscription Agreement shall be
deleted in its entirety and replaced with Exhibit 1 attached hereto.
(b) Section 8(e) shall be amended by replacing the words "or (b) an
initial public offering of any shares of Stock." with the words "or (b) a
public offering of Common Stock of the Company
<PAGE>
with net proceeds to the Company of at least $50 million pursuant to a firm
commitment underwriting."
(c) A new Section 8(g) shall be inserted as follows:
"(g) Conversions, Stock Splits. All repurchases pursuant to this
Section 8 shall apply to shares of capital stock referenced in this
Section 8 as well as any shares of capital stock held by such
Stockholders as a result of an exchange, conversion, recapitalization,
stock split, reverse stocksplit or other similar reclassification of
the capital stock of the Company."
(d) Section 10(c) shall be amended by replacing the dollar amount
"$100" with the dollar amount "$0.10".
(e) Section 10 shall be amended by adding the following definition for
common stock in the appropriate alphabetical order and by revising the
subsection numbers of the definition section accordingly:
"(c) "Common Stock" for purposes of Section 8 of this
Agreement only, shall mean Class D Common Stock of the Company and any
shares of Common Stock received in connection with a conversion or
exchange of Class D Common Stock or other securities into Common Stock
of the Company."
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 Management Subscription 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-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has signed this Agreement:
AMERIKING, 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:
-3-
<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
-4-
<PAGE>
<TABLE>
<CAPTION>
Subordinated
No. of Shares Notes Value
No. of Shares of Class A2 No. of Shares of Class B (All Restaurant of
Name of Common Stock Preferred Stock Preferred Stock Securities) Consideration
- ---- --------------- --------------- ------------------------ -------------- -------------
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> <C> <C>
Tabor Restaurants
Associates, Inc.(1) - 8,131.3 - 87.00 - 29.00 - $ 116,813.13
Jaro Restaurants - 17,128.4 - 187.50 - 62.50 $112,000 $ 363,712.84
Associates, Inc.(2)
Jaro Enterprises, Inc.(3) - 44,366.9 - 90.00 - 30.00 $1,224,000 $1,348,436.69
JB Restaurants, Inc.(4) - 123,763.4 - 550.50 - 183.50 $2,019,000 $2,765,376.34
Castleking, Inc.(5) - 26,876.3 - 187.50 - 62.50 $385,769 $ 638,456.63
White-Osborn Restaurants, - 33,363.7 - 97.50 - 32.50 $659,231 $ 792,567.37
Inc.(6)
Lawrence Jaro 3,371 - - - - - - $ 3,371.00
William Osborn 3,371 - - - - - - $ 3,371.00
Gary Hubert 3,371 - - - - - - $ 3,371.00
Joel Aaseby 1,124 - - - - - - $ 1,124.00
-------------
Total 11,237 253,630.0 0 1200 0 400 $4,400,000 $6,036,600.00
</TABLE>
OPTIONS
-------
Don Stahurski Options to purchase 5,620 shares of Common Stock
Scott Vasatka Options to purchase 5,620 shares of Common Stock
1. Lawrence Jaro owns 100% of the common stock of Tabor Restaurants
Associates, Inc. All of the Set 2 Securities received by Tabor Restaurants
Associates, Inc. will be subject to the repurchase provisions of Section 8.
2. Lawrence Jaro owns 100% of the common stock of Jaro Restaurants Associates,
Inc. All of the Set 2 Securities received by Jaro Restaurants Associates,
Inc. will be subject to the repurchase provisions of Section 8.
3. Lawrence Jaro owns 100% of the common stock of Jaro Enterprises, Inc. All
of the Set 2 Securities received by Jaro Enterprises, Inc. shall be subject
to the repurchase provisions of Section 8.
4. Lawrence Jaro owns 75% of the common stock of JB Restaurants, Inc.
Seventh-five percent (75%) of the Set 2 Securities received by JB
Restaurants, Inc. shall be subject to the repurchase provisions of
Section 8.
5. William Osborn owns 75% of the common stock of Castleking, Inc.
Seventy-five percent (75%) of the Set 2 Securities received Castleking,
Inc. will be subject to the repurchase provisions of Section 8.
6. William Osborn owns 65% of the common stock of White-Osborn Restaurants,
Inc. Sixty-five percent (65%) of the Set 2 Securities received
White-Osborn, Inc. will be subject to the repurchase provisions of
Section 8.
[MAYER, BROWN & PLATT LETTERHEAD]
November 26, 1996
AmeriKing, Inc.
2215 Enterprise Drive
Suite 1502
Westchester, Illinois 60154
Re: Senior Notes due 2006; 1,200,000 Units consisting of Senior
Exchangeable Preferred Stock due 2008, $.01 par value and
Common Stock, $.01 par value per share
-----------------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to AMERIKING, Inc., a Delaware
corporation (the "Company"), in connection with the proposed concurrent public
offerings (the "Offerings") of (i) up to $100,000,000 aggregate principal
amount of the Company's Senior Notes due 2006 (the "Senior Notes") and (ii) up
to 1,200,000 Units (the "Units") consisting of (A) Senior Exchangeable
Preferred Stock due 2008, $.01 par value (the "Senior Preferred Stock") that is
exchangeable for Exchange Indentures due 2008 (the "Exchange Debentures") and
(B) Common Stock, $.01 par value per share (the "Common Stock" and together
with Senior Notes, Senior Preferred Stock and Exchange Debentures, the
"Securities"). In this connection, we have examined such corporate and other
records, instruments, certificates and documents as we have considered
necessary to enable us to express this opinion.
Based on the foregoing, it is our opinion that upon completion of the
Offerings, the Securities will have been duly authorized for issuance. The
Senior Preferred Stock and Common Stock, when delivered in accordance with the
Underwriting Agreement for the Units Offering in substantially the form filed
as Exhibit 1.2 to the Registration Statement, will be validly issued, fully
paid and non-assessable. The Senior Notes, when delivered in accordance with the
terms of the Indenture in substantially the form filed as Exhibit 4.38 to the
Registration Statement (the "Senior Notes Indenture") and the Underwriting
Agreement for the Notes Offering in
<PAGE>
substantially the form filed as Exhibit 1.1 to the Registration Statement will
be validly issued and enforceable in accordance with the Senior Note Indenture.
The Exchange Debentures, when delivered in accordance with the terms of the
Indenture is substantially the form filed as Exhibit 4.40 to the Registration
Statement(the "Exchange Debenture Indenture") and the Certificate of
Designations in substantially the form filed as Exhibit 4.44 to the Registration
Statement, will be validly issued and enforceable in accordance with the
Exchange Debenture Indenture.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" and "Experts."
Very truly yours,
/s/ MAYER, BROWN & PLATT
MAYER, BROWN & PLATT
AMENDMENT NO. 1
TO
NOTE PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO NOTE PURCHASE AGREEMENT (this "Amendment No.
1"), dated as of November 27, 1996(1), is made by and among AmeriKing, Inc.
(formerly NRE Holdings, Inc.), a Delaware corporation (the "Company"), National
Restaurant Enterprises, Inc., a Delaware corporation, and a wholly-owned
subsidiary of Holdings ("NRE"), and PMI Mezzanine Fund L.P., a Delaware limited
partnership (the "PMI"). Capitalized terms not defined herein shall have the
meanings ascribed to them in the Note Purchase Agreement, dated as of February
7, 1996, among the Company, NRE and PMI (the "Note Purchase Agreement").
W I T N E S S E T H:
WHEREAS, the Company, NRE and PMI are parties to the Note Purchase
Agreement; and
WHEREAS, Section 3.3 of the Note Purchase Agreement provides for the
prepayment of the Subordinated Notes upon the occurrence of certain events; and
WHEREAS, the Company, NRE and PMI wish to amend Section 3.3 to provide
for a modified prepayment premium with respect to the Subordinate Notes in the
event the Company exercises its Special Call Right pursuant to Section 18 of
Amendment No. 1 to Common Stock Purchase Warrants, dated as of the date hereof,
and as set forth herein; and
WHEREAS, PMI wishes to waive the Company's notice requirements
pursuant to Section 3 of the Note Purchase Agreement in connection with the
Company's proposed prepayment of the Subordinated Notes upon the consummation
of the Company's public offering of securities, including Common Stock, as
described in Amendment No. 4 to the Registration Statement on Form S-1 filed on
November 1, 1996 (the "Offerings"); and
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 agree that,
from and after the date hereof, the Note Purchase Agreement be, and hereby is,
amended as follows:
- --------------
(1) This is our expected pricing date; we would look to have this signed the
night that we price; if the offerings price but do not close within 5
business days, this Agreement will be deemed void.
<PAGE>
A G R E E M E N T:
SECTION 1. Amendment. Effective as of the date hereof, the Note
Purchase Agreement shall be amended as follows:
1.1. The following definition shall be inserted in appropriate
alphabetical order in Section 2 of the Note Purchase Agreement:
"Offering Prepayment Premium" shall mean an amount equal to
$2,700,000.
1.2. The definition of "Applicable Prepayment Premium" shall be
amended by inserting the following at the end of the first sentence thereof:
"plus, in the event that the Company has exercised its Special
Call Right pursuant to Section 18 of the Warrants, the Offering
Prepayment Premium".
SECTION 2. Effective Date. This Amendment No. 1 shall take effect on
the date hereof; provided, that in the event a closing of the Offering at which
the Subordinated Notes are paid in full along with any Applicable Prepayment
Premium (the "Closing") does not occur within five (5) Business Days of the
date hereof, this Amendment No. 1 shall be deemed void and shall be of no
further force and effect.
SECTION 3. Waiver of Notice. PMI hereby waives any applicable notice
requirements in connection with the prepayment of the Subordinated Notes with
the net proceeds of the Offerings at the closing of such Offerings.
SECTION 4. Effect of this Amendment No. 1 on the Other Terms of the
Note Purchase Agreement. Except as expressly amended and modified herein, all
other terms of the Note Purchase Agreement shall remain in full force and
effect as originally made and entered into by the parties thereto.
SECTION 5. Governing Law. This Amendment No. 1 shall be governed by
and construed in accordance with the laws of the State of New York (excluding
provisions relating to choice of law).
SECTION 6. 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 7. 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-
<PAGE>
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
NATIONAL RESTAURANT ENTERPRISES,
INC.
By:
-----------------------------------------
Name: A. Richard Caputo, Jr.
Title: Vice President
PMI MEZZANINE FUND, L.P.,
a Delaware limited partnership
By: Pacific Mezzanine Investors, L.L.C.
a Delaware limited liability company,
its General Partner
By:
-------------------------------------
Name:
Title:
-3-
MBP DRAFT - 11/12/96
EXHIBIT __
FORM OF INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT (this "Intercreditor Agreement"), dated as of
December __, 1996, between Burger King Corporation ("BKC"), AmeriKing, Inc.,
(the "Company") and its wholly owned subsidiaries, National Restaurant
Enterprises, Inc., AmeriKing Virginia Corporation I, AmeriKing Colorado
Corporation I, AmeriKing Illinois Corporation I, AmeriKing Tennessee
Corporation I and AmeriKing Cincinnati Corporation I, Lawrence E. Jaro, William
Osborn and Gary Hubert (each an "Obligor" and collectively, the "Obligors") and
Fleet National Bank, as trustee under the indenture referred to below (the
"Trustee").
W I T N E S S E T H
WHEREAS, BKC has issued certain franchise agreements for Burger King
restaurants (the "Franchise Agreements" and the "Restaurants," respectively) to
certain Obligors;
WHEREAS, BKC has leased the premises on which the Restaurants are
located to certain Obligors pursuant to several Lease/Sublease Agreements (the
"Leases");
WHEREAS, BKC has required the execution and delivery of this Agreement
by the Obligors and Trustee;
WHEREAS, the Company is executing and delivering to the Trustee an
indenture (the "Indenture"), dated as of the date hereof, providing for the
issuance of an aggregate principal amount of $100,000,000 of ______% Senior
Notes due 2006 (the "Senior Notes");
WHEREAS, pursuant to Section 1.05 of the Indenture, the Trustee is
authorized to execute and deliver this Intercreditor Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Obligors, BKC and the Trustee mutually covenant and agree as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
<PAGE>
2. No Recourse Against Others. No officer, employee, director or
stockholder of the Obligor shall have any liability for any Obligations of the
Company or any Obligor under the Senior Notes, the Indenture or this
Intercreditor Agreement or for any claim based on, in respect of, or by reason
of, such Obligations or their creation of any such Obligation. 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.
3. BKC Senior Indebtedness. The term "BKC Senior Indebtedness" shall
mean all indebtedness, liabilities and other obligations of the Obligors to BKC
payable under the Franchise Agreements, the Leases or any other indebtedness of
the Obligors to BKC, whenever and however arising, whether primary or
secondary, absolute or contingent, and including charges and costs of
collection (including reasonable counsel fees); provided, in the case of
indebtedness, that such indebtedness was permitted by the Indenture at the time
of incurrence.
4. Petition Date. The term "Petition Date" shall mean the date on
which any Obligor files a case under the Bankruptcy Law.
5. Subordination. Notwithstanding anything to the contrary contained
in the Senior Notes or the Indenture or any other agreement between the
Obligors and the holders of the Senior Notes or the Trustee to the contrary,
including without limitation any guarantees of such Obligors with respect to
the Senior Notes, payment of or on account of any obligation of the Obligors
with respect to the Senior Notes shall, on the terms and conditions hereof, be
subordinated and subject in right of payment to the prior payment in full of
BKC Senior Indebtedness, provided, however, that prior to the Petition Date,
payments of interest in the ordinary course of business and payments of
principal (including voluntary prepayments) may be made on account of the
Senior Notes in accordance with the terms of the Indenture so long as no
default shall have occurred and be continuing in the payment when due of any of
the BKC Senior Indebtedness as to which the Trustee shall have received written
notice from BKC, which notice shall be effective immediately upon receipt but
shall expire and cease to be effective for purposes of this clause not later
than 179 days thereafter. The Trustee will provide BKC notice of acceleration
as a result of default in the Senior Notes.
6. Insolvency Proceedings. In the event of any bankruptcy, insolvency,
reorganization, receivership, composition, assignment for benefit of creditors,
or other similar proceeding initiated by or against any Obligor or any
dissolution or winding up or total or partial liquidation or reorganization of
any Obligor, whether voluntary or involuntary (any of the events just described
in respect of the Obligors being hereinafter referred to as a "Proceeding"),
and upon payment or distribution of any assets of any Obligor in any
Proceeding, all BKC Senior Indebtedness shall first be paid in full before the
holders of the Senior Notes shall receive or retain any assets so paid or
distributed in respect of any obligation of any Obligor with respect to the
Senior Notes; and, in connection with any such Proceeding any payment or
distribution of assets of any Obligor to which the holders of the
-2-
<PAGE>
Senior Notes would be entitled, except for the provisions hereof, shall be paid
by the Obligor or by any receiver, trustee, assignee for benefit of creditors,
agent or other person making such payments or distribution, or by the holders
of the Senior Notes or the Trustee if received by them, to the then holder of
BKC Senior Indebtedness to the extent necessary to pay all BKC Senior
Indebtedness in full (after giving effect to any concurrent payment or
distribution to or for the account of the holders of BKC Senior Indebtedness or
their representatives) before any payment or distribution is made on the Senior
Notes.
7. Intentionally Omitted.
8. No Waiver. No right of any present or future holder of, or trustee
for, any BKC Senior Indebtedness to enforce the subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act, in good faith, by any such holder, or by any noncompliance by
the Obligor with the terms, provisions, and covenants hereof, regardless of any
knowledge thereof any such holder may have or with which any such holder may
otherwise be charged.
9. Choice of Law; Jurisdiction and Venue. This Intercreditor Agreement
shall be governed by and construed in accordance with the laws of the State of
Florida. The parties hereto acknowledge and agree that the United States
District Court for the Southern District of Florida, or if such court lacks
jurisdiction, the 11th Judicial Court (or its successor) in and for Dade
County, Florida, shall be the venue and exclusive proper forum in which to
adjudicate any case or controversy arising, either directly or indirectly,
under or in connection with this Agreement, the BKC Agreements, or related
documentation and any other agreement between BKC and any party hereto, and the
parties further agree that, in the event of litigation arising out of or in
connection with this Intercreditor Agreement, the BKC Agreements, or related
documentation or any other agreement between BKC and any party hereto in these
courts, they will not contest or challenge the jurisdiction or venue of these
courts.
10. Counterparts. The parties may sign any number of copies of this
Intercreditor Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement.
11. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Intercreditor
Agreement to be duly executed and attested, all as of the date first above
written.
Dated:
----------------------------
AMERIKING, INC.
-------------------------------
By:
Title:
Attest:
- ----------------------------------
Name:
Title:
BURGER KING CORPORATION
-------------------------------
By:
Title:
Attest:
- ----------------------------------
Name:
Title:
AmeriKing Virginia Corporation I
-------------------------------
-4-
<PAGE>
Attest:
- ----------------------------------
Name:
Title:
AmeriKing Colorado Corporation I
--------------------------------
Attest:
- ----------------------------------
Name:
Title:
AmeriKing Illinois Corporation I
--------------------------------
Attest:
- ----------------------------------
Name:
Title:
AmeriKing Tennessee Corporation I
--------------------------------
Attest:
-5-
<PAGE>
- ----------------------------------
Name:
Title:
AmeriKing Cincinnati Corporation I
---------------------------------
Attest:
- ----------------------------------
Name:
Title:
---------------------------------
Lawrence E. Jaro
Attest:
- ----------------------------------
Name:
Title:
---------------------------------
William Osborn
Attest:
- ----------------------------------
Name:
Title:
-6-
<PAGE>
---------------------------------
Gary Hubert
Attest:
- ----------------------------------
Name:
Title:
FLEET NATIONAL BANK, as Trustee
By:
------------------------------
Name:
Title:
Attest:
- ----------------------------------
Name:
Title:
-7-
RESTATED EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
This Restated Employment and Non-Interference Agreement (this
"Agreement") is dated as of November __, 1996, by and between William Osborn
(the "Executive") and National Restaurant Enterprises, Inc., a Delaware
corporation (the "Company") and a wholly-owned subsidiary of AmeriKing, Inc., a
Delaware corporation (the successor to NRE Holdings, Inc.) ("Parent");
W I T N E S S E T H:
WHEREAS, Executive and the Company entered into an Employment and
NonInterference Agreement, dated as September 1, 1994 (the "Prior Employment
Agreement");
WHEREAS, Executive and the Company wish to terminate the Prior
Employment Agreement in its entirety simultaneously with the execution of this
Agreement, which will replace the prior Employment Agreement;
WHEREAS, the Company wishes to obtain the future services of the
Executive for the Company; and
WHEREAS, the Executive is willing, upon the terms and conditions
herein set forth, to provide services hereunder; and
WHEREAS, the Company wishes to secure the Executive's
non-interference, upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Nature of Employment
Subject to Section 3, the Company hereby employs Executive, and
Executive agrees to accept such employment, during the Term of Employment (as
defined in Section 3(a)) as Vice Chairman of Parent and the Company and to
undertake such duties and responsibilities as may be reasonably and
specifically assigned to Executive from time to time by the Chairman. The Vice
Chairman shall have no duties except as specifically instructed or delegated to
him in writing by the Chairman and shall have no authority, unless so delegated
in writing, to bind or otherwise act for Parent or the Company.
<PAGE>
2. Extent of Employment
(a) During the Term of Employment, the Executive shall perform his
obligations hereunder faithfully and to the best of his ability at the location
set forth below in paragraph 2(d), under the direction of the Chairman and
Board of Directors of the Company, and shall abide by the rules, customs and
usages from time to time established by the Company and the Parent."
(b) During the Term of Employment, the Executive shall devote such
amount of his business time, energy and skill as may be reasonably necessary
for the performance of his duties, responsibilities and obligations hereunder
(except for vacation periods and reasonable periods of illness or other
incapacity).
(c) Nothing contained herein shall require Executive to follow any
directive or to perform any act which would violate any of the rules and
regulations as provided by the Burger King Corporation franchise entity form of
ownership guidelines, the Burger King Uniform Franchise Offering Circular, as
amended or updated from time-to-time, and any other franchise and other
regulations and requirements, from time to time in effect (the "Burger King
Regulations") of the Burger King Corporation or any laws, ordinances,
regulations or rules of any governmental, regulatory or administrative body,
agent or authority, any court or judicial authority, or any public, private or
industry regulatory authority. Subject to clause (e) below, Executive shall act
in good faith in accordance with all Burger King Regulations and laws,
ordinances, regulations or rules of any governmental, regulatory or
administrative body, agent or authority, any court or judicial authority, or
any public, private or industry regulatory authority to the extent the
Executive knows or has reasonable notice of such Burger King regulations, laws,
ordinances, regulations or rules.
(d) During the Term of Employment, the Executive shall live in the
Chicago, the Front Range of Colorado or any other area selected by Executive.
The Company will pay the Executive a one-time lump sum of $50,000 plus
documented out-of-pocket expenses to move Executive's personal belongings and
household items, as a transition expense payment, upon the date of this
Agreement to provide suitable and appropriate transition arrangements,
including, should Executive arrange, an executive office, secretarial and
office services for a transition for Executive.
(e) The Company will use reasonable efforts to cause Executive to be
promptly removed and released as an "Owner" or "Managing Owner" under the
Burger King Regulations, although Executive will remain subject to those
classifications and responsibilities at the date hereof, and Executive will
remain, in any event, subject to certain lease and related guarantees in
connection with the Company's prior acquisition of restaurants from Sheldon
Friedman.
-2-
<PAGE>
3. Term of Employment; Termination
(a) The "Term of Employment" shall commence on the date hereof and
shall continue until September 1, 1999. Should the Executive's employment by
the Company be earlier terminated pursuant to Section 3(b), the Term of
Employment shall end on the date of such earlier termination.
(b) Subject to the payments contemplated by Section 3(e), Term of
Employment may be terminated at any time by the Company:
(i) upon the death of Executive;
(ii) for Cause (as defined in Section 3(c));
Termination shall become effective upon the delivery by the Company to
the Executive of notice specifying such termination and the reasons therefor.
(c) For the purposes of this Section 3, "Cause" shall mean any of the
following:
(i) Executive's conviction of a serious felony or a crime
involving embezzlement, conversion of property or moral turpitude;
(ii) a final, non-appealable finding of Executive's fraud,
embezzlement or conversion of property;
(iii) a final non-appealable finding of Executive's breach of any
of his fiduciary duties to the Company or its stockholders or making
of a willful misrepresentation or omission which breach,
misrepresentation or omission might reasonably be expected to
materially adversely affect the business, properties, assets,
condition (financial or other) or prospects of the Company, provided,
that, the Executive has been given notice and 30 days from such notice
fails to cure the breach, misrepresentation or omission;
(iv) Executive's willful and continual neglect or failure to
discharge his duties, responsibilities or obligations prescribed by
this Agreement or any other agreement between the Executive and the
Company, provided, that, the Executive has been given notice and 30
days from such notice fails to cure the neglect or failure;
(v) Executive's habitual drunkenness or substance abuse, which
materially interferes with Executive's ability to discharge his
duties, responsibilities and obligations prescribed by this Agreement,
provided that Executive has been given notice and 30 days from such
notice fails to cure such drunkenness or abuse;
-3-
<PAGE>
(vi) Executive's material and knowing violation of any
obligations imposed upon Executive, personally, as opposed to upon the
Company, whether as a stockholder or otherwise, under this Agreement,
the Purchase and Sale Agreement, dated September 1, 1994, by and among
the Company, the Parent and Burger King Corporation, the Franchise
Agreement, dated September 1, 1994, by and among the Company, Parent
and Burger King Corporation, the Certificate of Incorporation or
By-Laws of the Company, or the Burger King Regulations, each as
amended to date, provided, that the Executive has been given notice
and 90 days from such notice fails to cure the violation;
(vii) Executive's personal (as opposed to the Company's) material
and knowing failure, to observe or comply with Burger King Regulations
whether as an officer, stockholder or otherwise, in any material
respect or in any manner which might reasonably have a material
adverse effect in respect of the Company's ongoing business,
operations, conditions, franchises, other business relationships or
properties; provided, that the Executive has been given notice and 90
days from such notice fails to cure the failure, or
(viii) Executive disparaging or making other public statements
that injure or damage Parent, Company or their respective businesses.
(d) In the event Executive's employment is terminated pursuant to
(i) Section 3(b)(i), the Company will pay to Executive (or his
estate or representative) the full amounts to which he would be
entitled under Section 4(a) for the period from effectiveness of
termination through the first anniversary of such termination;
(ii) Section 3(b)(ii) there will be no amounts owing by the
Company to Executive under this Agreement from and after such
termination, except for accrued, but unused vacation pay and sick pay
which shall be paid to the Executive in accordance with Company
practices; and
Termination of the Term of Employment will not terminate Sections 7, 8, 10
through 21, or any other provisions not associated specifically with the Term
of Employment.
In the event of Termination and the Company is obligated to make payments
pursuant to this Section 3(e), the Company's payment obligations under this
Section 3(e) will be mitigated and reduced to the extent of Executive's
compensation under alternative employment during the period for which payments
are owed by the Company pursuant to this Section 3(e).
4. Compensation. During the Term of Employment, the Company shall pay
compensation to Executive as follows:
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<PAGE>
(a) As base compensation for his services hereunder, in bimonthly
installments, a base salary at a rate of $225,000 per annum.
(b) During the Term of Employment the Executive shall receive an
automobile allowance of $800 per month and reimbursements for automobile
insurance, repairs, maintenance and business related fuel not to exceed $6,000
per annum.
(c) During the Term of Employment, the Company will purchase and pay
the premium payments for a life insurance policy in an amount up to $1 million
(such amount to be determined by the Executive) on the life of the Executive
for the benefit of beneficiaries designated by the Executive; provided that the
premium payments on such life insurance policy are less than $10,000 per annum.
5. Reimbursement of Expenses
During the Term of Employment, and in addition to Section 2(d), the
Company shall reimburse Executive for documented travel and other expenses
reasonably incurred by Executive in connection with attending meetings of the
Board of Directors or in connection with activities expressly authorized in
writing by the Chairman, in each case, while serving as Vice Chairman in
accordance with this Agreement, but not any other expenses incurred by
Executive for any other purpose, all in accordance with the rules, customs and
usages promulgated by the Company from time to time in effect.
6. Benefits
During the Term of Employment, the Executive shall be entitled to
perquisites and benefits (including health, short and long term disability,
pension and life insurance benefits consistent with past practice, or as
increased from time to time) referred to herein or expressly approved for
Executive by the Board of Directors.
7. Confidential Information
(a) During and after the Term of Employment, Executive will not,
directly or indirectly in one or a series of transactions, disclose to any
person, or use or otherwise exploit for the Executive's own benefit or for the
benefit of anyone other than the Company, any Confidential Information (as
defined in Section 9), whether prepared by Executive or not; provided, however,
that any Confidential Information may be disclosed to officers,
representatives, employees and agents of the Company who need to know such
Confidential Information in order to perform the services or conduct the
operations required or expected of them in the Business (as defined in Section
9). Executive shall use his best efforts to prevent the removal of any
Confidential Information from the premises of the Company, except as required
in his normal course of employment by the Company. Executive shall use his best
efforts to cause all persons or entities to whom any Confidential Information
shall be
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<PAGE>
disclosed by him hereunder to observe the terms and conditions set forth herein
as though each such person or entity was bound hereby. Executive shall have no
obligation hereunder to keep confidential any Confidential Information if and
to the extent disclosure of any thereof is specifically required by law;
provided, however, that in the event disclosure is required by applicable law,
the Executive shall provide the Company with prompt notice of such requirement,
prior to making any disclosure, so that the Company may seek an appropriate
protective order. At the request of the Company, Executive agrees to deliver to
the Company, at any time during the Term of Employment, or thereafter, all
Confidential Information that he may possess or control. Executive agrees that
all Confidential Information of the Company (whether now or hereafter existing)
conceived, discovered or made by him during the Term of Employment exclusively
belongs to the Company (and not to Executive). Executive will promptly disclose
such Confidential Information to the Company and perform all actions reasonably
requested by the Company to establish and confirm such exclusive ownership.
(b) The terms of this Section 7 shall survive the termination of this
Agreement regardless of who terminates this Agreement, or the reasons therefor.
8. Non-Interference
(a) Executive acknowledges that services to be provided give him the
opportunity to have special knowledge of the Company and its Confidential
Information and the capabilities of individuals employed by or affiliated with
the Company and that interference in these relationships would cause
irreparable injury to the Company. In consideration of this Agreement,
Executive covenants and agrees that:
(i) From the date hereof until the later to occur of three years
from the date hereof, or the first anniversary of expiration on
termination of the Term of Employment (the "Restricted Period"),
Executive will not, without the express written approval of the Board
of Directors of the Company, anywhere in the Market, directly or
indirectly, in one or a series of transactions, own, manage, operate,
control, invest or acquire an interest in, or otherwise engage or
participate in, whether as a proprietor, partner, stockholder, lender,
director, officer, employee, joint venturer, investor, lessor,
supplier, agent, representative or other participant, in any business
which competes, directly or indirectly, with the Business in the
Market ("Competitive Business") without regard to (A) whether the
Competitive Business has its office, manufacturing or other business
facilities within or without the Market, (B) whether any of the
activities of the Executive referred to above occur or are performed
within or without the Market or (C) whether the Executive resides, or
reports to an office, within or without the Market; provided, however,
that (x) the Executive may, anywhere in the Market, directly or
indirectly, in one or a series of transactions, own, invest or acquire
an interest in up to five percent (5%) of the capital stock of a
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<PAGE>
corporation whose capital stock is traded publicly, or that (y)
Executive may accept employment with a successor company to the
Company.
(ii) During the Restricted Period (which shall not include any
period of violation of this Agreement by Executive or period which is
required for litigation to enforce the rights hereunder), Executive
will not without the express prior written approval of the Board of
Directors of the Company (A) directly or indirectly, in one or a
series of transactions, recruit, solicit or otherwise induce or
influence any proprietor, partner, stockholder, lender, director,
officer, employee, sales agent, joint venturer, investor, lessor,
supplier, customer, agent, representative or any other person which
has a business relationship with the Company or had a business
relationship with the Company within the twenty-four (24) month period
preceding the date of the incident in question, to discontinue, reduce
or modify such employment, agency or business relationship with the
Company, or (B) employ or seek to employ or cause any Competitive
Business to employ or seek to employ any person or agent who is then
(or was at any time within six (6) months prior to the date the
Executive or the Competitive Business employs or seeks to employ such
person) employed or retained by the Company. Notwithstanding the
foregoing, nothing herein shall prevent the Executive from providing a
letter of recommendation to an employee with respect to a future
employment opportunity.
(iii) During the Restricted Period, Executive will not publicly
disparage the Parent or the Company or its affiliates or their
respective businesses.
(iv) The scope and term of this Section 8 would not preclude him
from earning a living with an entity that is not a Competitive
Business.
(b) Upon a final, non-appealable finding that the Executive has
breached his obligations in any material respect under this Section 8, the
Company, in addition to pursuing all available remedies under this Agreement,
at law or otherwise, and without limiting its right to pursue the same shall
cease all payments to the Executive under this Agreement or any other
agreement.
9. Definitions
"Burger King Regulations" is defined in Section 1.
"Business" means (a) the construction, development, operations,
ownership and promotion of restaurants in which the Burger King Corporation is
either (i) the exclusive franchisor or (ii) co-franchisor in a dual-use
restaurant involving or relating principally to hamburgers as a major menu
item, or (b) any similar or incidental business involving or relating
principally to hamburgers as a major menu item conducted, or engaged in, by the
Company prior to the date hereof or at any time during the Term of Employment.
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<PAGE>
"Cause" is defined in Section 3(d).
"Companies" means Parent and its successors or any of its direct or
indirect subsidiaries (including the Company), now or hereafter existing.
"Company" is defined in the introduction.
"Competitive Business" is defined in Section 8(a)(i).
"Confidential Information" means any confidential information
including, without limitation, any study, data, calculations, software storage
media or other compilation of information, patent, patent application,
copyright, trademark, trade name, service mark, service name, "know-how", trade
secrets, customer lists, details of client or consultant contracts, pricing
policies, operational methods, marketing plans or strategies, product
development techniques or plans, business acquisition plans or any portion or
phase of any scientific or technical information, ideas, discoveries, designs,
computer programs (including source of object codes), processes, procedures,
formulae, improvements or other proprietary or intellectual property of the
Company, whether or not in written or tangible form, and whether or not
registered, and including all files, records, manuals, books, catalogues,
memoranda, notes, summaries, plans, reports, records, documents and other
evidence thereof. The term "Confidential Information" does not include, and
there shall be no obligation hereunder with respect to, information that
becomes generally available to the public other than as a result of a
disclosure by the Executive not permissible hereunder.
"Executive" means William Osborn or his estate, if deceased.
"Market" means any county in the United States of America and each
similar jurisdiction in any other country in which the Business was conducted
by or engaged in by the Company prior to the date hereof or is conducted or
engaged in, or for which a restaurant site is in development, by the Company at
any time during the Term of Employment.
"Restricted Period" is defined in Section 8(a)(i).
"Term of Employment" is defined in Section 3(a).
10. Notice
Any notice, request, demand or other communication required or
permitted to be given under this Agreement shall be given in writing and if
delivered personally, or sent by
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<PAGE>
certified or registered mail, return receipt requested, as follows (or to such
other addressee or address as shall be set forth in a notice given in the same
manner):
If to Executive: William Osborn
------------
------------
with a copy to:
Freeborn & Peters
950 Seventeenth Street
Suite 2600
Denver, Colorado 80202
Attention: Ernest J. Panasci, Esq.
If to Company: AmeriKing
2215 Enterprise Drive
Suite 1502
Westchester, IL 60154
Attention: Chairman
with a copy to:
Mayer, Brown & Platt
1675 Broadway
Suite 1900
New York, New York 10019
Attention: James B. Carlson, Esq.
Any such notices shall be deemed to be given on the date personally delivered
or such return receipt is issued.
11. Executive's Representation
Executive hereby warrants and represents to the Company that: (i)
Executive has carefully reviewed this Agreement and the Prior Employment
Agreement and has consulted with such advisors as Executive considers
appropriate in connection with this Agreement and the Prior Employment
Agreement, (ii) Executive is not subject to any covenants, agreements or
restrictions, including without limitation any covenants, agreements or
restrictions arising out of Executive's prior employment or the Burger King
Regulations which would be
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<PAGE>
breached or violated by Executive's execution of this Agreement or by
Executive's performance of his duties hereunder and (iii) Executive will not
knowingly breach or violate any provision of the Burger King Regulations in any
material respect or in any manner which might reasonably have a material
adverse effect in respect of the Company's ongoing business, operations,
conditions, franchises, or other business relationships or properties.
12. Other Matters
(a) Executive agrees and acknowledges that the obligations owed to
Executive under this Agreement are solely the obligations of the Company, and
that none of the Company's stockholders, directors, officers or lenders will
have any obligations or liabilities in respect of this Agreement and the
subject matter hereof.
(b) Executive and the Company hereby agree and acknowledge that this
Agreement replaces and supersedes the Prior Employment Agreement, and upon the
execution of this Agreement, the Prior Employment Agreement shall automatically
be terminated and rendered without force and effect and that the Executive
shall release and discharge the Company and Parent, and their respective
directors, stockholders, officers and lenders from any further obligations or
liabilities thereunder, including any compensation, bonus or severance
thereunder.
13. Validity
If, for any reason, any provision hereof shall be determined to be
invalid or unenforceable, the validity and effect of the other provisions
hereof shall not be affected thereby.
14. Severability
Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. If any
court determines that any provision of Section 8 or any other provision hereof
is unenforceable because of the power to reduce the scope or duration of such
provision, as the case may be and, in its reduced form, such provision shall
then be enforceable.
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<PAGE>
15. Waiver of Breach; Specific Performance
The waiver by the Company or Executive of a breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any other breach of such other party. Each of the parties (and third party
beneficiaries) to this Agreement will be entitled to enforce its rights under
this breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of
Sections 7 and 8 of this Agreement and that any party (and third party
beneficiaries) may in its sole discretion apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive relief,
including temporary restraining orders, preliminary injunctions and permanent
injunctions in order to enforce or prevent any violations of the provisions of
this Agreement. In the event either party takes legal action to enforce any of
the terms or provisions of this Agreement, the nonprevailing party shall pay
the successful party's costs and expenses, including but not limited to,
reasonable attorneys' fees, incurred in such action.
16. Assignment; Third Parties
Neither the Executive nor the Company may assign, transfer, pledge,
hypothecate, encumber or otherwise dispose of this Agreement or any of his or
its respective rights or obligations hereunder, without the prior written
consent of the other. The parties agree and acknowledge that each of the
Companies and the stockholders and investors therein are intended to be third
party beneficiaries of, and have rights and interests in respect of,
Executive's agreements set forth in Sections 7 and 8.
17. Amendment; Entire Agreement
This Agreement may not be changed orally but only by an agreement in
writing agreed to by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought. This Agreement embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter of this Agreement, and supersedes and replaces all prior
agreements, understandings and commitments with respect to such subject matter,
including the Prior Employment Agreement.
18. Litigation
THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. EACH OF THE PARTIES
HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF THIS
AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY HARMED AND COULD NOT BE
MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY OTHER REMEDY TO
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<PAGE>
WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE PARTIES SHALL BE ENTITLED
TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. EACH PARTY AGREES
THAT JURISDICTION AND VENUE WILL BE PROPER IN CHICAGO, ILLINOIS AND WAIVES ANY
OBJECTIONS BASED UPON FORUM NON CONVENIENS. EACH PARTY WAIVES PERSONAL SERVICE
OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR
PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL JURISDICTION IF
SERVED BY REGISTERED OR CERTIFIED MAIL TO THE PARTY AT THE ADDRESS SET FORTH IN
THIS AGREEMENT, OR AS OTHERWISE PROVIDED BY THE LAWS OF THE STATE OF ILLINOIS
OR THE UNITED STATES. THE CHOICE OF FORUM SET FORTH IN THIS SECTION 11(G) SHALL
NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN ANY OTHER
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY
OTHER APPROPRIATE JURISDICTION.
19. Arbitration
ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO THIS AGREEMENT RELATING TO
OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION, EXECUTION, PERFORMANCE,
SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR ACTIONS UNDER OR IN
RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION ANY CLAIM UNDER THE
SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, ANY OTHER
STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR BOTH, THE RACKETEER
INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR FEDERAL OR STATE
COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY PURSUANT TO,
ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN
ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN CHICAGO,
ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF ILLINOIS.
DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO SUCH
ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES, SUBJECT TO
CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. ss.ss. 1 ET SEQ.
ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF RECORD.
20. Further Action
Executive and the Company agree to perform any further acts and to
execute and deliver any documents which may be reasonable to carry out the
provisions hereof.
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21. Counterparts
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first written above.
EXECUTIVE:
--------------------------------------
Name: William Osborn
NATIONAL RESTAURANT ENTERPRISES, INC.
By
------------------------------------
Name: A. Richard Caputo, Jr.
Title: Vice President
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===============================================================================
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, Profit Sharing Plan and Trust, Paul Rodzevick, Profit
Sharing Plan and Trust, 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, Jerald 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 (the "Offerings") of
$100.0 million aggregate principal amount of Senior Notes due 2006 (the "Senior
Notes") and $30.0 million aggregate principal amount of Units (the "Units")
consisting of Senior Exchangeable Preferred Stock due 2008 ("Senior Preferred
Stock") and Common Stock $.01 par value of the Company;
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) following the
Reclassification the 1,000-for-1 stock split (the "Stock Split") of all
outstanding shares of Common Stock; (c) the Offerings; (d) the prepayment in
full of the Company's
<PAGE>
$15.0 million aggregate principal amount of 12.5% Senior Subordinated Notes due
2005 (the "Senior Subordinated Notes") 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 repayment of Borrowings under the
Credit Agreement in the aggregate amount of $86.6 million and the termination
of Term Loan A and Term Loan B pursuant to the terms of the Credit Agreement;
(h) the repurchase of all of the warrants to purchase Class C Common Stock of
the Company issued by the Company to PMI; (i) the payment of $[439,000] to TJC
in payment of accrued fees under the TJC Consulting Agreement prior to November
__, 1996; (j) the amendment of the Stockholders Agreement; (k) the amendment of
the Management Subscription Agreement; (l) the amendment of the Option
Agreements; and (m) 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 and Restated
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.
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<PAGE>
"Amended and Restated Stockholders Agreement" means the Amended and
Restated Stockholders Agreement substantially in the form of Exhibit C hereto.
"Amendment No. 1 to Option Agreement" means Amendment No. 1 to each of
the Option Agreements substantially in the form of Exhibit D hereto..
"Amendment No. 1 to Management Subscription Agreement" means Amendment
No. 1 to the Management Subscription Agreement dated the date hereof
substantially in the form of Exhibit E hereto.
"BKC" means the Burger King Corporation.
"Certificate of Designation" means the Certificate of Designation
authorizing the Senior Preferred Stock.
"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 A1 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.
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<PAGE>
"Common Stockholders" has the meaning specified in the preamble to
this Agreement.
"Company" has the meaning as specified 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 from
time to time.
"Credit Agreement" means the Second Amended and Restated Credit
Agreement, dated February 7, 1986, by and among Enterprises, the Company, The
First National Bank of Boston and the other lenders thereto and the First
National Bank of Boston, as agent.
"Directors Indemnification Agreements" means the Indemnification
Agreements substantially in the form of Exhibit F hereto.
"Enterprises" has the meaning specified in the preamble of this
Agreement.
"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, 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 Osborn, Gary W. Hubert, Joel D. Aaseby,
Scott E. 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.
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<PAGE>
"Management Subscription Agreement" means the Management Subscription
Agreement, dated September 1, 1994, by and among the Company and the
stockholders listed on the signature page thereto.
"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 offerings of Senior Notes
and Units pursuant to the Registration Statement.
"Option Agreements" mean the Stock Option Agreements, dated September
1, 1994, between the Company and each of Scott Vasatka and Donald Stahurski.
"Osborn" has the meaning specified in the preamble to this Agreement.
"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.
"Preferred Stock" means the Company's Class A1 Preferred Stock, Class
A2 Preferred Stock, Class B Preferred Stock and Senior Preferred Stock.
"Preferred Stockholders" 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 Offerings, and composed of
Messrs. Caputo and Jaro.
"Recapitalization" has the meaning specified in the recitals to this
Agreement.
-5-
<PAGE>
"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 5.13, 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 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 G hereto.
"Stockholders" means the Common Stockholders, PMI and the Preferred
Stockholders.
"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 January 31, 1997.
"TJC" has the meaning specified in the preamble to this Agreement.
"Underwriting Agreements" means the Underwriting Agreements, to be
entered into by the Company and the Underwriters in connection with the
Offerings.
"Underwriters" means Donaldson, Lufkin & Jenrette Securities
Corporation and Jeffries & Company Inc., as representatives, on behalf of
themselves and the other underwriters named in the Underwriting Agreements.
-6-
<PAGE>
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, 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.
-7-
<PAGE>
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 1,300,000 shares of Preferred Stock, including 7,500 shares of
existing Preferred Stock, and [1,200,000](1) shares of Senior Preferred Stock
and [92,500](1) shares of undesignated Preferred Stock. At the Closing Time but
prior to the consummation of the Offerings, the Company shall have
[1,030,660](1) shares of Common Stock outstanding and [1,207,500](1) 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) represents and warrants, 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 any court or government instrumentality applicable to such
Party, except such violations as
- ---------
1 Assuming 1,200,000 shares of Senior Preferred Stock and 30,000 shares of
Common Stock are sold in the Offerings.
-8-
<PAGE>
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 5.2, 5.3, 5.4(a), 5.6, 5.10, 5.12 and 5.13 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 Offerings (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 Recapitalization Documents and the
Recapitalization generally, provided that, with regard to
-9-
<PAGE>
Parties that are directors of the Company, the foregoing will be subject to
their fiduciary duties as directors.
Section 5.2. Amended Charter Documents.
(a) Prior to the effective date of the Registration Statement, the
Amended and Restated Company Charter that provides for, among other things, the
authorization of 92,500 shares of undesignated Preferred Stock 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 Closing Time, the Certificate of Designation will be
filed by the Company with the Secretary of State of the State of Delaware.
(d) 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 5.2(a), 5.2(b) and 5.3(c) of this Agreement.
Section 5.3. 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 that 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) the Stock Split shall be consummated and each holder of shares of
capital stock of the Company shall be entitled to receive a new certificate or
certificates representing the
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<PAGE>
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 5.4. Issuance of Securities.
(a) At or prior to the effective date, the Stockholders, will consent
to the Offerings and to the execution and delivery of the Underwriting
Agreements by the Company to the Underwriters.
(b) At the Closing the Company and the Underwriters will consummate
the Offerings pursuant to the terms of the Underwriting Agreements and the
Company will issue the Senior Notes, the Units, the Senior Preferred Stock and
the Common Stock.
Section 5.5. Repayment of Credit Agreement Borrowings.
(a) At the Closing, the Company will use a portion of the net proceeds
from the Offerings to repay the entire outstanding aggregate principal amount
of the Term Loan A facility, Term Loan B facility and Revolving Credit facility
plus accrued interest and any other amounts owed thereon through the Closing
Date. At the Closing, the lenders under the Credit Agreement, will deliver to
the Company the notes evidencing the principal amount of the Term Loan A
facility, Term Loan B facility and Revolving Credit facility held by such
lenders to be repaid together with written instructions to complete the
repayment.
Section 5.6. Subordinated Note Repurchase.
(a) At the Closing, the Company will use a portion of the net proceeds
from the Offerings 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 Offerings to repurchase at 100% of the principal amount the entire
outstanding aggregate
-11-
<PAGE>
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 Offerings 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 5.7. Repurchase of Warrants. At the Closing, the Company will
repurchase all of the warrants issued to PMI pursuant to Section 18 of the
Common Stock Purchase Warrants, dated February 7, 1996, issued by the Company,
pursuant to a repurchase agreement substantially in the form of Exhibit H.
Section 5.8. 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 5.9. 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 5.10. 1996 Annual Meeting of Stockholders. The Parties hereby
agree to execute and deliver stockholder consents, substantially in the form of
Exhibit J 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 5.11. Amended and Restated Stockholders Agreement. At the
Closing, the Company and the Stockholders will execute, deliver and consummate
the Amended and Restated Stockholders Agreement.
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<PAGE>
Section 5.12. Amendment to Management Subscription Agreement.
Effective upon the filing of the Amended and Restated Company Charter, the
Company, Jaro and affiliates of Jaro and the Management Investors Subscription
will execute, deliver and consummate Amendment No. 1 to the Management
Agreement.
Section 5.13. Amendment to Option Agreements. Effective upon the
filing of the Amended and Restated Company Charter, the Company, Enterprises,
Scott E. Vasatka and Donald Stahurski will execute, deliver and consummate the
Amendment No. 1 to the Option Agreements.
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.
(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. (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.
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<PAGE>
(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
agreements on their part to be performed pursuant to this Agreement on
or prior to the Closing Time.
(b) Recapitalization and Recapitalization Documents. (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 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 5.2(d) of this Agreement.
(c) Consummation of the Offerings. The Offerings shall have been
consummated substantially in accordance with the terms set forth in
the Registration Statement.
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<PAGE>
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, Senior Preferred Stock or
Common Stock 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 (including any
warrants or options to purchase any Equity Securities) arising from the
issuance and sale of the Units, Senior Preferred Stock or Common Stock in the
Offerings; provided that such waiver shall not apply to any adjustments
required as a result of the Stock Split and (iii) 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. 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
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<PAGE>
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.
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 interest rate of the Senior Notes or Senior Preferred
Stock or the number of shares of Units, Senior Preferred Stock or Common Stock
to be issued 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.
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<PAGE>
Section 8.7. Survival. All representations, warranties, covenants and
agreements herein will survive the Closing.
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<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:
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<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:
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<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
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<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
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PAUL RODZEVIK PROFIT SHARING PLAN
AND TRUST
By:
-----------------------------------
Name: Paul Rodzevik
Title: Trustee
--------------------------------------
Dennis Hogerty
--------------------------------------
Jerald Dunn
JII PARTNERS
By:
-----------------------------------
Name:
Title:
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<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
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<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
-24-
<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:
-25-
<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
-26-
<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
-27-
<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
-28-
<PAGE>
EXHIBIT A
AMENDED AND RESTATED COMPANY BY-LAWS
<PAGE>
EXHIBIT B
AMENDED AND RESTATED COMPANY CHARTER
<PAGE>
EXHIBIT C
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
<PAGE>
EXHIBIT D
AMENDMENT NO. 1 TO OPTION AGREEMENT
<PAGE>
EXHIBIT E
AMENDMENT NO. 1 TO MANAGEMENT SUBSCRIPTION AGREEMENT
<PAGE>
EXHIBIT F
INDEMNIFICATION AGREEMENT
<PAGE>
EXHIBIT G
STOCKHOLDER CHART
<PAGE>
EXHIBIT H
PMI WARRANT REPURCHASE AGREEMENT
TO COME
<PAGE>
EXHIBIT I
RESTATED OSBORN EMPLOYMENT AND NON-DISCLOSURE AGREEMENT
<PAGE>
EXHIBIT J
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............................................ 7
Section 2.2. Authority; No Conflicts...................................... 7
Section 2.3. Capital Stock................................................ 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE OTHER PARTIES
Section 3.1. Due Authorization............................................ 8
Section 3.2. Authority; No Conflicts...................................... 8
Section 3.3. Capital Stock................................................ 9
ARTICLE IV
THE CLOSING
Section 4.1. Closing...................................................... 9
ARTICLE V
THE RECAPITALIZATION
Section 5.1. General...................................................... 9
Section 5.2. Amended Charter Documents.................................... 10
Section 5.3. Reclassification and Stock Split............................. 10
Section 5.4. Issuance of Securities....................................... 11
Section 5.5. Repayment of Credit Agreement Borrowings..................... 11
Section 5.6. Subordinated Note Repurchase................................. 11
Section 5.7. Repurchase of Warrants....................................... 12
Section 5.8. Osborn Employment Agreement.................................. 12
Section 5.9. Directors Indemnification Agreements......................... 12
Section 5.10. 1996 Annual Meeting of Stockholders......................... 12
-i-
<PAGE>
Page
Section 5.11. Amended and Restated Stockholders Agreement................. 12
Section 5.12. Amendment to Management Subscription Agreement.............. 13
Section 5.13. Amendment to Option Agreements.............................. 13
ARTICLE VI
CONDITIONS OF THE PARTIES'
(OTHER THAN THE COMPANY AND ENTERPRISES) OBLIGATIONS
Section 6.1. Conditions of the Stockholders' Obligations.................. 13
ARTICLE VII
CONDITIONS OF THE COMPANY'S OBLIGATIONS
Section 7.1. Conditions of the Company's Obligations...................... 14
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Waiver of First Refusal, Anti-Dilution Rights and
Registration Rights........................................ 15
Section 8.2. Power of Attorney............................................ 15
Section 8.3. Notices...................................................... 16
Section 8.4. Consent to Amendments and Waivers............................ 16
Section 8.5. Governing Law................................................ 16
Section 8.6. Successors and Assigns....................................... 16
Section 8.7. Survival..................................................... 17
-ii-
<PAGE>
EXHIBITS
A Amended and Restated Company By-Laws
B Amended and Restated Company Charter
C Amended and Restated Stockholders Agreement
D Amendment No. 1 to Option Agreement
E Amendment No. 1 to Management Subscription Agreement
F Indemnification Agreement
G Stockholder Chart
H PMI Warrant Repurchase Agreement
I Restated Osborn Employment and Non-Disclosure Agreement
J Stockholder Written Consent in Lieu of 1996 Annual Meeting
November 25, 1996
TO: Burger King Corporation
FROM: AmeriKing, Inc.
Based upon our conversations and correspondence to date, the
following sets forth the understandings of AmeriKing, Inc. ("AmeriKing") of
the commitments Burger King Corporation ("BKC") is requesting of AmeriKing in
connection with BKC's approval, to the extent required under applicable BKC
Guidelines, of AmeriKing's offerings, as defined in its Registration Statement
(File No. 333-4261). Capitalized terms not otherwise defined herein shall have
the meanings given to such terms in the Registration Statement.
In connection with the proposed Offerings, AmeriKing has asked, at
least informally, that BKC treat the proceeds of the Offerings as equity
rather than as debt for purposes of evaluating whether AmeriKing may receive
financial approvals to obtain additional franchises. BKC does recognizes that
the Senior Notes and PIK Preferred have characteristics that make them more
advantageous (and more like equity) than typical debt obligations, including
the debt to be repaid with the proceeds of the Offering. Accordingly, based on
the Recapitalization as reflected in the Pro Forma, BKC is prepared to grant
AmeriKing certain financial approvals on an exception basis, and to treat the
Senior Notes and PIK Preferred as equity for the purposes of BKC's financial
ratios subject to the conditions set forth in.
1. ADVERTISING/INVESTMENT SPENDING. The pro forma financial information
provided by AmeriKing to BKC in connection with the Offering (as Amended or
Supplemented from time to time, the "Pro Forma") reflects an expenditure of
5.2% to 5.3 of gross sales on advertising, which includes "investment
spending" dollars and discretionary advertising in addition to the 4%
advertising fund contribution mandated by the Franchise Agreements. Consistent
with the Pro Forma, Enterprises will be required to vote in favor of
investment spending initiatives of BKC and so long as such spending
initiatives are approved by the requisite percentage of the relevant ADI to
contributing to investment spending along with other franchisees in the
relevant ADI at a level equal to the greater of 1% of gross sales or
1
<PAGE>
the actual percentage of gross sales from time to time being supported by BKC
for investment spending.
2. CAPITAL REINVESTMENT COMMITMENT. Enterprises will be required to spend a
minimum of 1% of gross sales on capital reinvestment in its established
restaurant base. (Any carryover capital spending commitments associated with
the acquisition of restaurants in Chattanooga, Tennessee would be separate
from this obligation.)
3. DEVELOPMENT. Enterprises shall promptly seek and obtain approvals for 17
restaurants to be developed and opened in calendar year 1997. BKC exception
financial approval that would be granted based on the proposed
recapitalization would be financial approval for these 17 restaurants only.
Enterprises would be required to execute a negotiated development
agreement/target reservation agreement for the 17 restaurants to be developed
in 1997. That negotiated agreement would require Enterprises to make a
payments to BKC of $75,000 for each restaurant by which AmeriKing misses this
target in fiscal 1997.
In addition, Enterprises will be required to seek BKC approval to develop new
restaurants in the years 1998 - 2001 in accordance with the Pro Forma. BKC is
not currently granting any approvals needed for such development, and will
have no express or implied obligation to grant such approvals.
4. NO ACQUISITIONS. The exception approval, if granted, will not extend to any
acquisitions. Future approvals for all purposes, whether new development or
acquisitions, will continue to be granted or withheld in BKC's sole
discretion, and BKC's right of first refusal will apply to all proposed
acquisitions. Enterprises should not anticipate that any approvals for future
acquisitions would be granted unless Enterprises meets BKC's then current
minimum standards for financial, legal, credit and operations approval.
Additionally, in connection with any acquisitions that AmeriKing and/or
Enterprises pursue but as to which they do not or would not meet BKC's
then-current standards for financial approval (both before and after the
proposed acquisition), Enterprises shall indemnify BKC against any claims by
the person(s) from whom Enterprises is seeking to acquire the restaurants in
the event BKC does not approve the acquisition by Enterprises on the basis
that AmeriKing and/or Enterprises do not or would not meet BKC's then-current
standards for financial approval.
5. DEBT AND FINANCIAL RESTRICTIONS. In addition to the full subordination of
the Senior Notes to obligations of AmeriKing and Enterprises to BKC, AmeriKing
and Enterprises will be subject to certain express covenants related to
assuring the performance of obligations to BKC and the realization of
assumptions in the Pro Forma as follows:
2
<PAGE>
a. AmeriKing and Enterprises will be required to apply the proceeds of
the Offerings to pay off current debt as contemplated by the Pro Forma and the
Registration Statement.
b. AmeriKing will not pay cash dividends to PIK Preferred stockholders
before the time in 2001 when dividends paid in kind are no longer permitted
without BKC's prior written consent.
c. No dividends will be paid to common stockholders of AmeriKing until
the Senior Notes and the PIK Preferred are retired without BKC's prior written
consent.
d. All future debt agreements will require that BKC be given
simultaneous written notice of any default. AmeriKing will use its best
efforts to cause its current debt agreements to contain a similar provision.
6. SECURITIES ISSUES. AmeriKing and Enterprises agree with BKC that:
a. They will comply with all requirements of BKC in connection with any
future offerings of debt or equity securities. Those requirements will include
prompt written notice to BKC of any proposed securities offering; submission
of registration statements and/or prospectuses to BKC for review in connection
with trademark usage, inclusion of disclaimers, and otherwise; the execution
by the companies, the Owners, and the underwriters, if any, of certificates
required under BKC's then-current guidelines applicable to such offerings, the
execution of any indemnity of BKC by the companies and Owners; and such other
requirements under BKC's then-current guidelines applicable to such offerings.
b. They will not grant any further registration rights in connection
with any securities now or hereafter issued, or amend or modify in any
material respect any registration rights previously granted. BKC must be
promptly advised in writing of any amendment of previously granted
registration rights and of the exercise of any such rights.
7. FOLLOW UP AND PROCEDURES. After the closing of the Offerings, AmeriKing and
Enterprises will provide such written materials as BKC may reasonably request
with respect to the Offerings and the application of the proceeds. Enterprises
will prepare annual development proposals to BKC, supported by all required
documentation including financial statements, in April of each year. AmeriKing
and Enterprises must promptly notify BKC in writing of any material changes to
financial statement or pro formas submitted to BKC and on the basis of which
BKC has granted or is evaluating the potential grant of expansion approvals
for units that have not been opened Material changes may result in loss of
approval for any restaurants that have not received site approval from BKC.
In recognition of the time constraints arising from the manner in which
AmeriKing chose to proceed, AmeriKing agrees to pay for some of BKC's internal
and external costs in
3
<PAGE>
connection with its review of the proposed Offerings and documentation of
conditions for exception financial with its review of the proposed Offerings
and documentation of conditions for exception financial approval as outlined
above. This amount is currently estimated to be from $20,000 to $30,000, as
determined solely by BKC, and would be payable without regard to the outcome.
The foregoing is our understanding of BKC's requests to date. AmeriKing
understands that BKC may have new or different requests in connection with its
continuing review of the proposed Offering. Any agreement by AmeriKing to BKC
requests will be subject to final documentation by the parties.
4
<PAGE>
AMERIKING, INC.
CALCULATION OF EPS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEP. 2, 1994
THROUGH DEC. FISCAL PRO FORMA, AS
31, 1994 1995 ADJUSTED 1995
--------------- ---------- -------------
<S> <C> <C> <C>
NET INCOME ................ $ 241 $ 902 $ 2,405
ORIGINAL PREFERRED STOCK . (122) (450) (450)
EXCHANGEABLE PREFERRED
STOCK .................... (3,750)
--------------- ---------- -------------
EARNINGS AVAIL. FOR COMMON
STOCKHOLDERS ............. $ 119 $ 452 ($ 1,795)
WEIGHTED AVERAGE SHARES
OUTSTANDING .............. 1,000.01 1,000.01 1,046.83
FULLY DILUTED W/A SHARES
OUTSTANDING .............. 1,123.61 1,123.61 1,170.43
EARNINGS PER SHARE
(WEIGHTED AVERAGE) ....... $0.12 $0.45 ($1.71)
EARNINGS PER SHARE (FULLY
DILUTED) ................. $0.11 $0.40 ($1.53)
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA, AS PRO FORMA, AS PRO GORMA AS
ACTUAL YTD ADJUSTED YTD ACTUAL YTD ADJUSTED YTD ACTUAL LTM ADJUSTED LTM
10/2/95 10/2/96 9/30/96 9/30/96 9/30/96 9/30/96
---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET INCOME ................ $ 721 $ 1,938 ($ 638) ($ 176) ($ 457) $ 291
ORIGINAL PREFERRED STOCK . (338) (338) (338) (338) (450) (450)
EXCHANGEABLE PREFERRED
STOCK .................... (2,813) (2,813) (3,750)
--------- ---------- ---------- --------- --------- ---------
EARNINGS AVAIL. FOR COMMON
STOCKHOLDERS ............. $ 383 ($ 1,213) ($ 976) ($ 3,327) ($ 907) ($ 3,909)
WEIGHTED AVERAGE SHARES
OUTSTANDING .............. 1,000.01 1,046.83 1,000.01 1,046.83 1,000.01 1,046.83
FULLY DILUTED W/A SHARES
OUTSTANDING .............. 1,123.61 1,170.43 1,195.33 1,170.43 1,195.33 1,170.43
EARNINGS PER SHARE
(WEIGHTED AVERAGE) ....... $0.38 ($1.16) ($0.98) ($3.18) ($0.91) ($3.73)
EARNINGS PER SHARE (FULLY
DILUTED) ................. $0.34 ($1.04) ($0.82) ($2.84) ($0.76) ($3.34)
</TABLE>
<PAGE>
AMERIKING, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL 1995
-------------------------
PRO FORMA, AS
ACTUAL ADJUSTED
--------- --------------
EARNINGS
<S> <C> <C>
Income before income taxes and
extraordinary item ................. $ 1,727 $ 4,275
Interest expense .................... 8,323 11,402
Amortization of deferred financing
costs .............................. 511 544
Portion of rents representative of
interest factor .................... 3,445 4,629
--------- -------------
Total earnings ...................... $14,006 $20,850
========= =============
FIXED CHARGES
Interest expense .................... $ 8,323 $11,402
Amortization of deferred financing
costs .............................. 511 544
Portion of rents representative of
interest factor .................... 3,445 4,629
--------- -------------
Total fixed charges ................. $12,279 $16,575
========= =============
Ratio of Earnings to Fixed Charges . 1.14 1.26
========= =============
Insufficient Earnings to Cover Fixed
Charges ............................
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------------------------- TWELVE MONTHS ENDED
OCTOBER 2, 1995 SEPTEMBER 30, 1996 SEPTEMBER 30, 1996
------------------------ ------------------------- ------------------------
PRO FORMA, AS PRO FORMA, AS PRO FORMA, AS
ACTUAL ADJUSTED ACTUAL ADJUSTED ACTUAL ADJUSTED
--------- ------------- ---------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS
Income before income taxes and
extraordinary item ................. $ 1,382 $ 3,445 ($ 1,064) ($ 280) ($ 719) $ 550
Interest expense .................... 6,222 8,570 8,880 8,509 10,981 11,341
Amortization of deferred financing
costs .............................. 378 408 736 408 869 544
Portion of rents representative of
interest factor .................... 2,538 3,457 3,463 3,564 4,370 4,736
--------- ------------- ---------- ------------- --------- -------------
Total earnings ...................... $10,520 $15,880 $12,015 $12,201 $15,501 $17,171
========= ============= ========== ============= ========= =============
FIXED CHARGES
Interest expense .................... $ 6,222 $ 8,570 $ 8,880 $ 8,509 $10,981 $11,341
Amortization of deferred financing
costs .............................. 378 408 736 408 869 544
Portion of rents representative of
interest factor .................... 2,538 3,457 3,463 3,564 4,370 4,736
--------- ------------- ---------- ------------- --------- -------------
Total fixed charges ................. $ 9,138 $12,435 $13,079 $12,481 $16,220 $16,621
========= ============= ========== ============= ========= =============
Ratio of Earnings to Fixed Charges . 1.15 1.28 N/A N/A N/A 1.03
========= ============= ========== ============= ========= =============
Insufficient Earnings to Cover Fixed
Charges ............................ $ 1,064 $ 280 $ 719
========== ============= =========
</TABLE>
AMERIKING, INC.
LIST OF SUBSIDIARIES
National Restaurant Enterprises, Inc.
AmeriKing Illinois Corporation I
AmeriKing Colorado Corporation I
AmeriKing Tennessee Corporation I
AmeriKing Virginia Corporation I
AmeriKing Cincinnati Corporation I
<PAGE>
<TABLE>
<CAPTION>
AMERIKING CORPORATE STRUCTURE
-----------------------------
<S><C>
--------------------
| |
| AMERIKING, INC. |
| |
--------------------
| 100%
|
-----------------------------------------
| |
| NATIONAL RESTAURANT ENTERPRISES, INC. |
| (d/b/a AmeriKing Corporation) |
| |
-----------------------------------------
|
-----------------------------------------------------------------------------------------------------
| | | | |
| 100% | 100% | 100% | 100% | 100%
- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------
| AMERIKING COLORADO | |AMERIKING TENNESSEE | | AMERIKING VIRGINIA | |AMERIKING CINCINNATI| | AMERIKING ILLINOIS |
| CORPORATION I | |CORPORATION I | | CORPORATION I | |CORPORATION I | | CORPORATION I |
- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------
</TABLE>
Notes:
1. All corporations are Delaware corporations.
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 25, 1996
Chicago, Illinois
