<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1996
333-04261
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 2
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. John T. Gaffney, Esq.
Mayer, Brown & Platt Cravath, Swaine & Moore
1675 Broadway Worldwide Plaza
New York, New York 10019 825 Eighth Avenue
(212) 506-2500 New York, New York 10019
(212) 474-1000
</TABLE>
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
----------------
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM AGGREGATE
TO BE REGISTERED OFFERING PRICE(1)(2) AMOUNT OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK ($.01 PAR VALUE PER SHARE) $118,128,000 $40,733.79(3)
</TABLE>
- -----------------------------------------------------------------------------
(1) Includes $15,408,000 of shares of Common Stock issuable upon exercise
of an over-allotment option granted to the U.S. Underwriters by the
Company.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933.
(3) Of which $39,655.17 has been previously paid.
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>
AMERIKING, INC.
CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM AND HEADING OF FORM S-1 HEADING OR LOCATION IN PROSPECTUS
----------------------------------- --------------------------------------------------
<S> <C> <C>
1. Forepart of the Registration Facing Page of Registration Statement; Cross
Statement and Outside Front Cover Reference Sheet; Outside Front Cover Page of
Page of Prospectus ................. Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back Cover Page of
Pages of Prospectus ................ Prospectus
3. Summary Information and Risk
Factors ............................ Prospectus Summary; Risk Factors
4. Use of Proceeds .................... Prospectus Summary; Use of Proceeds
5. Outside Front Cover Page of Prospectus; Risk
Determination of Offering Price ... Factors; Underwriting
6. Dilution ........................... Dilution
7. Selling Security Holders ........... Not Applicable
8. Plan of Distribution ............... Outside and Inside Front Cover Pages of
Prospectus; Underwriting
9. Description of Securities to be Outside Front Cover Page of Prospectus; Dividend
Registered ......................... Policy; Description of Capital Stock; Shares
Eligible for Future Sale
10. Interest of Named Experts and
Counsel ............................ Legal Matters; Experts
11. Information with Respect to the Outside Front and Outside Back Cover Page of
Registrant ......................... Prospectus; Prospectus Summary; Risk Factors;
Dividend Policy; Dilution; Capitalization; Pro
Forma Consolidated Financial Statements; Selected
Consolidated Financial Information; Management's
Discussion and Analysis of Financial Condition and
Results of Operations; Business; Management;
Principal Stockholders; Description of Capital
Stock; Description of Certain Indebtedness;
Certain Transactions; Shares Eligible for Future
Sale; Underwriting; Experts; Index to Consolidated
Financial Statements
12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities .................... Not Applicable
</TABLE>
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with an underwritten public offering in the United States
and Canada (the "U.S. Prospectus") and one to be used in a concurrent
underwritten public offering outside the United States and Canada (the
"International Prospectus"). The U.S. Prospectus and the International
Prospectus are identical except for the front and back cover pages. The form
of U.S. Prospectus is included herein and is followed by the alternate pages
to be used in the International Prospectus. The alternate pages for the
International Prospectus included herein are labeled "Alternate Page For
International 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 JULY 10, 1996
PROSPECTUS
6,420,000 SHARES
[AMERIKING LOGO]
COMMON STOCK
All of the shares of common stock (the "Common Stock") of AmeriKing, Inc.
(the "Company") offered hereby are being sold by the Company. Of the
6,420,000 shares of Common Stock offered hereby, a total of 5,136,000 shares
are being offered hereby for sale in the United States and Canada (the "U.S.
Offering") by the U.S. Underwriters (as defined) and a total of 1,284,000
shares are being offered by the Managers (as defined) in a concurrent
international offering outside the United States and Canada (the
"International Offering" and, together with the U.S. Offering, the
"Offerings").
Prior to the Offerings, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will
be between $14.00 and $16.00 per share. See "Underwriting" for information
relating to the factors considered in determining the initial public offering
price. The Common Stock has been approved for trading on the Nasdaq National
Market under the symbol "AKNG," subject to official notice of issuance.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
THESE 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
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share $ $ $
------------------ ----------------- -----------------
Total (3) $ $ $
</TABLE>
- -----------------------------------------------------------------------------
(1) For information regarding indemnification of the U.S. Underwriters and
the Managers, see "Underwriting."
(2) Before deducting expenses estimated at $ payable by the Company.
(3) The Company has granted the U.S. Underwriters a 30-day option to
purchase up to 963,000 additional shares of Common Stock solely to
cover over-allotments, if any. See "Underwriting." If such option is
exercised in full, the total Price to Public, Underwriting Discounts
and Commissions and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
The shares of Common Stock are being offered by the several U.S.
Underwriters named herein, subject to prior sale, when, as and if accepted by
them and subject to certain conditions. It is expected that certificates for
the shares of Common Stock offered hereby will be available for delivery on
or about , 1996, at the offices of Smith Barney Inc., 333 West 34th
Street, New York, New York 10001.
SMITH BARNEY INC.
PAINEWEBBER INCORPORATED
EVEREN SECURITIES, INC.
, 1996
<PAGE>
[MAP]
Burger King(Registered Trademark) is a registered trademark and service
mark and Whopper(Registered Trademark) is a registered 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, please see "Available Information."
IN CONNECTION WITH THE OFFERINGS, THE U.S. UNDERWRITERS AND MANAGERS MAY
OVER- ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE COMMON STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED
THROUGH THE NASDAQ NATIONAL MARKET, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS 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 (i) gives effect to the recapitalization of the Company's capital
stock, including the 6,318.86-to-1 stock split which will occur in connection
with the Offerings (the "Recapitalization") and (ii) assumes that the
over-allotment option granted by the Company to the U.S. Underwriters is not
exercised. 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
The Company is the largest independent Burger King franchisee in the U.S.
based upon pro forma fiscal 1995 restaurant sales of $237.4 million. The
Company was formed in 1994 by a group consisting of Burger King franchisees,
former Burger King Corporation ("BKC") executives and The Jordan Company to
take advantage of significant acquisition and related new restaurant
development opportunities within the growing Burger King system. Since its
inception, the Company has grown primarily through a series of nine
acquisitions involving the purchase of 175 Burger King restaurants.
Currently, the Company operates 180 Burger King restaurants in the states of
Illinois, Virginia, Indiana, Colorado, Texas, Tennessee, Kentucky, Wisconsin,
Ohio, North Carolina and Georgia.
The Company's growth strategy consists of two principal components: (i)
strategic acquisitions of multi-restaurant Burger King operations in new and
existing markets and (ii) development of new Burger King restaurants in
markets in which the Company has established a presence. The Company
currently intends to acquire 40 restaurants in the Michigan Acquisition (as
described below) and plans to develop 16 new restaurants in fiscal 1996
(including four developed to date, with the remaining 12 in the initial
stages of development) and 34 new restaurants in fiscal 1997.
Management believes that there are many attractive acquisition candidates
in the $8.4 billion Burger King system because of its significant size and
highly fragmented nature. According to information publicly filed by Grand
Metropolitan PLC ("GrandMet"), BKC's parent corporation, as of September 30,
1995, the Burger King system included more than 8,000 restaurants worldwide,
of which over 90% were operated by approximately 1,500 independent
franchisees. 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. In addition, since
September 30, 1991, the number of restaurants in the Burger King system has
grown by approximately 30%. During BKC's fiscal year ended September 30,
1995, a record number of 657 new restaurants were added to the Burger King
system.
The Company has and will continue to target acquisitions in geographic
markets which have potential for substantial new restaurant development.
Management believes that the underpenetration of the Burger King system
relative to other quick-service hamburger restaurant concepts provides the
Company with significant new development opportunities. Moreover, management
believes that the proven success of the Burger King concept and the relative
predictability of development costs and restaurant profitability versus that
of newer restaurant concepts substantially reduce the Company's new
restaurant development risk. For fiscal 1996, the Company has budgeted
approximately $350,000 for the development of each new Burger King restaurant
(exclusive of land acquisition and building costs, as the Company leases each
of its properties). For the 121 restaurants operated by the Company for all
of fiscal 1995, average restaurant sales and average restaurant operating
cash flow were approximately $1.1 million and $173,000, respectively.
The Company's operating strategy is to maximize restaurant level and
overall profitability. The Company implements this strategy from a revenue
perspective principally by engaging in activities and undertaking investments
designed to expand the Company's customer base and to increase sales volume.
The Company regularly reviews its restaurant properties for revenue-enhancing
opportunities (such as improvements in drive-thru efficiencies and the
addition or expansion of children's playground facilities) and when
appropriate implements such opportunities.
3
<PAGE>
In addition, the Company tightly controls its operating costs at both the
restaurant and corporate levels and captures economies of scale throughout
its operations. The Company believes that the large number of restaurants it
operates, combined with its sophisticated management information systems,
provide the Company with significant advantages over many other quick-service
restaurant operators, particularly with respect to market consistency and
cost control. In addition, the Company believes that its size and management
information systems will continue to enhance profitability in the future,
providing the Company with significant cost saving opportunities as it
continues to acquire and develop restaurants.
The Company's senior management has extensive experience in the Burger
King system as either former executives of BKC or as independent Burger King
franchisees. The top four members of the Company's senior management each
have over 10 years of experience, and in some cases more than 20 years of
experience, within the Burger King system in connection with the operation,
acquisition and development of 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.
BURGER KING CORPORATION
The Company believes that it 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.
BKC, an operating subsidiary of GrandMet, was founded in 1954 and is
currently 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. According to Technomic Information Services
("Technomic"), an independent research organization, domestic revenues for
the quick-service hamburger restaurant industry totaled approximately $37.6
billion in 1995, and the Burger King system accounted for approximately 18%
of these sales, as compared to 42% for McDonald's, 11% for Wendy's and 8% for
Hardees.
THE MICHIGAN ACQUISITION
On May 11, 1996, the Company executed purchase agreements to acquire 40
Burger King restaurants in the Grand Rapids, Michigan area (the "Michigan
Acquisition") from a franchisee for an aggregate cash purchase price of $36.5
million. The Company plans to use a portion of the net proceeds from the
Offerings to fund the Michigan Acquisition. The Michigan Acquisition is
conditioned on, among other things, the consummation of the Offerings, BKC's
consent (described below) and standard closing conditions. As part of the
Michigan Acquisition, it is expected that the seller will enter into a
non-competition agreement and an agreement to assist the Company in
developing additional Burger King restaurant sites in the Michigan market. It
is anticipated that the key operating personnel of the restaurants acquired
in the Michigan Acquisition will be retained. Pursuant to the terms of BKC's
standard franchise agreements, acquisitions of Burger King restaurants,
including those to be acquired in the Michigan Acquisition, are subject to
BKC's consent and right of first refusal. See "Risk Factors--BKC Franchise
Agreement Restrictions." On June 21, 1996, BKC agreed not to exercise its
right of first refusal with respect to the Michigan Acquisition. Management
anticipates receiving BKC's consent for the Michigan Acquisition prior to the
consummation of the Offerings.
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.
4
<PAGE>
THE OFFERINGS
<TABLE>
<CAPTION>
<S> <C>
COMMON STOCK OFFERED:
U.S. Offering ................... 5,136,000 shares
International Offering .......... 1,284,000 shares
Total ......................... 6,420,000 shares
Common Stock to be outstanding
after the Offerings .............. 13,600,000 shares(1)(2)
Use of proceeds ................... To fund the Michigan Acquisition and reduce outstanding
indebtedness. See "Use of Proceeds."
Nasdaq National Market Symbol .... AKNG
</TABLE>
- ------------
(1) Excludes an aggregate of 680,000 shares of Common Stock reserved for
issuance under the Company's 1996 Long-Term Incentive Plan and 1996
Outside Directors Plan (collectively, the "Employee Benefit Plans").
See "Management--Employee Benefit Plans."
(2) Includes: (i) 709,987 shares of Non-Voting Common Stock (as hereinafter
defined) issuable upon exercise of immediately exercisable warrants
beneficially owned by BancBoston Investments Inc. ("BancBoston"), (ii)
80,000 shares of Common Stock to be distributed in the Preferred Stock
Merger (as hereinafter defined), and (iii) 71,024 shares of Common
Stock to be issued to certain executives of the Company simultaneously
with the consummation of the Offerings in connection with such
executives' exercises of previously granted stock options (the "Stock
Option Exercises"). See "Management--Employee Benefit Plans,"
"Principal Stockholders," "Description of Capital Stock-- Non-Voting
Common Stock" and "Certain Transactions."
5
<PAGE>
SUMMARY 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 following
information should be read in conjunction with the "Selected Consolidated
Financial Information," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Pro Forma Consolidated Financial
Statements," 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>
THE INITIAL
ACQUISITIONS(1)(2)
--------------------------
JAN. 1, 1994
FISCAL THROUGH SEPT.
1993 1, 1994
--------- ---------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
INCOME STATEMENT DATA:
Restaurant sales .................... $82,895 $56,720
Restaurant operating expenses ....... 76,297 53,351
--------- ---------------
Restaurant contribution ............. $ 6,598 $ 3,369
========= ===============
General and administrative expenses .
Operating income ....................
Interest expense ....................
Other income (expense) ..............
Provision for income taxes ..........
Net income ..........................
Net income per share(6) .............
Weighted average number of shares
outstanding (in thousands)(6) ......
SELECTED OPERATING DATA:
Restaurants open at end of period ... 82 82
Average sales per restaurant(7) ..... $ 1,011
Average restaurant operating cash
flow(7)(8) ......................... $ 106
Average restaurant operating cash
flow margin(7) ..................... 10.5%
SUPPLEMENTAL DATA: (9)(10)
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>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
THE COMPANY
-----------------------------------------------------------------------------
FIRST QUARTER ENDED
FISCAL 1995 APRIL 1, 1996
SEPT. 2, 1994 ------------------------ ----------- -----------------------
THROUGH PRO FORMA, PRO FORMA,
DEC. 31, AS MAR. 31, AS
1994(3) ACTUAL ADJUSTED(4) 1995 ACTUAL ADJUSTED(4)
--------------- ---------- ------------ ----------- --------- ------------
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C> <C>
Restaurant sales .................... $ 33,931 $139,572 $237,389 $30,967 $43,103 $56,851
Restaurant operating expenses ....... 29,876 123,181 210,308 28,338 38,862 51,527
--------------- ---------- ------------ ----------- --------- ------------
Restaurant contribution ............. 4,055 16,391 27,081 2,629 4,241 5,324
General and administrative expenses . 1,374 5,904 7,779 1,203 1,932 2,218
--------------- ---------- ------------ ----------- --------- ------------
Operating income .................... 2,681 10,487 19,302 1,426 2,309 3,106
Interest expense .................... (1,925) (8,323) (7,135) (2,036) (2,742) (1,548)
Other income (expense) .............. (324) (437) (201) (87) (227) (101)
Provision for income taxes .......... 191 825 5,023 (333) (271) 597
--------------- ---------- ------------ ----------- --------- ------------
Net income .......................... $ 241 $ 902 $ 6,943(5) $ (364) $ (389) $ 860(5)
=============== ========== ============ =========== ========= ============
Net income per share(6) ............. $ 0.51 $ 0.06
Weighted average number of shares
outstanding (in thousands)(6) ...... 13,600 13,600
SELECTED OPERATING DATA:
Restaurants open at end of period ... 121 140 213 121 178 216
Average sales per restaurant(7) ..... $ 1,125 $ 1,147 $ 256 $ 263 $ 265
Average restaurant operating cash
flow(7)(8) ......................... $ 173 $ 175 $ 31 $ 36 $ 36
Average restaurant operating cash
flow margin(7) ..................... 15.4% 15.3% 12.1% 13.7% 13.6%
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
AS OF APRIL 1, 1996
-------------------------
PRO FORMA,
AS
ACTUAL ADJUSTED(11)
----------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency) $(17,400) $(15,151)
Total assets ................ 150,758 187,823
Long term debt and
capitalized leases ......... 115,961 80,178
Total stockholders' equity . 8,354 83,600
</TABLE>
- ------------
(1) Reflects the combined historical financial results of the 68 BKC
Restaurants and the 14 Management Restaurants acquired by the Company
on September 2, 1994 for the indicated period during which 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 during the period prior to their acquisition
by the Company on a meaningful and consistent basis, net income is not
comparable and is not presented for the Initial Acquisitions.
(3) Reflects the historical results of the Company, including the Initial
Acquisitions subsequent to their acquisition by the Company on
September 2, 1994. Also includes limited expenses of the Company during
the period August 17, 1994 (date of incorporation) to September 2,
1994, during which period the Company had no operations.
(4) Pro forma, as adjusted, to reflect (i) the 1995 Acquisitions (in the
case of fiscal 1995), (ii) the 1996 Acquisitions, (iii) the Michigan
Acquisition, (iv) the refinancing of the BKC Note (as defined herein),
(v) the establishment of the New Credit Facility (as defined herein),
(vi) the Preferred Stock Merger and (vii) the Offerings, including the
application of the estimated net proceeds therefrom at an assumed
initial public offering price of $15 per share (the mid-point of the
price range set forth on the cover of this Prospectus) as if all such
events occurred on January 1, 1995. See "Use of Proceeds" and "Pro
Forma Consolidated Financial Statements."
(5) 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
$10,115 (approximately $5,968 on an after-tax basis, or $0.44 per
share), consisting of (i) an approximate $2,240 (approximately $1,321
on an after-tax basis) write-off of deferred financing costs related to
the repayment of the Subordinated Debt, (ii) an approximate $3,825
(approximately $2,257 on an after-tax basis) write-off of deferred
financing costs related to the repayment of the existing Credit
Agreement and (iii) an approximate $4,050 (approximately $2,390 on an
after-tax basis) prepayment premium incurred in connection with the
repayment of the Subordinated Debt.
(6) Net income per share was computed using the weighted average number of
shares of Common Stock outstanding assuming the exercise of all
currently exercisable options and warrants and the consummation of the
Offerings and the Preferred Stock Merger.
(7) Reflects the results of only those restaurants operating for the entire
period.
(8) Restaurant operating cash flow includes restaurant sales less
restaurant operating expenses other than depreciation and amortization.
Although restaurant operating cash flow is useful in making restaurant
industry comparisons and is generally indicative of the Company's
ability to satisfy its obligations under the Credit Agreement and New
Credit Facility, it should not be considered by a prospective investor
as an alternative to net income as a better measure of the Company's
operating performance or as an alternative to cash flows as a better
measure of liquidity.
(9) Sets forth for the Initial Acquisitions the components constituting
aggregate restaurant sales, restaurant operating expenses and
restaurant contribution for the indicated periods. See the Historical
Schedules of Restaurant Contribution and the notes thereto with respect
to the Initial Acquisitions.
(10) Jaro restaurants consist of the 11 Management Restaurants acquired from
entities owned or controlled by Lawrence Jaro, the Company's current
Chief Executive Officer and Chairman of the Company's Board of
Directors. Osborn restaurants consist of the three Management
Restaurants acquired from entities owned or controlled by William
Osborn, the current Vice Chairman of the Company's Board of Directors.
(11) Pro forma, as adjusted, to give effect to (i) the Michigan Acquisition,
(ii) the refinancing of the BKC Note (as defined herein), (iii) the
establishment of the New Credit Facility (as defined herein), (iv) the
Preferred Stock Merger and (v) the Offerings and the application of the
estimated net proceeds therefrom, as if all such transactions had
occurred at the end of the period. See "Use of Proceeds,"
"Capitalization" and "Pro Forma Consolidated Financial Statements."
7
<PAGE>
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should consider
carefully the following risk factors, in addition to the other information
set forth in this Prospectus, before purchasing any shares of Common Stock.
BKC FRANCHISE AGREEMENT RESTRICTIONS
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 plan.
Consent to Restaurant Acquisition and Development and Franchise Renewal;
Right of First Refusal. 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
April 1, 1996, 26 of the Company's current 180 franchise agreements with BKC,
which generated $26.9 million in total restaurant sales in fiscal 1995, 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 on or prior to July 19,
1996. In the event the transaction is not consummated by that date, BKC has
the right to designate an alternative purchaser until such transaction is
completed. 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 which 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.
Consent to Certain Changes in Capital Structure and Corporate
Governance. Current BKC policies and procedures require the Company and each
of its subsidiaries which is a franchisee to seek BKC's consent prior to
making certain changes to their capital structure and modifications to their
corporate governance documents, including changing the (i) description of the
Company or the relevant subsidiary franchisee's purpose or authorized
activities; (ii) designation of, or the procedures for designating, the
managing owner (the individual primarily in charge of implementing BKC's
policies and procedures) or (iii) authority granted to the managing owner.
Restrictions on Management Structure. 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, was 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 have a currently exercisable 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
8
<PAGE>
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 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 (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 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.
Consent to Issuance of Securities; Change of Control. Pursuant to BKC's
franchise agreements, BKC's consent may be required for certain transfers or
issuances by the Company of its equity securities. 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
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.
BKC Indemnity Agreement. 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 and (ii) 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
"Business--Franchise Agreements," "Description of Capital
Stock--Anti-Takeover Effects of Delaware Law and the BKC Franchise
Agreements" and "Certain Transactions."
DEPENDENCE UPON BURGER KING CORPORATION
The Company's financial performance is directly related to the success of
the Burger King restaurant system, including the management and financial
condition of BKC as well as restaurants operated by other Burger King
franchisees. The inability of Burger King restaurants to compete effectively
with other quick-service restaurants would have a material adverse effect on
the Company's operations. The success of Burger King restaurants depends in
part on the effectiveness of BKC's marketing efforts, new product development
programs, quality assurance and other operational systems over which the
Company has no control. For example, adverse publicity involving BKC or one
or more Burger King franchisees could have an adverse effect on all Burger
King franchisees, including the Company. See "Business--Burger King
Corporation" and "--Competition."
RISKS OF EXPANSION AND DEVELOPMENT
The Company intends to expand rapidly in the future through the
acquisition and development of additional Burger King restaurants. This
expansion could significantly increase the number of restaurants operated by
the Company. The Company currently intends to acquire an additional 40
restaurants in the Michigan Acquisition and to develop 16 new restaurants in
fiscal 1996 (including four developed to date, with the remaining 12 in the
initial stages of development) and 34 new Burger King restaurants in fiscal
1997. 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
9
<PAGE>
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
acquisitions and development of Burger King restaurants. Consequently, the
Company may require additional debt or equity financing for future
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 and the New Credit Facility (described below)
contain 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 acquisition
or development opportunity, the Company limit the amount of its proposed or
future debt financing. The failure to continue its expansion by acquisition
or development of restaurant sites could have a material adverse effect on
the Company's performance.
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
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.
LEVERAGE AND RELATED FINANCIAL AND OPERATING RESTRICTIONS
In connection with its acquisition of Burger King restaurants, the Company
has incurred substantial indebtedness resulting in a highly leveraged capital
structure. The Company and National Restaurant Enterprises, Inc.
("Enterprises"), the Company's principal operating subsidiary and parent
corporation to the Company's other subsidiaries, are parties to a Second
Amended and Restated Revolving Credit and Term Loan Agreement (the "Credit
Agreement"). At April 1, 1996, the Company had $127.9 million of long-term
debt outstanding, of which $89.0 million was outstanding under the Credit
Agreement. Concurrent with the consummation of the Offerings, the Company
will replace the Credit Agreement with a new credit agreement (the "New
Credit Facility"), which will, among other things, increase the Company's
borrowing capacity by $50 million. A portion of the net proceeds of the
Offerings, together with borrowings under the New Credit Facility, will be
used to repay in full amounts outstanding under the Credit Agreement and
other outstanding Company indebtedness. See "Use of Proceeds." On a pro forma
basis giving effect to (i) the Michigan Acquisition, (ii) the borrowing of
$82.6 million under the New Credit Facility, (iii) the Preferred Stock Merger
and (iv) the Offerings and the application of the net proceeds thereof at an
assumed initial public offering price of $15 per share (the mid-point of the
price range set forth on the cover of this Prospectus), the Company would
have had $90.8 million of debt and capital lease obligations outstanding at
April 1, 1996. See "Capitalization." The Company anticipates that it may
require additional debt financing for future acquisition and development
activities resulting in a more leveraged capital structure.
To date, a substantial portion of the Company's cash flow has been devoted
to debt service. The ability of the Company to make payments of principal and
interest on outstanding indebtedness will be largely dependent upon its
future performance. Failure to generate sufficient cash flow from operations
will limit the Company's ability to expand through additional restaurant
acquisitions and development and could limit the Company's ability to obtain
additional financing. In addition, under the terms of the Credit Agreement
and the terms of the New Credit Facility, the Company is required and will be
required
10
<PAGE>
to meet certain financial covenants on a regular basis, including minimum
cash flow, debt service and interest coverage ratios, and is restricted in
its ability to incur additional indebtedness, create additional liens, invest
further in certain of its subsidiaries, engage in business activities other
than the ownership and operation of Burger King restaurants or dispose of
certain of its assets without obtaining the prior approval of the lenders
(the "Lenders"). If the Company is unable to generate sufficient cash flow or
otherwise obtain funds necessary to make required payments under the Credit
Agreement or the New Credit Facility, or if the Company fails to comply with
the various other covenants or restrictions contained in the Credit Agreement
or the New Credit Facility, the Lenders would be able to accelerate the
maturity of all amounts borrowed under the Credit Agreement or the New Credit
Facility to be due and payable, together with accrued and unpaid interest, if
any. If the Company is unable to repay its indebtedness to the Lenders, the
Lenders could foreclose on substantially all of the tangible operating assets
of the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and
"Description of Certain Indebtedness--Credit Agreement."
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 220 restaurants
(including the 40 restaurants to be acquired in the Michigan Acquisition),
113 or 51.4% 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. See "Business--Restaurant Locations."
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 also competes against
quick-service chains offering alternative menus such as Taco Bell, Pizza Hut
and Kentucky Fried Chicken as well as convenience stores and grocery stores
that offer menu items comparable to that of Burger King restaurants. To the
extent that a competitor of the Company offers items which are better priced,
more appealing to consumer tastes or if such competitor increases the number
of restaurants it operates in one of the Company's targeted markets, this
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 acquiring and developing Burger King
restaurants include BKC, which (i) has exercised its right of first refusal
with respect to previously proposed restaurant sales, (ii) controls the areas
in which new Burger King restaurant sites can be developed and (iii) 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. BKC has substantially greater financial resources
than the Company to fund acquisitions and restaurant development. There can
be no assurance that BKC will not (i) exercise its right of first refusal
with respect to future restaurant acquisitions by the Company, (ii) limit the
areas in which the Company may develop restaurants 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 may have greater financial
11
<PAGE>
resources than the Company to finance acquisition and development
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
franchise agreements and leases with BKC as 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--Employees," "--Franchise Agreements" and "Management-- Employment
Agreements."
CONTROL BY PRINCIPAL STOCKHOLDERS
The Company's executive officers and directors (and their respective
affiliates, including The Jordan Company) will beneficially own an aggregate
of 36.0% of the Company's outstanding shares of Common Stock after the
Offerings (33.6% if the U.S. Underwriters' over-allotment option is exercised
in full). 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 (i) any amendment to the amended and
restated certificate of incorporation of the Company (the "Certificate of
Incorporation"), (ii) any merger, consolidation, sale of all or substantially
all of the assets of the Company, and (iii) any "going private" transaction,
and prevent or cause a change of control of the Company, all of which may
adversely affect the Company and its stockholders. See "Principal
Stockholders."
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 currently under
consideration in the U.S. Congress) 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.
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Certificate of Incorporation, the Company's
amended and restated bylaws (the "Bylaws"), BKC's franchise agreements and
BKC policies and procedures may delay, discourage or
12
<PAGE>
prevent a change in control of the Company. Such provisions may also
discourage bids for the Common Stock at a premium over the market price of
the Common Stock and may adversely affect the market price and the voting and
other rights of the holders of Common Stock. In addition, the Board of
Directors has the authority without action by the Company's stockholders to
fix the rights, privileges and preferences of and to issue shares of the
Company's preferred stock, $.01 par value per share (the "Preferred Stock"),
which may have the effect of delaying, deterring or preventing a change in
control of the Company. The Company's Bylaws also impose various procedural
and other requirements that could make it more difficult for stockholders to
effect certain corporate actions. See "Business--Franchise Agreements,"
"Description of Capital Stock--Certificate of Incorporation and Bylaws" and
"--Anti- Takeover Effects of the BKC Franchise Agreements."
LACK OF PRIOR PUBLIC MARKET FOR COMMON STOCK
Prior to the Offerings, there has been no public market for the Common
Stock. The Common Stock has been approved for trading on the Nasdaq National
Market under the symbol "AKNG," subject to official notice of issuance. There
can be no assurance, however, that an active public market will develop for
the Common Stock. The initial public offering price will be determined
through negotiations between the Company and the Representatives (as
hereinafter defined) of the U.S. Underwriters and the Managers, and may not
be indicative of the market price of the Common Stock after the completion of
the Offerings.
The market price of the Common Stock after the completion of the Offerings
could be subject to significant fluctuations in response to variations in the
Company's quarterly operating results and other factors. In addition, the
stock market in recent years has experienced broad price and volume
fluctuations which often have been unrelated to the operating performance of
companies. These broad fluctuations may also adversely affect the market
price of the Common Stock. See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
After the completion of the Offerings, 13,600,000 shares of Common Stock
will be outstanding (assuming the consummation of the Preferred Stock Merger,
the exercise of all currently outstanding options and warrants and the
conversion of the Non-Voting Common Stock into Common Stock). Of such shares,
only the 6,420,000 shares sold pursuant to the Offerings will be tradeable
without restriction by persons other than "affiliates" of the Company. The
remaining 7,180,000 shares of Common Stock outstanding after the Offerings
will be "restricted securities" within the meaning of Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be
publicly resold, except in compliance with the registration requirements of
the Securities Act or pursuant to an exemption from registration, including
that provided by Rule 144 promulgated under the Securities Act. No prediction
can be made as to the effect, if any, that future sales of shares, or the
availability of shares for future sale, will have on the market price of the
Common Stock prevailing from time to time. Sales of substantial amounts of
Common Stock, or the perception that such sales could occur, could adversely
affect the prevailing market price of the Common Stock.
The Company, the directors and executive officers of the Company, and each
holder of capital stock of the Company immediately prior to the Offerings
(including holders of options and warrants exercisable into shares of Common
Stock) have agreed that, for a period of 180 days after the date of this
Prospectus, they will not, without the prior written consent of Smith Barney
Inc., offer, sell, contract to sell or otherwise dispose of any Common Stock
or securities convertible, exercisable or exchangeable for Common Stock or
grant any options or warrants to purchase Common Stock, subject to certain
exceptions. Upon expiration of the 180-day period, 7,180,000 shares of Common
Stock (assuming the consummation of the Preferred Stock Merger, the exercise
of all currently outstanding options and warrants and the conversion of the
Non-Voting Common Stock into Common Stock) will be eligible for immediate
resale without restriction under the Securities Act, subject to certain
volume, timing and other requirements of Rule 144 promulgated under the
Securities Act. The Company intends to file Registration Statements on Form
S-8 immediately following the Offerings to register under the Securities Act
an aggregate of 680,000 shares of Common Stock covered by the Employee
Benefit Plans. See
13
<PAGE>
"Management--Employee Benefit Plans." In addition, after the consummation of
the Offerings, stockholders beneficially owning 7,180,000 shares of Common
Stock and Non-Voting Common Stock will be entitled to incidental registration
rights and certain stockholders of the Company will be entitled to demand
registration rights with respect to 2,913,437 shares of Common Stock and
Non-Voting Common Stock. After the expiration of the 180-day period, such
holders may choose to exercise such rights, which could result in a large
number of shares being sold in the public market and could have an adverse
effect on the market price for the Common Stock. See "Description of Capital
Stock--Registration Rights" and "Shares Eligible for Future Sale."
SUBSTANTIAL DILUTION
Based on an initial public offering price of $15.00 (the midpoint of the
price range set forth on the cover of this Prospectus), purchasers of the
Common Stock offered hereby will experience substantial dilution in the net
tangible book value per share of Common Stock of $18.77. As of the date of
this Prospectus, the Company had granted warrants and options to purchase an
aggregate of 781,011 shares of Common Stock, all of which will be exercisable
upon the consummation of the Offerings. All such warrants and options will be
immediately exercisable upon consummation of the Offerings and their exercise
has been assumed in the calculation of dilution set forth above. See
"Dilution."
ABSENCE OF DIVIDENDS
The Company has never declared or paid any dividends on the Common Stock
and does not anticipate paying any cash dividends on the Common Stock in the
foreseeable future. In addition, the Company's existing and future loan and
financing documents will likely restrict the Company's ability to pay
dividends. See "Dividend Policy" and "Description of Certain Indebtedness."
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offerings at an assumed initial
public offering price of $15 per share (the mid-point of the price range set
forth on the cover of this Prospectus) are estimated to be approximately
$87.8 million (approximately $101.3 million if the U.S. Underwriters'
over-allotment option is exercised in full) after deducting estimated
underwriting discounts and expenses of the Offerings payable by the Company
of $8.5 million. The net proceeds from the Offerings, combined with
borrowings under the New Credit Facility, will be used (i) to finance the
Michigan Acquisition, (ii) to repay borrowings under the Credit Agreement,
(iii) to repay the Senior Subordinated Notes (including a prepayment
penalty), the Subordinated Notes, the BBI Note and the Seller Notes (each as
hereinafter defined and collectively referred to herein as the "Subordinated
Debt") and (iv) to redeem all of the shares of the various classes of the
Company's preferred stock issued and outstanding prior to the
Recapitalization (collectively, the "Original Preferred Stock") other than
the shares of Original Preferred Stock that will be cancelled pursuant to the
Preferred Stock Merger. Affiliates of the Company will receive a portion of
the proceeds from the Offerings. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources," "Business," "Certain Transactions," "Description of Certain
Indebtedness," "Description of Capital Stock--The Recapitalization" and
"Summary--The Michigan Acquisition."
The following table sets forth an estimated breakdown of the sources and
uses of funds, assuming a closing had taken place on April 1, 1996.
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
SOURCES OF FUNDS:
Offerings (net proceeds) ........................ $ 87,800
Borrowings under New Credit Facility ............ 82,608
--------------
Total Sources ................................. $170,408
==============
USES OF FUNDS:
Finance Michigan Acquisition .................... $ 37,624(1)
Repay Credit Agreement Borrowings ............... 89,000(2)
Prepay Subordinated Debt (including a prepayment
penalty of $4,050) ............................. 35,050(3)
Redeem Original Preferred Stock ................. 6,984
Financing costs related to the New Credit
Facility ....................................... 1,750
Total Uses .................................... $170,408
==============
</TABLE>
(1) Reflects a $36,450 purchase price plus (i) a $640 estimated working
capital adjustment and (ii) $534 in estimated transaction expenses. See
"Business--Business Strategy--Growth by Acquisition" and the Pro Forma
Consolidated Financial Statements and the notes thereto included in
this Prospectus.
(2) Credit Agreement borrowings consist of (i) two term loans, $45,000
principal amount of term loans ("Term Loan A") which mature on January
31, 2002, and $40,000 principal amount of term loans ("Term Loan B")
which mature on January 31, 2004, and (ii) $4,000 principal amount of
revolving credit loans which mature on January 31, 2002. As of April 1,
1996, the weighted average interest rate with respect to all Credit
Agreement borrowings was 8.36%. See "Description of Certain
Indebtedness."
(3) Subordinated Debt consists of: (i) $15,000 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) $11,000 principal amount
of Subordinated Notes bearing interest at a rate of 12.75% per annum
with a scheduled maturity of August 31, 2005; (iii) a $4,050 prepayment
premium to be paid in connection with the repayment of the Senior
Subordinated Notes; (iv) a $600 principal amount BBI Note bearing
interest at a rate of 6% per annum with a scheduled maturity of March
31, 2005; and (v) $4,400 principal amount of Seller Notes bearing
interest at a rate of 12.75% per annum with a scheduled maturity of
August 31, 2005. See "Description of Certain Indebtedness."
15
<PAGE>
DIVIDEND POLICY
The Company has never declared or paid any dividends on its capital stock.
Enterprises has paid dividends to the Company from time to time in order to
permit the Company to pay interest on the Subordinated Notes, which the
Company intends to repay in full with the net proceeds of the Offerings. The
Company does not anticipate paying any dividends on the Common Stock in the
foreseeable future and intends to retain all available funds for use in the
operation and development of its business. The Board of Directors intends to
review the Company's dividend policy from time to time. Any payment of
dividends in the future will be at the discretion of the Board of Directors
and will be dependent on the earnings and financial requirements of the
Company and other factors, including the restrictions imposed by the General
Corporation Law of the State of Delaware ("Delaware Corporation Law") on the
payment of dividends, covenants restricting the payment of dividends in
existing and future loan and financing documents, and such other factors as
the Board of Directors deems relevant.
DILUTION
As of April 1, 1996, the net tangible book value of the Company was
$(99.0) million or $(13.94) per share. Net tangible book value per share is
defined as the total book value of tangible assets of the Company, less total
liabilities, divided by the number of shares of Common Stock outstanding.
After giving effect to: (i) the sale of 6,420,000 shares of Common Stock
offered hereby at an assumed initial public offering price of $15 per share
(the midpoint of the price range set forth on the cover of this Prospectus
and after deducting estimated underwriting discounts and expenses of the
Offerings), (ii) the issuance of 80,000 shares of Common Stock to certain
entities controlled by Mr. Jaro pursuant to the Preferred Stock Merger; and
(iii) the Michigan Acquisition, the refinancing of the BKC Note, and the
establishment of the New Credit Facility, the pro forma net tangible book
value of the Company as of April 1, 1996 would have been $(51.3) million or
$(3.77) per share, representing an immediate increase in net tangible book
value of $10.17 per share to the existing stockholders and an immediate
dilution to new stockholders of $18.77 per share. The following table
illustrates the dilution per share to new stockholders:
<TABLE>
<CAPTION>
PER SHARE
-----------
<S> <C> <C>
Initial public offering price .............................. $15.00
Deficit in net tangible book value ........................ $(13.94)
Net increase in net tangible book value attributable to
the Offerings ............................................ 10.17
----------
Pro forma net tangible book value after the Offerings ..... (3.77)
-----------
Dilution to new investors .................................. $18.77
===========
</TABLE>
The following table summarizes, on a pro forma basis as of April 1, 1996,
the difference between (i) the number of shares of Common Stock which the
existing stockholders acquired since the Company's inception or which they
have a right to acquire within 60 days after the date of this Prospectus;
(ii) the number of shares of Common Stock purchased from the Company by new
investors in the Offerings; (iii) the total cash consideration paid by
existing stockholders and the new investors; and (iv) the average purchase
price per share paid by existing stockholders and the new investors (before
deducting the underwriting discounts and commissions and expenses of the
Offerings):
<TABLE>
<CAPTION>
AVERAGE
PRICE PER
SHARES PURCHASED TOTAL CONSIDERATION SHARE
----------------------- ------------------------ -----------
NUMBER PERCENT AMOUNT PERCENT
------------ --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders
(1)(2) .................... 7,180,000 52.8% $ 1,301,125 1.3% $ 0.18
New stockholders ........... 6,420,000 47.2 96,300,000 98.7 15.00
------------ --------- ------------- --------- -----------
Total .................. 13,600,000 100.0% $97,601,125 100.0% $ 7.18
============ ========= ============= ========= ===========
</TABLE>
- ------------
(1) Does not include 680,000 shares of Common Stock reserved for issuance
under the Company's Employee Benefit Plans.
(2) Includes: (i) 709,987 shares of Non-Voting Common Stock (as hereinafter
defined) issuable upon exercise of immediately exercisable warrants
beneficially owned by BancBoston, (ii) 80,000 shares of Common Stock to
be distributed in the Preferred Stock Merger, and (iii) 71,024 shares
of Common Stock to be issued in the Stock Option Exercises. See
"Management--Employee Benefit Plans," "Principal Stockholders,"
"Description of Capital Stock--Non-Voting Common Stock" and "Certain
Transactions."
16
<PAGE>
CAPITALIZATION
The following table sets forth as of April 1, 1996, (i) the consolidated
capitalization of the Company and (ii) the pro forma consolidated
capitalization after giving effect to the Michigan Acquisition, the
refinancing of the BKC Note, the establishment of the New Credit Facility,
the Preferred Stock Merger and the Offerings and the application of the
estimated net proceeds therefrom at an assumed initial offering price of
$15 per share (the mid-point of the price range set forth on the cover
page of this Prospectus) as described in "Use of Proceeds." This
table should be read in conjunction with the Consolidated Financial
Statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
APRIL 1, 1996
---------------------------
PRO FORMA, AS
ACTUAL(1) ADJUSTED(2)
---------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt and capital leases $ 12,231 $ 10,622
========== ===============
Long-term debt--less current portion:
Borrowings under the Credit Agreement .............. $ 83,100
Borrowings under New Credit Facility ............... $ 72,608
Subordinated Debt .................................. 31,000
Other long-term debt ............................... 1,712 7,421
---------- ---------------
Total long-term debt--less current portion ...... 115,812 80,029
Other long-term liabilities .......................... 149 149
Total long-term debt ................................. 115,961 80,178
---------- ---------------
Stockholders' equity:
Preferred Stock(3) .................................
Common Stock(4) .................................... 65
Non-Voting Common Stock ............................
Additional paid-in capital ......................... 7,600 89,035
Retained earnings (deficit) ........................ 754 (5,500)
---------- ---------------
Total stockholders' equity ....................... 8,354 83,600
---------- ---------------
Total capitalization ........................... $124,315 $163,778
========== ===============
</TABLE>
- ------------
(1) Historical capitalization of the Company as of April 1, 1996.
(2) Gives effect to the Michigan Acquisition, the refinancing of the BKC
Note, the establishment of the New Credit Facility, the Preferred Stock
Merger and the Offerings and the application of the estimated net
proceeds therefrom at an assumed initial offering price of $15 per
share (the mid-point of the price range set forth on the cover page of
this Prospectus), as if each had occurred as of April 1, 1996. For
information relating to the pro forma assumptions and adjustments, see
"Pro Forma Consolidated Financial Statements" and the notes thereto
included in this Prospectus.
(3) Due to rounding, the "Actual" column does not reflect the Company's
outstanding Original Preferred Stock with a total par value of seventy
five dollars, which will be redeemed in full with a portion of the net
proceeds of the Offerings and through the consummation of the Preferred
Stock Merger. See "Use of Proceeds" and "Description of Capital
Stock--The Recapitalization" and "Certain Transactions."
(4) Due to rounding, the "Actual" column does not reflect the Company's
outstanding common stock with a total par value of ten dollars.
17
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Each of the pro forma consolidated income statements of the Company for
fiscal 1995 and for the first quarter ended April 1, 1996 gives effect to
each of the following transactions as if each had occurred on January 1,
1995: (i) the Company's acquisition of a total of 18 restaurants from BKC and
two existing Burger King franchisees in three transactions, one in September
1995, one in October 1995 and one in November 1995, including five
restaurants in Colorado, nine in Tennessee, two in Illinois and two in
Georgia (collectively, the "1995 Acquisitions"); (ii) the Company's
acquisition of a total of 36 restaurants from two existing Burger King
franchisees in two transactions in February 1996, including 21 restaurants in
Virginia, three in North Carolina, seven in Kentucky, three in Ohio and two
in Indiana (collectively, the "1996 Acquisitions"); (iii) the refinancing of
the BKC Note; (iv) the establishment of the New Credit Facility; (v) the
Michigan Acquisition; (vi) the Preferred Stock Merger; and (vii) 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 as of April 1, 1996 gives effect to each of the
following transactions as if each had occurred on April 1, 1996: (i) the
refinancing of the BKC Note; (ii) the establishment of the New Credit
Facility; (iii) the Michigan Acquisition; (iv) the Preferred Stock Merger and
(v) the consummation of the Offerings and the application of the estimated
net proceeds therefrom at an assumed initial public offering price of $15 per
share (the mid-point of the price range set forth on the cover of this
Prospectus) as further described in "Use of Proceeds."
Subject to certain conditions, the Company has executed purchase
agreements to acquire 40 restaurants in the Grand Rapids, Michigan area in
the Michigan Acquisition for an aggregate cash purchase price (including a
working capital adjustment and estimated transaction costs) of approximately
$37.6 million. The Company anticipates that it will consummate the Michigan
Acquisition concurrently with the completion of the Offerings and that a
portion of the net proceeds of the Offerings will be used to fund the
Michigan Acquisition. See "Summary--The Michigan Acquisition." The Michigan
Acquisition is accounted for in the pro forma financial statements under the
purchase method of accounting. The total purchase price is allocated to
tangible and identifiable intangible assets and liabilities based on
management's estimate of their fair values with the excess of cost, including
transaction costs, over the fair value of the net assets acquired allocated
to goodwill. The actual assigned values for the acquired assets are estimated
and may be adjusted in the future in the event the Michigan Acquisition is
consummated.
The Company believes that the assumptions used in the pro forma financial
statements provide a reasonable basis on which to present the 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 below 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.
18
<PAGE>
PRO FORMA CONSOLIDATED INCOME STATEMENT
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 $
Restaurant operating
expenses:
Cost of sales .......... 44,798 4,846 13,116
Restaurant labor and
related costs ......... 34,526 4,037 10,254
Depreciation and
amortization .......... 4,927 321 436 1,381 (4)
Occupancy and other
operating expenses ... 38,930 3,834 12,393 (1,500)(5)
(241)(6)
-------- -------------- -------------- -------------
Total restaurant
operating expenses .. 123,181 13,038 36,199 (360)
-------- -------------- -------------- -------------
Restaurant contribution 16,391 1,361 5,522 360
General and
administrative expenses 5,904 799(7) 1,992(7) (463) (8)
(1,096) (8)
128 (9)
-------- -------------- -------------- -------------
Operating income ...... 10,487 562(11) 3,530(11) 1,791
Other income (expense):
Interest expense ....... (8,323) (4,463)(12)
Amortization of
deferred costs ........ (511) (367)(14)
Other income (expense),
net ................... 74
-------- -------------- -------------- -------------
Total other income
(expense), net ....... (8,760) (4,830)
-------- -------------- -------------- -------------
Income before income
taxes .................. 1,727 562(11) 3,530(11) (3,039)
Provision for income
taxes .................. 825 432 (16)
-------- -------------- -------------- -------------
Net income .............. $ 902 $ 562(11) $ 3,530(11) $ (3,471)
======== ============== ============== =============
Net income per share(21)
Weighted average shares
outstanding (in
thousands)(21) .........
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ADJUSTMENTS
--------- ---------------------------------------
MICHIGAN MICHIGAN
PRO FORMA ACQUISITION ACQUISITION OFFERINGS PRO FORMA, AS
SUBTOTAL (3) ADJUSTMENTS ADJUSTMENTS ADJUSTED
----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Restaurant sales ........ $195,692 $41,697 $ $ $237,389
Restaurant operating
expenses:
Cost of sales .......... 62,760 13,450 76,210
Restaurant labor and
related costs ......... 48,817 12,239 61,056
Depreciation and
amortization .......... 7,065 926 661 (4) 8,652
Occupancy and other
operating expenses ... 53,416 11,332 (358)(6) 64,390
--------- ------------- ----------- ----------- --------------
Total restaurant
operating expenses .. 172,058 37,947 303 210,308
--------- ------------- ----------- ----------- --------------
Restaurant contribution 23,634 3,750 (303) 27,081
General and
administrative expenses 7,264 1,443(7) (621) (8) (307) (10) 7,779
--------- ------------- ----------- ----------- --------------
Operating income ...... 16,370 2,307(11) 318 307 19,302
Other income (expense):
Interest expense ....... (12,786) 5,651 (13) (7,135)
Amortization of
deferred costs ........ (878) 603 (15) (275)
Other income (expense),
net ................... 74 74
--------- ------------- ----------- ----------- --------------
Total other income
(expense), net ....... (13,590) 6,254 (7,336)
--------- ------------- ----------- ----------- --------------
Income before income
taxes .................. 2,780 2,307(11) 318 6,561 11,966
Provision for income
taxes .................. 1,257 1,076 (17) 2,690 (18) 5,023
--------- ------------- ----------- ----------- --------------
Net income .............. $ 1,523 $ 2,307(11) $ (758) $3,871 $ 6,943(19)(20)
========= ============= =========== =========== ==============
Net income per share(21) $ 0.51
Weighted average shares
outstanding (in
thousands)(21) ......... 13,600
</TABLE>
19
<PAGE>
PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR QUARTER ENDED APRIL 1, 1996
<TABLE>
<CAPTION>
ADJUSTMENTS
------------------------------ -----------
1996 1996
ACQUISITIONS ACQUISITIONS PRO FORMA
ACTUAL (2) ADJUSTMENTS SUBTOTAL
--------- -------------- -------------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Restaurant sales ........ $43,103 $3,454 $ $46,557
Restaurant operating
expenses:
Cost of sales .......... 14,033 1,121 15,154
Restaurant labor and
related costs ......... 11,059 938 11,997
Depreciation and
amortization .......... 1,669 44 132 (4) 1,845
Occupancy and other
operating expenses ... 12,101 1,169 (145) (5) 13,125
--------- -------------- -------------- -----------
Total restaurant
operating expenses .. 38,862 3,272 (13) 42,121
--------- -------------- -------------- -----------
Restaurant contribution 4,241 182 13 4,436
General and
administrative expenses 1,932 235(7) (143) (8) 2,031
7 (9)
--------- -------------- -------------- -----------
Operating income ...... 2,309 (53)(11) 149 2,405
Other income (expense):
Interest expense ....... (2,742) (300) (12) (3,042)
Amortization of
deferred costs ........ (224) (31) (14) (255)
Other income (expense),
net ................... (3) (3)
--------- -------------- -------------- -----------
Total other income
(expense), net ....... (2,969) (331) (3,300)
--------- -------------- -------------- -----------
Income before income
taxes .................. (660) (53)(11) (182) (895)
Provision for income
taxes .................. (271) (96)(16) (367)
--------- -------------- -------------- -----------
Net income .............. $ (389) $ (53)(11) $ (86) $ (528)
========= ============== ============== ===========
Net income per share(21)
Weighted average shares
outstanding (in
thousands)(21) .........
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ADJUSTMENTS
---------------------------------------------
MICHIGAN
MICHIGAN ACQUISITION OFFERINGS PRO FORMA,
ACQUISITION (3) ADJUSTMENTS ADJUSTMENTS AS ADJUSTED
--------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Restaurant sales ........ $10,294 $ $ $56,851
Restaurant operating
expenses:
Cost of sales .......... 3,344 18,498
Restaurant labor and
related costs ......... 2,841 14,838
Depreciation and
amortization .......... 222 203 (4) 2,270
Occupancy and other
operating expenses ... 2,965 (169)(6) 15,921
--------------- ------------- ------------- --------------
Total restaurant
operating expenses .. 9,372 34 51,527
--------------- ------------- ------------- --------------
Restaurant contribution 922 (34) 5,324
General and
administrative expenses 281(7) (57) (8) (37) (10) 2,218
--------------- ------------- ------------- --------------
Operating income ...... 641(11) 23 37 3,106
Other income (expense):
Interest expense ....... 1,494 (13) (1,548)
Amortization of
deferred costs ........ 157 (15) (98)
Other income (expense),
net ................... (3)
--------------- ------------- ------------- --------------
Total other income
(expense), net ....... 1,651 (1,649)
--------------- ------------- ------------- --------------
Income before income
taxes .................. 641(11) 23 1,688 1,457
Provision for income
taxes .................. 272 (17) 692 (18) 597
--------------- ------------- ------------- --------------
Net income .............. $ 641(11) $(249) $ 996 $ 860(19)(20)
=============== ============= ============= ==============
Net income per share(21) $ 0.06
Weighted average shares
outstanding (in
thousands)(21) ......... 13,600
</TABLE>
20
<PAGE>
NOTES TO FISCAL PRO FORMA CONSOLIDATED INCOME STATEMENTS
The Pro Forma Consolidated Income Statements of the Company for fiscal
1995 and for the quarter ended April 1, 1996 give effect to the 1995
Acquisitions, the 1996 Acquisitions, the Michigan Acquisition, the Preferred
Stock Merger and the Offerings and the application of the estimated net
proceeds therefrom, as if each such transaction 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 such 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, 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) 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 such acquired restaurants subsequent to their
respective acquisition is included under "Actual" for the quarter
ended April 1, 1996.
(3) Reflects restaurant contribution and the unaudited estimates of
general and administrative expenses for the restaurants to be
acquired in the Michigan Acquisition. See the Historical Schedules of
Restaurant Contribution and the footnotes thereto included elsewhere
in this Prospectus. The "Michigan Acquisition" consists of the
proposed acquisition of 40 restaurants in the Grand Rapids, Michigan
area of which 37 were in operation during fiscal 1995 and 38 were in
operation during the quarter ended April 1, 1996. The other two
restaurants are expected to open in the third quarter of fiscal 1996.
(4) 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 $1,381
adjustment for the 1995 and 1996 Acquisitions consists of $141 and
$1,240 pertaining to the 1995 Acquisitions and the 1996 Acquisitions,
respectively.
(5) 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.
(6) 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 $241
adjustment for the 1995 and 1996 Acquisitions consists of a $44
increase and $285 decrease in rental expense pertaining to the 1995
Acquisitions and the 1996 Acquisitions, respectively.
(7) 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.
(8) The adjustment to general and administrative expenses reflects cost
savings resulting from the elimination of redundant operating
expenses arising from the combination of the various entities,
including the elimination of certain management positions, the
standardization of employee benefits and compensation practices and
the implementation of operating strategies currently utilized by the
Company's management. The pro forma cost savings for fiscal 1995 and
the quarter ended April 1, 1996 are summarized in the tables below:
FISCAL 1995:
<TABLE>
<CAPTION>
1995 1996 MICHIGAN
ACQUISITIONS ACQUISITIONS ACQUISITION
-------------- -------------- -------------
<S> <C> <C> <C>
Supervisory management expense $ 56 $ (405) $(319)
Overhead expense .............. (519) (691) (302)
-------------- -------------- -------------
Total ........................ $(463) $(1,096) $(621)
============== ============== =============
</TABLE>
QUARTER ENDED APRIL 1, 1996:
<TABLE>
<CAPTION>
1996 MICHIGAN
ACQUISITIONS ACQUISITION
-------------- -------------
<S> <C> <C>
Supervisory management expense $ (84) $ 119
Overhead expense .............. (59) (176)
-------------- -------------
Total ........................ $(143) $ (57)
============== =============
</TABLE>
21
<PAGE>
(9) 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 $128 adjustment
for the 1995 and 1996 Acquisitions consists of $20 and $108
pertaining to the 1995 Acquisitions and the 1996 Acquisitions,
respectively. See "Certain Transactions."
(10) Reflects a change in management fees due to the amendment of certain
provisions of the TJC Consulting Agreement. See "Certain
Transactions."
(11) Presented for informational and referencing purposes only.
(12) 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 pro forma income statement) and for
the 1996 Acquisitions (in the case of the first quarter ended April
1, 1996). For fiscal 1995, the $4,463 adjustment for the 1995 and
1996 Acquisitions consists of $567 and $3,896 pertaining to the 1995
Acquisitions and the 1996 Acquisitions, respectively.
(13) Reflects the application of a portion of the estimated net proceeds
of the Offerings to pay or prepay aggregate borrowings.
(14) Reflects the amortization of deferred financing and organizational
costs on a straight line basis over seven and five years,
respectively. For fiscal 1995, the $367 adjustment for the 1995 and
1996 Acquisitions consists of $18 and $349 pertaining to the 1995
Acquisitions and the 1996 Acquisitions, respectively.
(15) 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 New Credit Facility.
(16) Represents the incremental tax effect of the pro forma adjustments
assuming an effective corporate tax rate of 41.0%. For fiscal 1995,
the $432 increase relates to $1,053 of incremental income before
income taxes comprised of $562 for the 1995 Acquisitions, $3,530 for
the 1996 Acquisitions and $(3,039) for the adjustments to restaurant
operating expenses, corporate overhead and capital structure arising
from the 1995 and 1996 Acquisitions. For the first quarter ended
April 1, 1996, the $96 decrease relates to $235 of incremental loss
before income taxes comprised of $53 of incremental loss for the 1996
Acquisitions and $182 for the adjustments to restaurant operating
expenses, corporate overhead and capital structure arising from the
1996 Acquisitions.
(17) Represents the incremental tax effect of the Michigan pro forma
adjustments assuming an effective corporate tax rate of 41.0%. For
fiscal 1995, the $1,076 increase relates to the $2,625 of incremental
income before income taxes comprised of $2,307 for the Michigan
Acquisition and $318 for the adjustments to restaurant operating
expenses, corporate overhead and capital structure arising from the
Michigan Acquisition. For the first quarter ended April 1, 1996, the
$272 increase relates to the $664 of incremental income before income
taxes comprised of $641 for the Michigan Acquisition and $23 for the
adjustments to restaurant operating expenses, corporate overhead and
capital structure arising from the Michigan Acquisitions.
(18) Represents the incremental tax effect of the Offerings pro forma
adjustments assuming an effective corporate tax rate of 41.0%.
(19) Does not reflect anticipated future increases in salary expenses
under the Company's employment agreements with its executive
officers. See "Management--Employment Agreements."
(20) The pro forma statements of income 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 $10,115 (approximately $5,968 on an after-tax
basis, or $0.44 per share), consisting of (i) an approximate $2,240
(approximately $1,321 on an after-tax basis) write-off of deferred
financing costs related to the repayment of the Subordinated Debt,
(ii) an approximate $3,825 (approximately $2,257 on an after-tax
basis) write-off of deferred financing costs related to the repayment
of the existing Credit Agreement and (iii) an approximate $4,050
(approximately $2,390 on an after-tax basis) prepayment premium
incurred in connection with the repayment of the Subordinated Debt.
(21) Net income per share was computed using the weighted average number
of shares of Common Stock outstanding assuming the exercise of all
currently exercisable options and warrants and the consummation of
the Offerings and the Preferred Stock Merger.
22
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF APRIL 1, 1996
<TABLE>
<CAPTION>
ADJUSTMENTS
-----------------------------
MICHIGAN OFFERINGS PRO FORMA, AS
ACTUAL ACQUISITION ADJUSTMENTS ADJUSTED
---------- ------------- -------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........ $ 4,580 $ 40(1) $ 4,620
Accounts receivable .............. 771 771
Inventory ........................ 1,236 240(2) 1,476
Prepaid expenses ................. 1,667 360(3) 2,027
---------- ------------- -------------- -------------
Total current assets ........... 8,254 640 8,894
PROPERTY AND EQUIPMENT ............. 35,172 8,811(4) 43,983
GOODWILL ........................... 97,326 26,913(5) 124,239
OTHER ASSETS:
Deferred financing costs ......... 5,531 $ (3,640) (6) 1,891
Deferred organization costs ...... 205 205
Franchise agreements ............. 4,270 1,260(7) 5,530
Deferred income taxes ............ 3,081 (8) 3,081
---------- ------------- -------------- -------------
Total other assets ............. 10,006 1,260 (559) 10,707
---------- ------------- -------------- -------------
TOTAL ASSETS ....................... $150,758 $37,624 $ (559) $187,823
========== ============= ============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued
expenses ........................ $ 8,378 $ 8,378
Accrued payroll .................. 2,145 2,145
Accrued sales tax payable ........ 1,395 1,395
Accrued interest payable ......... 1,505 1,505
Current portion of long-term debt 12,126 $ (1,609) (9) 10,517
Current portion of capital leases 105 105
---------- ------------- -------------- -------------
Total current liabilities ...... 25,654 (1,609) 24,045
LONG-TERM DEBT--Less current
portion ............................ 115,812 $37,624(10) (73,407)(11) 80,029
OTHER LONG-TERM LIABILITIES ....... 149 149
DEFERRED INCOME TAXES .............. 789 (789)(8)
---------- ------------- -------------- -------------
TOTAL LIABILITIES .................. 142,404 37,624 (75,805) 104,223
---------- ------------- -------------- -------------
STOCKHOLDERS' EQUITY
Preferred Stock ..................
Common stock ..................... 65 (12) 65
Additional paid-in capital ....... 7,600 81,435 (13) 89,035
Retained earnings (deficit) ...... 754 (6,254)(14) (5,500)
---------- ------------- -------------- -------------
Total stockholders' equity ..... 8,354 75,246 83,600
---------- ------------- -------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY .............. $150,758 $37,624 $ (559) $187,823
========== ============= ============== =============
</TABLE>
23
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
The Pro Forma Consolidated Balance Sheet of the Company as of April 1,
1996 gives effect to the consummation of the Michigan Acquisition, the
refinancing of the BKC Note, the establishment of the New Credit Facility,
the Preferred Stock Merger and the consummation of the Offerings and the
application of the estimated net proceeds therefrom, as if each such
transaction had occurred on April 1, 1996.
(1) Reflects the acquisition of restaurant cash on hand in the Michigan
Acquisition.
(2) Reflects the acquisition of inventory in the Michigan Acquisition.
(3) Reflects the acquisition of prepaid expenses in the Michigan
Acquisition.
(4) Reflects the acquisition of restaurant property and equipment in the
Michigan Acquisition.
(5) Goodwill represents the excess of the total cost of the assets to be
acquired in the Michigan Acquisition plus transaction costs over
their fair value. Amounts for the Michigan Acquisition are estimated.
(6) Reflects a decrease in deferred financing costs relating the
prepayment of the Subordinated Debt and costs related to the existing
Credit Agreement which is partially offset by an increase in
financing costs pertaining to the New Credit Facility. See Note 14.
(7) Reflects the value of the BKC franchise agreements to be acquired in
the Michigan Acquisition.
(8) Reflects the net income tax benefit to be received upon the write-off
of deferred financing costs and prepayment penalties paid in
connection with the prepayment of Subordinated Debt. See Note 14.
(9) Represents the refinancing of the BKC Note in the principal amount of
$6,103 ($394 on a short term basis and $5,709 on a long term basis)
and the reclassification of $4,100 reclassification of indebtedness
under the New Credit Facility from long-term to current debt due to
the change in amortization schedules under the New Credit Facility.
(10) Represents additional borrowings to fund the Michigan Acquisition.
(11) Reflects the repayment of indebtedness.
(12) Reflects the issuance of 6.5 million shares of Common Stock, $.01 par
value per share, in the Offerings and the Preferred Stock Merger.
(13) Reflects (i) the redemption (with a portion of the net proceeds of
the Offering) and cancellation (through the consummation of the
Preferred Stock Merger) of the Original Preferred Stock and the
related $7,500 reduction to paid in capital and (ii) the issuance of
Common Stock in the Offerings and the Preferred Stock Merger and the
related $88,935 increase in paid in capital at an assumed initial
public offering price of $15 per share (the mid-point of the price
range set forth on the cover of this Prospectus).
(14) Reflects the extraordinary pre-tax charge which the Company expects
to incur immediately following the close of the Offerings. If such
pre-tax charge were taken at the end of the first quarter ended April
1, 1996, such charge would have been approximately $9,440
(approximately $5,570 on an after-tax basis, or $0.41 per share),
consisting of (i) an approximate $2,014 (approximately $1,188 on an
after-tax basis) write-off of deferred financing costs related to the
repayment of the Subordinated Debt, (ii) an approximate $3,376
(approximately $1,992 on an after-tax basis) write-off of deferred
financing costs related to the repayment of the existing credit
agreement and (iii) an approximate $4,050 (approximately $2,390 on an
after-tax basis) prepayment premium incurred in connection with the
repayment of the Subordinated Debt. In addition, reflects cumulative
paid-in-kind dividends of $684 to be paid in connection with the
redemption and cancellation of the Original Preferred Stock
(including pursuant to the Preferred Stock Merger).
24
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The financial data set forth below are derived from the consolidated
financial statements of the Company and the Historical Schedules of
Restaurant Contribution. The data presented for the Initial Acquisitions as
of and for the year ended December 31, 1993 and for the period from January
1, 1994 through September 1, 1994 are derived from the audited Historical
Schedules of Restaurant Contribution for the 68 BKC Restaurants and the 14
Management Restaurants formerly owned and operated by BKC and entities
controlled by certain members of the Company's current management. 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 fiscal year ended January 1, 1996
are derived from the Company's audited financial statements appearing
elsewhere herein. The audited Historical Schedules of Restaurant Contribution
and financial statements of the Company were each audited by Deloitte &
Touche LLP. The data presented for the Company for the quarters ended March
31, 1995 and April 1, 1996 and as of April 1, 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) which 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 quarter ended April 1, 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 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)
--------------------------
JAN. 1, 1994
FISCAL THROUGH
1993 SEPT. 1, 1994
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA:
<S> <C> <C>
Restaurant sales ................. $82,895 $56,720
Restaurant operating expenses:
Cost of sales .................... 25,832 18,602
Restaurant labor and related
costs ............................ 21,998 15,529
Depreciation and amortization ... 2,062 1,366
Occupancy and other operating
expenses ......................... 26,405 17,854
--------- ---------------
Total restaurant operating
expenses ...................... 76,297 53,351
--------- ---------------
Restaurant contribution .......... $ 6,598 $ 3,369
========= ===============
General and administrative
expenses ........................
Operating income .................
Other income (expense):
Interest expense ................
Amortization of deferred costs ..
Other income (expense), net .....
Total other income (expense) ...
Income before income taxes .......
Provision for income taxes .......
Net income .......................
Net income per share(6) ..........
Weighted average shares number of
outstanding (in thousands)(6) ....
SELECTED OPERATING DATA:
Restaurants open at end of period 82 82
Average sales per restaurant(7) .. $ 1,011
Average restaurant operating
cash flow(7)(8) ................. $ 106
Average restaurant operating
cash flow margin(7) ............. 10.5%
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
THE COMPANY
---------------------------------------------------------------------------------
FIRST QUARTER ENDED
SEPT. 2, 1994 FISCAL 1995 APRIL 1, 1996
THROUGH -------------------------- ---------- -------------------------
DEC. 31, PRO FORMA, AS MAR. 31, PRO FORMA,
1994(3) ACTUAL ADJUSTED(4) 1995 ACTUAL AS ADJUSTED(4)
-------------- ---------- -------------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Restaurant sales ................. $33,931 $139,572 $237,389 $30,967 $43,103 $56,851
Restaurant operating expenses:
Cost of sales .................... 10,807 44,798 76,210 9,938 14,033 18,498
Restaurant labor and related
costs ............................ 8,647 34,526 61,056 8,291 11,059 14,838
Depreciation and amortization ... 1,193 4,927 8,652 1,182 1,669 2,270
Occupancy and other operating
expenses ......................... 9,229 38,930 64,390 8,927 12,101 15,921
-------------- ---------- -------------- ---------- --------- --------------
Total restaurant operating
expenses ...................... 29,876 123,181 210,308 28,338 38,862 51,527
-------------- ---------- -------------- ---------- --------- --------------
Restaurant contribution .......... 4,055 16,391 27,081 2,629 4,241 5,324
General and administrative
expenses ........................ 1,374 5,904 7,779 1,203 1,932 2,218
-------------- ---------- -------------- ---------- --------- --------------
Operating income ................. 2,681 10,487 19,302 1,426 2,309 3,106
Other income (expense):
Interest expense ................ (1,925) (8,323) (7,135) (2,036) (2,742) (1,548)
Amortization of deferred costs .. (104) (511) (275) (123) (224) (98)
Other income (expense), net ..... (220) 74 74 36 (3) (3)
-------------- ---------- -------------- ---------- --------- --------------
Total other income (expense) ... (2,249) (8,760) (7,336) (2,123) (2,969) (1,649)
-------------- ---------- -------------- ---------- --------- --------------
Income before income taxes ....... 432 1,727 11,966 (697) (660) 1,457
Provision for income taxes ....... 191 825 5,023 (333) (271) 597
-------------- ---------- -------------- ---------- --------- --------------
Net income ....................... $ 241 $ 902 $ 6,943(5) $ (364) $ (389) $ 860(5)
============== ========== ============== ========== ========= ==============
Net income per share(6) .......... $ 0.51 $ 0.06
Weighted average shares number of
outstanding (in thousands)(6) .... 13,600 13,600
SELECTED OPERATING DATA:
Restaurants open at end of period 121 140 213 121 178 216
Average sales per restaurant(7) .. $ 1,125 $ 1,147 $ 256 $ 263 $ 265
Average restaurant operating
cash flow(7)(8) ................. $ 173 $ 175 $ 31 $ 36 $ 36
Average restaurant operating
cash flow margin(7) ............. 15.4% 15.3% 12.1% 13.7% 13.6%
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
THE INITIAL ACQUISITIONS
--------------------------
JAN. 1, 1994
FISCAL THROUGH SEPT.
1993 1, 1994
--------- ---------------
<S> <C> <C>
SUPPLEMENTAL DATA(9)(10):
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>
APRIL 1, 1996
AS OF AS OF --------------------------
FISCAL 1994 FISCAL 1995 PRO FORMA AS
YEAR END YEAR END ACTUAL ADJUSTED
------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency) ...... $ (3,085) $(13,202) $(17,400) $(15,151)
Total assets ...................... 101,790 107,236 150,758 187,823
Long term debt and capitalized
leases ............................ 81,050 79,270 115,961 80,178
Total stockholders' equity ........ 7,841 8,743 8,354 83,600
</TABLE>
- ------------
(1) The Initial Acquisitions consist of the 68 BKC Restaurants and the 14
Management Restaurants acquired by the Company on September 2, 1994
from BKC and from entities formerly controlled by certain members of
the Company's current management. The information set forth under
"Initial Acquisitions" reflects the combined historical financial
results of the BKC Restaurants and Management Restaurants for the
indicated period during which time the restaurants were owned and
operated by BKC and management-controlled entities. The results of the
Initial Acquisitions for fiscal 1993 and the period from January 1,
1994 through September 1, 1994 may not be reflective of the ongoing
operations of the Company under its current ownership structure.
(2) Due to the inability of the Company to determine certain expenses for
the Initial Acquisitions prior to their acquisition by the Company on a
meaningful and consistent basis, net income is not comparable and is
not presented for the Initial Acquisitions.
(3) Reflects the historical results of the Company, including the Initial
Acquisitions subsequent to their acquisition by the Company on
September 2, 1994. Also includes limited expenses of the Company during
the period August 17, 1994 (date of incorporation) to September 2,
1994, during which period the Company had no operations.
(4) Pro forma, as adjusted, to reflect (i) the 1995 Acquisitions, (ii) the
1996 Acquisitions, (iii) the Michigan Acquisition and (iv) the
Offerings, including the application of the estimated net proceeds
therefrom at an assumed initial public offering price of $15 per share
(the mid-point of the price range set forth on the cover of this
Prospectus), as if all such events occurred on January 1, 1995. See
"Use of Proceeds" and "Pro Forma Consolidated Financial Statements."
(5) The pro forma income statements do not give effect to an extraordinary
pretax 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
$10,115 (approximately $5,968 on an after-tax basis or $0.44 per
share), consisting of (i) an approximate $2,240 (approximately $1,321
on an after-tax basis) write-off of deferred financing costs related to
the repayment of the Subordinated Debt, (ii) an approximate $3,825
(approximately $2,257 on an after-tax basis) write-off of deferred
financing costs related to the repayment of the existing Credit
Agreement and (iii) an approximate $4,050 (approximately $2,390 on an
after-tax basis) prepayment premium incurred in connection with the
repayment of the Subordinated Debt.
(6) Net income per share was computed using the weighted average number of
shares of Common Stock outstanding assuming the exercise of all
currently exercisable options and warrants and the consummation of the
Offerings and the Preferred Stock Merger.
(7) Reflects the results of only those restaurants operating for the entire
period.
(8) Restaurant operating cash flow includes restaurant sales net of
restaurant operating expenses other than depreciation and amortization.
Although restaurant cash flow is useful in making restaurant industry
comparisons and is generally indicative of the Company's ability to
satisfy its obligation under the Credit Agreement and New Credit
Facility, it should not be considered by a prospective investor as an
alternative to net income as a better indicator of the Company's
operating performance or as an alternative to cash flows as a better
measure of liquidity.
(9) 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.
(10) Jaro restaurants consist of the 11 Management Restaurants acquired from
entities owned or controlled by Lawrence Jaro, the Company's current
Chief Executive Officer and Chairman of the Company's Board of
Directors. Osborn restaurants consist of the three Management
Restaurants acquired from entities owned or controlled by William
Osborn, the current Vice Chairman of the Company's Board of Directors.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is the largest independent Burger King franchisee in the U.S.
based upon pro forma fiscal 1995 restaurant sales of $237.4 million. The
Company was incorporated in August 1994 to effect the acquisition of the 68
BKC Restaurants and the 14 Management Restaurants. Subsequently, the Company
has grown primarily through the acquisition of Burger King restaurants,
including the acquisition of 39 restaurants in 1994, 18 restaurants in 1995
and 36 restaurants in 1996. In addition, the Company has developed five
Burger King restaurants.
Each of the Company's Burger King restaurants operates under a separate
franchise agreement between BKC and the Company's subsidiaries which
generally has a term of 20 years and requires payment of a monthly royalty
fee to BKC equal to 3.5% of each restaurant's sales and a monthly advertising
contribution of 4.0% of sales. The franchise agreements are generally
renewable, subject to certain conditions being met by the Company and payment
by the Company's subsidiaries of a successor franchise fee. The franchise
agreements require the Company's subsidiaries to pay an initial franchise fee
(currently $40,000) for each new restaurant opened and to pay a successor
franchise fee (equal to the then-current franchise fee) upon renewal. The
Company amortizes these franchise fees over the terms of the related
franchise agreements. See "Business--Franchise Agreements."
To date the Company has grown principally through the acquisition of
existing Burger King restaurants. As the Company acquires additional Burger
King restaurants, it capitalizes the value of the acquired franchise
agreements based on the number of years remaining on their terms and the
franchise fee in effect at the time of acquisition (currently, $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.
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 quarterly period in the prior year are compared to
that for the comparable quarterly period in the indicated year. The Company
includes newly acquired, existing restaurants in the comparable restaurant
sales analysis directly following the acquisition thereof.
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.
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,
27
<PAGE>
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 COMBINED
-------------- --------------- --------------- ----------
JAN. 1, 1994 SEPT. 2, 1994
THROUGH SEPT. THROUGH DEC. FISCAL
FISCAL 1993 1, 1994 31, 1994 1994
-------------- --------------- --------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Restaurant sales ....................... $82,895 $56,720 $33,931 $90,651
Restaurant operating expenses:
Cost of sales ......................... 25,832 18,602 10,807 29,409
Restaurant labor and related costs ... 21,998 15,529 8,647 24,176
Depreciation and amortization ......... 2,062 1,366 1,193 2,559
Occupancy and other operating expenses 26,405 17,854 9,229 27,083
-------------- --------------- --------------- ----------
Total restaurant operating expenses . 76,297 53,351 29,876 83,227
-------------- --------------- --------------- ----------
Restaurant contribution ................ $ 6,598 $ 3,369 $ 4,055 $ 7,424
============== =============== =============== ==========
</TABLE>
The following table sets forth, for the periods indicated, operating
results as a percentage of restaurant sales.
<TABLE>
<CAPTION>
AS A PERCENTAGE OF SALES
---------------------------------------------------------------------
THE COMPANY
--------------------------------------
FIRST QUARTER ENDED
-----------------------
INITIAL
ACQUISITIONS COMBINED MARCH 31, APRIL 1,
FISCAL 1993 FISCAL 1994 FISCAL 1995 1995 1996
-------------- ------------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Restaurant sales ....................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales .......................... 31.2 32.4 32.1 32.1 32.6
Restaurant labor and related costs .... 26.5 26.7 24.7 26.8 25.6
Depreciation and amortization .......... 2.5 2.8 3.6 3.8 3.9
Occupancy and other operating expenses 31.8 29.9 27.9 28.8 28.1
-------------- ------------- ------------- ----------- ----------
Restaurant operating expenses ......... 92.0 91.8 88.3 91.5 90.2
-------------- ------------- ------------- ----------- ----------
Restaurant contribution ................ 8.0% 8.2% 11.7 8.5 9.8
============== ============= ============= =========== ==========
General and administrative expenses ... 4.2 3.9 4.4
------------- ----------- ----------
Operating income ....................... 7.5 4.6 5.4
Other income (expense) ................. (6.3) (6.9) (6.9)
------------- ----------- ----------
Income (loss) before income taxes ..... 1.2 (2.3) (1.5)
Provision for income taxes ............. 0.6 (1.1) (0.6)
------------- ----------- ----------
Net income (loss) ...................... 0.6% (1.2)% (0.9)%
============= =========== ==========
</TABLE>
FIRST QUARTER 1996 ENDED APRIL 1, 1996 COMPARED TO FIRST QUARTER 1995 ENDED
MARCH 31, 1995
Restaurant Sales. Restaurant sales increased $12.1 million or 39.2% during
first quarter 1996 to $43.1 million from $31.0 million in first quarter 1995,
due primarily to the inclusion of a full quarter of operations for the five
restaurants purchased in September 1995, the two restaurants purchased in
October 1995, and the eleven restaurants purchased in November 1995. Sales
also increased due to the inclusion of a partial quarter of operations for
the 36 restaurants purchased in Virginia and Cincinnati in February 1996. In
addition, the Company developed one new restaurant in August 1995 and two new
28
<PAGE>
restaurants in February 1996. The inclusion of the newly acquired restaurants
accounted for $10.5 million of the total increase in restaurant sales, while
new restaurant development accounted for $0.5 million of the increase in
sales. Sales at the 121 comparable restaurants owned by the Company at the
end of the first quarter 1996 increased 2.3%. Menu prices remained stable
during the first quarter.
Restaurant Operating Expenses. Total restaurant operating expenses
increased $10.5 million, or 37.1% during the first quarter 1996, to $38.8
million from $28.3 million in first quarter 1995. As a percentage of
restaurant sales, restaurant operating expenses declined 1.3% to 90.2% in
first quarter 1996 from 91.5% in first quarter 1995. The first quarter is the
lowest average sales quarter of the year.
Cost of sales increased $4.1 million during first quarter 1996, and
increased 0.5% as a percentage of restaurant sales to 32.6% in the first
quarter 1996 from 32.1% in the first quarter 1995 due primarily to a 0.4%
increase in the cost of paper as a percentage of restaurant sales.
Additionally, the Company experienced a 0.2% decrease in the cost of food as
a percentage of restaurant sales created by improved shrinkage control at the
restaurants through the use of the Company's management information system
which was not in place during the first quarter of 1995. The cost of
promotional merchandise increased 0.3%.
Restaurant labor and related expenses increased $2.8 million during the
first quarter 1996, but decreased 1.2% as a percentage of restaurant sales to
25.6% in the first quarter 1996 from 26.8% in the first quarter 1995, due
primarily to improvements in group insurance costs over the larger restaurant
base and the successful application of the Company's management information
system as it relates to scheduling and labor control.
Depreciation and amortization increased $0.5 million during the first
quarter 1996, to $1.7 million in the first quarter 1996, from $1.2 million in
the first quarter 1995. As a percentage of restaurant sales, depreciation and
amortization expenses increased 0.1% to 3.9% in the first quarter 1996 from
3.8% in the first quarter 1995, 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 $3.2 million during the first
quarter 1996, but decreased 0.7% as a percentage of restaurant sales to 28.1%
in the first quarter 1996 from 28.8% in the first quarter 1995. Occupancy
expense increased $1.1 million, but decreased 0.7% as a percentage of sales
to 11.2% in the first quarter 1996 from 11.9% in the first quarter 1995, due
primarily to lower effective rental rates (as a result of higher sales
increase at restaurants with sales below the additional percentage rent
threshold), and lower property taxes as a percentage of sales for the
acquired restaurants. Other expenses increased $2.0 million during first
quarter 1996, but remained constant as a percentage of restaurant sales at
16.9%.
Restaurant Contribution. Restaurant contribution increased $1.6 million or
61.3% to $4.2 million in the first quarter 1996 from $2.6 million in the
first quarter 1995. As a percentage of restaurant sales, restaurant
contribution increased 1.3% to 9.8% for the first quarter of 1996 from 8.5%
in the first quarter of 1995, due primarily to the improvements described
above.
Pro Forma Effect of Michigan Acquisition. On a pro forma basis, giving
incremental effect to the Michigan Acquisition, for the first quarter ended
April 1, 1996 the Company's restaurant sales would have increased by $10.3
million and restaurant contribution would have increased by $0.9 million.
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
a single new restaurant in August 1995. Sales at comparable restaurants for
all 139 restaurants owned by the Company
29
<PAGE>
at the end of fiscal 1995 declined 0.1%, primarily as a result of the
discontinuation of extensive promotional couponing at the 39 restaurants
acquired in December 1994. Comparable restaurant sales for the 82 restaurants
owned by the Company since its inception increased 1.7%. Restaurant menu
prices remained stable during the year.
Restaurant Operating Expenses. Total restaurant operating expenses
increased $40.0 million or 48.0% during fiscal 1995, to $123.2 million from
$83.2 million in fiscal 1994. As a percentage of restaurant sales, restaurant
operating expenses declined 3.5% to 88.3% in fiscal 1995 from 91.8% in fiscal
1994.
Cost of sales increased $15.4 million during fiscal 1995, but decreased
0.3% as a percentage of restaurant sales to 32.1% in fiscal 1995 from 32.4%
in fiscal 1994 due primarily to a 1.0% decline in food and paper costs as a
percentage of restaurant sales created by improved distribution efficiencies
from restaurant acquisitions. This decline was partially offset by a 0.7%
increase in the cost of promotional merchandise.
Restaurant labor and related expenses increased $10.4 million during
fiscal 1995, but decreased 2.0% as a percentage of restaurant sales to 24.7%
in fiscal 1995 from 26.7% in fiscal 1994, due primarily to improvements in
group insurance costs being applied over the larger restaurant base. In
addition, the successful application of the Company's information systems
technology within the restaurant base increased scheduling efficiency and
further reduced labor costs as a percentage of restaurant sales.
Depreciation and amortization increased $2.4 million during fiscal 1995,
to $4.9 million in fiscal 1995 from $2.5 million in fiscal 1994. As a
percentage of restaurant sales, depreciation and amortization expense
increased 0.8% to 3.6% in fiscal 1995 from 2.8% in fiscal 1994, due primarily
to the increase in goodwill amortization resulting from the purchase method
of accounting for the newly acquired restaurants.
Occupancy and other expenses increased $11.8 million during fiscal 1995,
but decreased 2.0% as a percentage of restaurant sales to 27.9% in fiscal
1995 from 29.9% in fiscal 1994. Occupancy expense increased $4.5 million, but
decreased 1.0% as a percentage of sales to 11.1% in fiscal 1995 from 12.1% in
fiscal 1994, due primarily to the negotiation of more favorable lease terms
under the Company's existing lease agreements. Other operating expenses
increased $7.3 million during fiscal 1995, but decreased 1.0% as a percentage
of restaurant sales to 16.8% in fiscal 1995 from 17.8% in fiscal 1994, due
primarily to the result of more favorable terms negotiated for general
liability insurance policies covering the Company's larger restaurant base.
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.
Pro Forma Effect of Michigan Acquisition. On a pro forma basis, giving
incremental effect to the Michigan Acquisition, for fiscal 1995 the Company's
restaurant sales would have increased by $41.7 million and restaurant
contribution would have increased by $3.4 million.
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
30
<PAGE>
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.
LIQUIDITY AND CAPITAL RESOURCES
The following table presents a summary of the Company's cash flows for
August 17, 1994 (date of incorporation) through December 31, 1994, fiscal
1995, the first quarter ended March 31, 1995 and the first quarter ended
April 1, 1996.
<TABLE>
<CAPTION>
FIRST QUARTER
ENDED
FISCAL MARCH 31,
1994 FISCAL 1995 1995
---------- ----------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by (used) operating activities ... $ 7,658 $ 4,173 $ (903)
Net cash used in investing activities ............... (82,558) (15,092) (624)
Net cash provided by (used) financing activities ... 82,550 5,156 (862)
---------- ----------- --------------
Net increase (decrease) in cash and cash equivalents $ 7,650 $ (5,763) $(2,389)
========== =========== ==============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
FIRST QUARTER
ENDED APRIL 1,
1996
---------------
<S> <C>
Net cash provided by (used) operating activities ... $ 7,096
Net cash used in investing activities ............... (39,841)
Net cash provided by (used) financing activities ... 35,438
---------------
Net increase (decrease) in cash and cash equivalents $ 2,693
===============
</TABLE>
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 shareholders, loans made under its 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 quarter of 1996, the Company's operations generated
approximately $7.1 million in cash, compared with a net use of cash of
approximately $0.9 million during the first quarter of 1995. The increase in
cash generated is related to the acquisition of 36 restaurants during the
quarter and 18 restaurants during 1995, resulting in an increase in accounts
payable, accrued payroll and other accrued expenses. The Company had capital
expenditures, associated primarily with new restaurant development and
acquisitions, during the first quarter 1996 and first quarter 1995 of
approximately $39.8 million and $0.6 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 April
1, 1996, the Company had $4.6 million in cash and cash
31
<PAGE>
equivalent balances compared to $5.3 million at March 31, 1995. The Credit
Agreement and the New Credit Facility require 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
April 1, 1996, the outstanding principal balance under the revolving credit
facility was $4 million, leaving $11 million of revolving credit
availability. The interest rate on each of the three facilities under the
Credit Agreement is variable, and as of April 1, 1996 the weighted average
interest rate of all three facilities was approximately 8.36%. 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. Concurrent with the consummation of the Offerings, the
Company will replace the Credit Agreement with the New Credit Facility, which
will provide for an additional $50 million of senior indebtedness. The other
terms of the New Credit Facility will be substantially similar to those of
the Credit Agreement, except that the New Credit Facility will, among other
things, provide for a lower interest rate.
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 intends to develop 16 new
restaurants in fiscal 1996 (including four developed to date and another
seven in the initial stages of development) and 34 new restaurants in fiscal
1997. The Company has budgeted approximately $350,000 for the development of
each of these restaurants. The Company anticipates it will spend
approximately an additional $3.0 to $5.0 million annually for other capital
expenditures. The actual amount of the Company's cash requirements for
capital expenditures depends on, among other things, the number of new
restaurants opened or acquired and the costs associated with such restaurants
and the number of franchises subject to renewal and the costs associated with
bringing the related restaurants up to BKC's then-current design
specifications in connection with these franchise renewals. See "Business--
Expansion."
The cost of developing a restaurant (exclusive of land acquisition and
building costs, as the Company leases each of its properties) is
approximately $350,000 (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."
The Company believes that the proceeds from the Offerings, together with
borrowings under the New Credit Facility and the Company's cash on hand, will
be sufficient to cover its working capital, capital expenditures, planned
development and acquisition activities and debt service requirements for the
next 18 months.
INCOME TAXES
The Company completed fiscal 1995 with a net operating loss carry-forward
for tax purposes of approximately $8.7 million.
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
32
<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 $5.3 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 quarter of fiscal 1996.
<TABLE>
<CAPTION>
1995
------------------------------------------------
FIRST QUARTER SECOND QUARTER THIRD 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
Other (expense) ............... (2,123) (2,146) (2,253)
Provision (benefit) for income
taxes ........................ (333) 421 573
--------------- -------------- ---------------
Net income .................... $ (364) $ 460 $ 625
=============== ============== ===============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1996
---------------
FOURTH QUARTER FIRST QUARTER
-------------- ---------------
(91 DAYS) (91 DAYS)
<S> <C> <C>
Restaurant sales .............. $36,126 $43,103
Restaurant operating expenses 31,842 38,862
Restaurant contribution ...... 4,284 4,241
General and administrative
expenses ..................... 1,701 1,932
-------------- ---------------
Operating income .............. 2,583 2,309
Other (expense) ............... (2,238) (2,969)
Provision (benefit) for income
taxes ........................ 164 (271)
-------------- ---------------
Net income .................... $ 181 $ (389)
============== ===============
</TABLE>
33
<PAGE>
BUSINESS
GENERAL
The Company is the largest independent Burger King franchisee in the U.S.
based upon pro forma fiscal 1995 restaurant sales of $237.4 million. See "Pro
Forma Consolidated Financial Statements." The Company was formed in 1994 by a
group consisting of former Burger King franchisees, former BKC executives and
The Jordan Company to take advantage of significant acquisition and related
new restaurant development opportunities within the growing Burger King
system. Since its inception, the Company has grown primarily through a series
of nine acquisitions involving the purchase of 175 Burger King restaurants.
Currently, the Company operates 180 Burger King restaurants in the states of
Illinois, Virginia, Indiana, Colorado, Texas, Tennessee, Kentucky, Wisconsin,
Ohio, North Carolina and Georgia.
The Company's senior management has extensive experience in the Burger
King system as either former executives of BKC or as independent Burger King
franchisees. The top four members of the Company's senior management each
have over 10 years of experience, and in some cases more than 20 years of
experience, within the Burger King system in connection with the operation,
acquisition and development of Burger King 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. See "Management--Directors and Executive
Officers."
BUSINESS STRATEGY
The Company's growth strategy consists of two principal components: (i)
strategic acquisitions of multi-restaurant Burger King operations in new and
existing markets and (ii) development of new Burger King restaurants in
markets in which the Company has established a presence. The Company
currently intends to acquire 40 restaurants in the Michigan Acquisition and
plans to develop an additional 16 new restaurants in fiscal 1996 (including
four developed to date, with the remaining 12 in the initial stages of
development) and 34 new restaurants in fiscal 1997.
Growth by Acquisition. Management believes that there are many attractive
acquisition candidates in the $8.4 billion Burger King system because of its
significant size and highly fragmented nature. According to information
publicly filed by GrandMet, BKC's parent corporation, as of September 30,
1995, the Burger King system included more than 8,000 restaurants worldwide,
of which over 90% were operated by approximately 1,500 independent
franchisees. 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. In addition, since
September 30, 1991, the number of restaurants in the Burger King system has
grown by approximately 30%. During BKC's fiscal year ended September 30,
1995, a record number of 657 new restaurants were added to the Burger King
system (of which 32 were developed by BKC and 625 were developed by
independent franchisees).
The Company's growth strategy includes new market acquisitions and fill-in
acquisitions within existing markets. New market acquisitions represent new
geographic markets for the Company and typically involve operations with the
critical mass necessary to achieve operating efficiencies and support a
regional operating structure. 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. Five of the Company's nine acquisitions to date have
been of large, regional operations, each consisting of more than 10
restaurants. Furthermore, the Company intends to use a portion of the net
proceeds from the Offerings for a significant new market acquisition, the
Michigan Acquisition.
The Company's fill-in acquisitions typically involve smaller, local
operations in areas in, or contiguous to, the Company's existing operations.
Fill-in acquisitions allow the Company (i) to achieve greater restaurant
penetration within existing markets; (ii) to increase regional operating
efficiencies (since fill-in
34
<PAGE>
restaurants can be added to a market with few, if any, additions to the
regional operating structure); and (iii) to take advantage of certain
economies of scale. 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 and the proposed
acquisition of 40 Burger King restaurants in the Michigan Acquisition.
<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
Pending Michigan 40 Franchisee
</TABLE>
On May 11, 1996, the Company executed purchase agreements to acquire 40
Burger King restaurants in the Grand Rapids, Michigan area from a franchisee
for an aggregate cash purchase price of $36.5 million. The Company plans to
use a portion of the net proceeds from the Offerings to fund the Michigan
Acquisition. The Michigan Acquisition is conditioned on, among other things,
the consummation of the Offerings, BKC's consent (described below) and
standard closing conditions. As part of the Michigan Acquisition, it is
expected that the seller will enter into (i) a non-competition agreement and
(ii) an agreement to assist the Company in developing additional Burger King
restaurant sites in the Michigan market. It is anticipated that the key
operating personnel of the restaurants acquired in the Michigan Acquisition
will be retained. Pursuant to the terms of BKC's standard franchise
agreements, acquisitions of Burger King restaurants, including those to be
acquired in the Michigan Acquisition, are subject to BKC's consent and right
of first refusal. See "Risk Factors--BKC Franchise Agreement Restrictions."
On June 21, 1996, BKC agreed not to exercise its right of first refusal with
respect to the Michigan Acquisition. Management anticipates receiving BKC's
consent for the Michigan Acquisition prior to the consummation of the
Offerings.
The Michigan Acquisition represents a new market acquisition for the
Company. The 40 restaurants to be acquired constitute approximately 47% of
all Burger King restaurants in the greater Grand Rapids, Michigan market, and
the Company believes that these restaurants provide the critical mass
necessary to achieve operating efficiencies and to support a regional
operating structure within this market. Of the 40 restaurants to be acquired
in the Michigan Acquisition, 37 were open as of December 31, 1995, generating
restaurant sales and cash flow during 1995 of $41.7 million and $4.7 million,
respectively (and $41.7 million and $5.0 million, respectively, on a pro
forma basis. See "Pro Forma Consolidated Financial Statements.") Thirty-one
of those restaurants were open for all of 1995, generating average annual
sales and restaurant cash flow for fiscal 1995 of $1.2 million and $146,000,
respectively (and $1.2 million and $158,000, respectively, on a pro forma
basis. See "Pro Forma Consolidated Financial Statements.") As of April 1,
1996, 38 restaurants were open with the remaining two projected to open in
the third quarter of 1996.
In addition to the Michigan Acquisition, the Company is engaged in various
levels of discussions with numerous independent Burger King franchisees
concerning the acquisition of all or a portion of their operations. In all
cases, these discussions and negotiations are preliminary in nature (no
agreements have been reached) and such discussions may be terminated by
either party at any time. The success of any particular acquisition is
subject to a significant number of factors, including the Company's
completion of its due diligence, successful negotiation of the purchase price
and related definitive documentation, BKC's consent to the proposed franchise
acquisition, BKC not exercising its right of first refusal with respect to
35
<PAGE>
the acquisition, obtaining the necessary governmental permits and approvals
and the ability of the Company to obtain financing as required. No assurances
can be made that the Company will be able to acquire the Burger King
restaurants that are currently the subject of these preliminary discussions
and negotiations or any future Burger King restaurants that the Company may
seek to acquire. See "Risk Factors--Risks of Expansion and Development,"
"--Franchise Agreements" and "Certain Transactions."
Development of New Burger King Restaurants. The Company has and will
continue to target acquisitions in geographic markets which have potential
for substantial new restaurant development as determined by the number and
location of existing Burger King restaurants and competing quick service
restaurants, as well as local market traffic patterns, demographics and other
relevant factors. 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. Moreover, management
believes that the proven success of the Burger King concept and the relative
predictability of development costs and restaurant profitability versus that
of newer restaurant concepts and management's extensive experience within the
Burger King system substantially reduces the Company's new restaurant
development risk. For fiscal 1996, the Company has budgeted approximately
$350,000 for the development of each new Burger King restaurant (exclusive of
land acquisition and building costs, as the Company leases each of its
properties). For the 121 restaurants operated by the Company for all of
fiscal 1995, average restaurant sales and average restaurant operating cash
flow were approximately $1.1 million and $173,000, respectively.
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. The
Company must obtain BKC's approval prior to beginning construction of a new
restaurant. Typically, it takes the Company between four and 18 months to
obtain BKC approval and to develop and open a new restaurant.
To date, the Company has developed four new restaurants and has initiated
the development of an additional 12 new restaurants. Developing and opening a
new Burger King restaurant typically requires an initial investment of
approximately $350,000 (not including the cost of the building and related
real estate), of which $40,000 is paid to BKC as a one-time franchise fee and
the balance of which is used to purchase equipment, furniture and fixtures,
point-of-sale systems and signage. The Company currently leases the buildings
and related real estate at each of its restaurant locations.
Improved Operations and Efficiencies. The Company's operating strategy is
to maximize restaurant level and overall profitability. The Company
implements this strategy from a revenue perspective principally by engaging
in activities and undertaking investments designed to expand the Company's
customer base and increase sales volumes. These activities and investments
include (i) seeking to ensure consistent high quality customer experiences;
(ii) regularly reviewing the Company's restaurant properties for revenue
enhancing opportunities (such as improvements in drive-thru efficiencies and
the addition or expansion of children's playground facilities), and, when
appropriate, implementing such opportunities; (iii) upgrading the appearance
of the Company's restaurants; (iv) supplementing BKC's national advertising
and promotions with local advertising and promotions; and (v) using the
Company's sophisticated management information systems to identify sales
growth opportunities. In 1996, the Company, in conjunction with a BKC
system-wide program, plans to implement a program to upgrade the appearance
of selected restaurants. In addition, the Company plans to continue to
actively sponsor local advertising and engage in local promotions. The
Company believes that the large number of restaurants it operates provides it
with certain competitive advantages. Generally, 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 restaurant management.
36
<PAGE>
The Company implements its operating strategy from a cost perspective
principally by (i) tightly controlling restaurant and corporate level costs,
(ii) capturing certain economies of scale and (iii) leveraging its corporate
overhead structure. With respect to controlling restaurant level costs, the
Company's principal competitive advantage is its sophisticated management
information systems. The Company's management information systems, typically
not affordable by smaller Burger King franchisees or quick-service
restaurants, allow the Company to: monitor point-of-sale order taking,
control shrinkage, manage inventory and product mix, efficiently schedule
labor and integrate accounting systems. The Company's management information
systems also permit the Company 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.
The Company believes that the large number of restaurants that it
operates, combined with its sophisticated management information systems,
provide it with significant advantages over many other quick-service
restaurant operators, particularly with respect to market consistency and
cost control. Areas where the Company has experienced both restaurant-level
and corporate-level savings as a result of its size and related bargaining
power include food and paper purchasing and distribution, restaurant
maintenance services and general liability insurance. In addition, as the
Company acquires and develops additional Burger King restaurants, management
believes that it will be able to leverage its corporate overhead structure by
spreading its relatively fixed general and administrative costs over a
growing number of restaurants.
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. BKC, an operating
subsidiary of GrandMet, was founded in 1954 and is currently 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. According to
Technomic, domestic revenues for the quick-service hamburger restaurant
industry totaled approximately $37.6 billion in 1995 and the Burger King
system accounted for approximately 18% of these sales, as compared to 42% for
McDonald's, 11% for Wendy's and 8% for Hardees. As is the case for all Burger
King franchisees, the Company is required to comply with BKC guidelines as to
menu and operations, restaurant configurations and marketing and promotion.
Menu and Operations. The Burger King system philosophy is characterized by
its "Have It Your Way" service, flame-broiling, generous portions and
competitive prices. Each of the Company's Burger King restaurant 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, milkshakes, 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.
37
<PAGE>
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. As an established franchisor, BKC has
historically made considerable advertising and promotional expenditures 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
Walt Disney Company, the NCAA and the Coca-Cola Company.
QUICK-SERVICE RESTAURANT INDUSTRY
Since the introduction of quick-service restaurants in the mid-1950s, the
percentage of the average family's food budget spent on meals consumed "away
from home" has grown significantly from approximately 25% of the food budget
in 1955 to approximately 46% in 1995, according to the National Restaurant
Association. Concurrently, the quick-service restaurant industry has expanded
to include hamburger, pizza, chicken, Mexican food, ice cream/yogurt, donuts
and various types of sandwiches. The National Restaurant Association
estimates that sales at these quick-service restaurants will reach
approximately $100 billion in 1996, representing an inflation-adjusted growth
rate of 4.2% over 1995. The National Restaurant Association's growth estimate
for the quick-service restaurant industry is slightly more than double the
rate of growth of full-service restaurant sales, which are expected to rise
by an inflation-adjusted rate of 2.0% in 1996. According to Technomic,
revenues from hamburger and related sales, which represented the biggest
share of the quick-service restaurant industry, totaled approximately $37.6
billion in 1995.
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
38
<PAGE>
the assigned region. Each of these managing directors must be approved by
BKC. Supporting the managing director in Chicago are four directors of
operations (who each oversee an average of 27 restaurants), who supervise 16
district managers (who directly supervise four to eight 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. After the consummation of the Offerings, the Company will also
provide its executive officers and employees with long-term incentive
compensation opportunities through the use of stock options. See
"Management--Employee Benefit Plans." In addition, 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.
Improved Technology. The Company utilizes a sophisticated management
information system which 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
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 A.M. the following day
and can be accessed by district managers on a remote basis using a laptop
computer. The Company's integrated management information system provides
management with the ability to (i) identify and quickly capitalize on
restaurant sales enhancement and profit opportunities, such as minimizing
shrinkage and controlling labor costs, (ii) monitor point-of-sale order
taking, (iii) effectively manage inventory and (iv) integrate accounting
systems. Customized exception reporting is used to focus operations on high
priority issues and opportunities. The Company also utilizes the system 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. These
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
39
<PAGE>
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 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.
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 April 1, 1996, 26 of the
Company's subsidiaries' current 180 franchise agreements with BKC, which
contributed $26.9 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 acquisitions and new restaurant development. 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 acquisition of Burger King restaurants by the Company from
other Burger King franchisees and the development of new Burger King
restaurants by the Company. BKC's consent to such renewals, acquisitions or
development may be withheld in BKC's sole discretion. See "Risk Factors--BKC
Franchise Agreement Restrictions" and "Certain Transactions."
Pursuant to current BKC policies and procedures, the Company and each of
its subsidiaries which is a franchisee is required to obtain BKC's consent
prior to making certain changes to their capital structure and modifications
to their corporate governance documents. In particular, no amendment may be
made to the Company's or the relevant subsidiary franchisee's certificate of
incorporation or bylaws, nor may any resolution be adopted, without first
obtaining BKC's consent, if such amendment or resolution would have any of
the following effects: (i) change the description of the Company or the
relevant subsidiary franchisee's purpose or authorized activities; (ii)
change the designation of, or the procedures for designating, the managing
owner; (iii) change the authority granted to the managing owner; or (iv)
materially alter promises or representations made in a distribution plan
approved by BKC. A distribution plan is a plan approved by BKC prior to
granting a franchise which describes the distribution of the securities of
the Company or the relevant subsidiary franchisee. The franchise agreements
also prohibit the Company's subsidiaries, its managing owners and owners,
including Messrs. Jaro, Osborn and Hubert, from transferring their interests
in the Company's franchise agreements in any way without first obtaining
BKC's consent.
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
40
<PAGE>
owners. The managing owner has the authority to bind the franchisee in its
dealings with BKC and to direct any action necessary to ensure compliance
with the franchise agreements and related documents, including leases with
BKC. In addition, the managing owner is personally liable to BKC for the
franchisee's obligations under such agreements. Also, each franchise
agreement requires that a managing director be designated to ensure that the
day-to-day operation of the relevant franchised restaurant 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 BKC's franchise agreements, BKC's consent may be required for
certain transfers or issuances by the Company of its equity securities.
Transfers that result in a change of control of the Company in connection
with a public tender offer may also require BKC's consent. If BKC's required
consent is 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. See "Description of Capital
Stock--Anti-Takeover Effects and the BKC Franchise Agreements," "Certain
Transactions" and "Risk Factors--BKC Franchise Agreements."
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 $200 million 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.
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
41
<PAGE>
these manufacturers and purveyors, and BKC monitors all BKC-approved
manufacturers and purveyors of its foodstuffs. BKC regularly visits these
manufacturers and purveyors to observe the preparation of the foodstuffs and
conducts various tests to ensure that only high quality foodstuffs are sold
to BKC-approved suppliers, distributors and franchisees. In addition, BKC
coordinates and supervises audits of approved suppliers and distributors to
determine continuing product specification compliance and to ensure that
manufacturing plant and distribution center standards are met.
The Company believes that reliable alternative sources for virtually all
restaurant supplies are readily available at competitive prices should the
arrangements with ProSource or any other existing supplier or distributor
change.
QUALITY ASSURANCE
The Company's operations are focused on achieving a high level of customer
satisfaction, with speed, accuracy and quality of service closely monitored.
The Company's senior management and restaurant management staff are
principally responsible for ensuring compliance with the Company's and BKC's
operating procedures. The Company and BKC have uniform operating standards
and specifications relating to the quality, preparation and selection of menu
items, maintenance and cleanliness of the premises and employee conduct.
Detailed reports from the Company's own management information system and
surveys conducted by the Company or BKC are tabulated and distributed to
management on a regular basis to help maintain compliance. In addition to
customer satisfaction, these reports track comparable sales and customer
counts, labor and food costs, inventory levels, waste losses and cash
balances.
All Burger King franchisees operate subject to a comprehensive regimen of
quality assurance standards set by BKC, as well as standards set by Federal,
state and local governmental laws and regulations. These standards include
food preparation rules regarding, among other things, minimum cooking times
and temperatures, sanitation and cleanliness. In addition, BKC has set
maximum time standards for holding unsold prepared food. For example,
sandwiches and french fries are required to be discarded after ten minutes
and seven minutes following preparation, respectively. The "conveyor belt"
cooking system utilized in all Burger King restaurants, which is calibrated
to carry hamburgers through the flame broiler at regulated speeds, is one of
the safest cooking systems among major quick-service restaurants and helps to
ensure that the standardized minimum times and temperatures for cooking are
met.
The Company closely supervises the operation of all of its restaurants to
help insure 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.
42
<PAGE>
The Company faces competition in its expansion plans. Potential Burger
King acquisition and development 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 proposals
currently before Congress, would increase the Company's labor costs.
The Company is also subject to various local, state and Federal laws
regulating the discharge of pollutants into the environment. The Company
believes that it conducts its operations in substantial compliance with
applicable environmental laws and regulations. In an effort to prevent and,
if necessary, to correct environment problems, the Company conducts
environmental audits of proposed restaurant sites in order to determine
whether there is any evidence of contamination prior to purchasing or
entering into a lease with respect to such restaurant.
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 April 1, 1996, 23 of the Company's 180 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.
43
<PAGE>
EMPLOYEES
As of April 1, 1996, the Company employed 631 full-time salaried employees
and approximately 5,400 full-time and part-time hourly employees. Of the
Company's full-time employees, 37 are involved in overseeing restaurant
operations, 528 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.
44
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth the names and ages of the Company's directors and
executive officers and the positions they will hold upon the consummation of
the Offerings:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ----------------------- ----- ---------------------------------------------------
MANAGING OWNER, CHAIRMAN AND CHIEF EXECUTIVE
<S> <C> <C>
Lawrence E. Jaro ....... 52 Officer
William C. Osborn ...... 47 Vice Chairman and Director
Gary W. Hubert ......... 44 Chief Operating Officer and Director
Joel D. Aaseby ......... 37 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 ........ 48 Director
John W. Jordan, II .... 47 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.
45
<PAGE>
MR. JORDAN has served as a Director of the Company since its inception.
Mr. Jordan is a managing partner of The Jordan Company, a private merchant
banking firm which he founded in 1982. Mr. Jordan is also a director of
Jordan Industries, Inc., American Safety Razor Company, Jackson Products,
Inc., Carmike Cinemas, Inc., NEWFLO Corporation, 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., NEWFLO Corporation 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 (as hereinafter defined), which
required the stockholders named therein to vote for such nominees.
Simultaneously with the closing of the Offerings, and pursuant to the
Recapitalization Agreement, certain provisions of the Stockholders Agreement,
including the agreement to nominate certain members to the Board of
Directors, will be terminated. See "Description of Capital Stock--The
Recapitalization."
Prior to the consummation of the Offerings, the Company intends to
increase the number of members of the Board of Directors from seven to nine
and will appoint two independent directors (the "Independent Directors")
within 90 days after the consummation of the Offerings to fill the new
positions on the Board of Directors.
Effective simultaneously with the closing of the Offerings, the Board of
Directors intends to establish (i) an executive committee with Messrs.
Caputo, Jaro, Jordan, and Quinn serving as the members thereof, (ii) an audit
committee with Mr. Caputo and the Independent Directors serving as the
members thereof, and (iii) a compensation committee with Mr. Quinn and the
Independent Directors serving as the members thereof (the "Compensation
Committee").
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. In 1993, Smith Barney Inc. acquired
the domestic retail brokerage business of Shearson Lehman Brothers Inc.,
which had, in turn, acquired E.F. Hutton & Company, Inc. in 1987.
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
46
<PAGE>
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 Securities Exchange Act of 1934, as amended (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.
Director Compensation. After the consummation of the Offerings, directors
who are not employees of the Company will receive $10,000 per year for
serving as a director of the Company. In addition, the Company reimburses
directors for their travel and other expenses incurred in connection with
attending meetings of the Board of Directors. The Independent Directors will
receive options under the 1996 Outside Directors' Plan. See "--Employee
Benefit Plans."
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
Prior to the consummation of the Offerings, the Board of Directors did 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").
47
<PAGE>
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 Vice
Chairman .................. 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. After the consummation of the
Offerings, bonuses paid to executive officers will be determined by the
Compensation Committee of the Board of Directors.
(2) No executive named in the table above received any Other Annual
Compensation in an amount in excess of either $50,000 or 10% of Salary
and Bonus reported for him in the two preceding columns.
(3) Represents the amount of life insurance premiums paid by the Company on
the life of Mr. Osborn with death benefits designated by Mr. Osborn.
Option Exercises in Fiscal 1995 and Fiscal Year-end Values
The following table shows stock options exercised by each of the Named
Executives during fiscal 1995, including the aggregate value of gains on the
date of exercise. In addition, this table includes the number of shares
covered by both exercisable and non-exercisable stock options as of fiscal
year-end, and the values for unexercised options. Except as listed in the
table, no other Named Executive exercised any Company stock options or
beneficially owned unexercised Company stock options.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON
STOCK
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
JANUARY 1, 1996 AT JANUARY 1, 1996(1)
----------------------------- ------------------------------
EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE
------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
SCOTT E. VASATKA 17,756 17,756 $266,059 $266,059
</TABLE>
(1) Based on the difference between an initial public offering price of
$15.00 per share (the midpoint of the range set forth on the cover of
this Prospectus) and the option exercise price of $0.016 per share. The
above valuation may not reflect the actual value of unexercised options
as the value of unexercised options will fluctuate with market
activity.
(2) In connection with the Stock Option Exercises, the vesting schedule for
these options will be amended to become immediately exerciseable
simultaneously with the consummation of the Offerings. See "Management
-- Employee Benefit Plans."
48
<PAGE>
RETIREMENT AND 401(K) PLANS
Starting August 1, 1996, the Company will offer to all its employees the
option to participate in its newly created 401(k) plan, upon fulfillment of
certain requirements. The Company will have the option, but not the
obligation, to match contributions made by its employees under the 401(k)
plan. In addition, the Company will provide disability insurance to certain
key executives. The insurance will cover all salary payments to the
executives during the entire period of disability.
EMPLOYMENT AGREEMENTS
Effective September 1, 1994, Enterprises entered into an employment
agreement with Lawrence E. Jaro (the "Jaro Employment Agreement"). Pursuant
to the terms of the Jaro Employment Agreement, Mr. Jaro agreed to serve as
Chief Executive Officer and Co-Managing Owner of the Company and Enterprises
for a five-year period ending on August 31, 1999 with automatic one-year
renewals thereafter, provided that neither Mr. Jaro nor Enterprises has
provided the other with a notice of termination 120 days prior to the
expiration date of the Jaro Employment Agreement. Mr. Jaro also agreed not to
compete against Enterprises throughout the term of his employment and for one
year thereafter, and not to disclose any confidential information during and
after the term of his employment. In exchange for his services and covenants,
Enterprises agreed to compensate Mr. Jaro with a base salary of $215,000 per
annum (subject to an annual cost of living adjustment), an automobile
allowance of $800 per month and reimbursement of up to $6,000 per annum for
automobile-related costs. In the event Mr. Jaro no longer provides services
to Enterprises due to (i) his death or physical or mental disability or (ii)
his dismissal without Cause (as defined in the Jaro Employment Agreement) or
as a result of a material reduction in his authority, then Mr. Jaro is
entitled to receive his base compensation from the date of his termination
through the first anniversary of such termination or through the remaining
term of his employment agreement, respectively.
Effective September 1, 1994, Enterprises entered into an employment
agreement with William C. Osborn (the "Osborn Employment Agreement").
Pursuant to the terms of the Osborn Employment Agreement, Mr. Osborn agreed
to serve as President and Co-Managing Owner of the Company and Enterprises
for a five-year period ending on August 31, 1999 with automatic one-year
renewals thereafter, provided that neither Mr. Osborn nor Enterprises has
provided the other with a notice of termination 120 days prior to the
expiration date of the Osborn Employment Agreement. Mr. Osborn also agreed
not to compete against Enterprises throughout the term of his employment and
for one year thereafter, and not to disclose any confidential information
during and after the term of his employment. In exchange for his services and
covenants, Enterprises agreed to compensate Mr. Osborn with a base salary of
$215,000 per annum (subject to an annual cost of living adjustment), an
automobile allowance of $800 per month and reimbursement of up to $6,000 per
annum for automobile-related costs. In the event Mr. Osborn no longer
provides services to Enterprises due to (i) his death or physical or mental
disability or (ii) his dismissal without Cause (as defined in the Osborn
Employment Agreement) or as a result of a material reduction in his
authority, then Mr. Osborn is entitled to receive his base compensation from
the date of his termination through the first anniversary of such termination
or through the remaining term of his employment agreement, respectively.
Effective May 10, 1996, the Company and Mr. Osborn agreed that Mr. Osborn
would resign as President to become Vice Chairman of the Company.
Effective September 1, 1994, Enterprises entered into an employment
agreement with Gary W. Hubert (the "Hubert Employment Agreement"). Pursuant
to the terms of the Hubert Employment Agreement, Mr. Hubert agreed to serve
as Senior Vice President and Managing Director of the Company and Enterprises
for a five-year period ending on August 31, 1999 with automatic one-year
renewals thereafter, provided that neither Mr. Hubert nor Enterprises has
provided the other with notice of termination 120 days prior to the
expiration of the Hubert Employment Agreement. Mr. Hubert also agreed not to
compete against Enterprises throughout the term of his employment and for one
year thereafter, and not to disclose any confidential information during and
after the term of his employment. In exchange for his services and covenants,
Enterprises agreed to compensate Mr. Hubert with a base salary of $215,000
per annum (subject to an annual cost of living adjustment), an automobile
allowance of $800 per month and reimbursement of up to $6,000 per annum for
automobile-related costs. In the
49
<PAGE>
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 new employment agreements with each of Messrs. Jaro,
Osborn, Hubert, Aaseby and Vasatka (collectively, the "New Employment
Agreements"). The New Employment Agreements will be substantially similar to
each executive's existing employment agreement, except that pursuant to the
terms of the New Employment Agreements: (i) each executive will be entitled
to an initial annual base compensation of $300,000, $225,000, $225,000,
$150,000 and $125,000, respectively, (ii) each executive may receive an
annual bonus set by the Compensation Committee of up to 70%, 0%, 60%, 50% and
50% of such executive's base compensation, respectively, and (iii) each
executive's contractual term of employment will be five years from the
consummation of the Offerings (other than Mr. Osborn's, which will be three
years), subject to automatic one-year renewals thereafter (other than Mr.
Osborn's New Employment Agreement).
EMPLOYEE BENEFIT PLANS
Subject to the approval of the Company's existing stockholders and the
consummation of the Offerings, the Company has adopted the following director
and employee stock option plans to provide incentives to attract and retain
qualified directors and employees.
50
<PAGE>
Long Term Incentive Plan. Under the Company's 1996 Long Term Incentive
Plan ("Incentive Plan"), options, stock appreciation rights ("SARs") and
stock awards are granted for the purpose of attracting and motivating key
employees of the Company. The maximum number of shares of Common Stock
reserved for issuance under the Incentive Plan is 650,000 shares, and
individual key employees of the Company will be limited to a maximum of
200,000 shares of Common Stock under the Incentive Plan. The number of shares
reserved for issuance and the limit on number of shares granted to individual
employees are subject to adjustment for certain events such as stock splits,
stock dividends and capital reorganizations.
The Incentive Plan will be administered by the Compensation Committee. The
Compensation Committee, which will be comprised of certain non-employee
members of the Board of Directors, will determine which key employees will be
granted stock options, SARs and stock awards, the number of shares to be
granted with respect to each and the terms and conditions under which such
grants may be exercised.
The Incentive Plan will provide for the grant of options to purchase
shares that are either "qualified", that is, those that satisfy the
requirements of Section 422 of the Code for incentive stock options, or
"non-qualified", that is, those that are not intended to satisfy the
requirements of Section 422 of the Code, as well as SARs on such options.
SARs may be granted in tandem or otherwise in connection with the options, or
may be granted as free-standing awards. Under the Incentive Plan, options
will be exercisable at the market price of the Common Stock at the time of
the grant. SARs are the right to receive, in cash or shares of Common Stock,
the excess of fair market value of a specified number of shares of Common
Stock at the time of exercise over a specified price not less than 100% of
the fair market value of the Common Stock when the SAR is granted, or if
granted in tandem with an option, the option exercise price. Options and SARs
become exercisable in accordance with the terms and conditions established by
the Compensation Committee, including conditions relating to length of
employment or achievement of performance standards. Generally, options and
SARs may not be exercised by a participant in the Incentive Plan until the
participant has completed at least one year of continuous service with the
Company after the grant date.
The Company intends to file immediately after the Offerings a registration
statement on Form S-8 to register under the Securities Act the shares of
Common Stock reserved for issuance under the Incentive Plan.
Outside Directors Plan. Under the Company's 1996 Outside Directors Plan
(the "Outside Directors Plan"), options are granted for the purpose of
attracting and retaining experienced and knowledgeable non-employee
directors. The maximum number of shares of Common Stock reserved for issuance
under the Outside Directors' Plan is 30,000 shares (subject to adjustment for
certain events such as stock splits, stock dividends and capital
reorganizations). Upon becoming members of the Board of Directors, each of
the directors who are not employees of the Company or any of its subsidiaries
("Eligible Directors") will receive options to purchase up to 5,000 shares of
Common Stock (subject to certain adjustments for Eligible Directors who join
the Company or meet the eligibility criteria under the Outside Directors Plan
during a plan year).
The Outside Directors Plan will be administered by the Outside Directors
Committee. The Outside Directors Committee, which will be comprised of
certain disinterested members of the Board of Directors, will determine the
terms and conditions under which Eligible Directors of the Company may
exercise options granted to them under the plan.
Under the Outside Directors Plan, an option will generally be exercisable
on the last day of the plan year for which it was granted at a price equal to
the market price of the Common Stock at the time of the grant. Options become
exercisable in accordance with the terms and conditions established by the
Outside Directors Committee.
Under the Outside Directors Plan, options expire on the earlier of (i) the
tenth anniversary of the grant date and (ii) the first anniversary of the
Eligible Director's termination of service by reason of death or disability.
If an Eligible Director's termination of service is for reasons other than
death or disability, the Eligible Director forfeits the options granted
during the plan year.
51
<PAGE>
The Company intends to file immediately after the Offerings a registration
statement on Form S-8 to register under the Securities Act the shares of
Common Stock reserved for issuance under the Outside Directors Plan.
Existing Stock Options. In connection with their employment by the
Company, on September 1, 1994, the Company granted each of Messrs. Stahurski
and Vasatka options to purchase 35,512 shares of Common Stock, pursuant to
separate option agreements which are not part of the Employee Benefit Plans.
These options vest at a rate of 50% per year, and will be amended upon the
consummation of the Offerings to allow for the immediate exercise of the
options.
The Company intends to file immediately after the Offerings a registration
statement on Form S-8 to register under the Securities Act the shares of
Common Stock reserved for issuance under each of the option agreements issued
to Messrs. Stahurski and Vasatka.
52
<PAGE>
PRINCIPAL STOCKHOLDERS
The table below sets forth as of June 30, 1996, certain information prior
to and after the Offerings regarding beneficial ownership of Common Stock
held by (i) each director and each of the Named Executives who own shares of
Common Stock, (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 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 PERCENTAGE OF
OWNED PRIOR TO THE BENEFICIAL OWNERSHIP
OFFERINGS(1) AFTER THE OFFERINGS(1)
-----------------------------
NUMBER PERCENTAGE
------------
<S> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Lawrence E. Jaro .............................. 1,435,011(2) 22.7% 9.6%(3)
William C. Osborn ............................. 593,655(4) 9.4 4.4
Gary W. Hubert ................................ 213,008 3.4 1.6
Joel D. Aaseby ................................ 71,024 1.1 0.5
Thomas H. Quinn(5) ............................ 212,980 3.4 1.6
John W. Jordan ................................ 2,083,066(6) 33.0 15.3
A. Richard Caputo, Jr.(7) ..................... 92,295 1.5 0.7
David W. Zalaznick ............................ 2,083,066(8) 33.0 15.3
Scott E. Vasatka .............................. 35,512(9) 0.6 0.3
All directors and executive officers as a
group
(9 persons) .................................. 5,016,783(10) 78.9 36.0
OTHER PRINCIPAL STOCKHOLDERS:
MCIT PLC ...................................... 1,802,834 28.5% 13.3%
Leucadia Investors, Inc.(11) .................. 450,708 7.1 3.3
BancBoston Investments Inc. ................... 709,987(12) 10.1 5.2
PMI Mezzanine Fund, L.P. ...................... 453,188(13) 6.7 0(14)
</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. As of June 30, 1996, the Company had 6,318,989 shares of Common
Stock issued and outstanding. The table gives effect to the
Recapitalization and aggregates the Non-Voting Common Stock with the
Common Stock for purposes of calculating percentages of beneficial
ownership. See "Description of Capital Stock--The Recapitalization" and
"--Non-Voting Common Stock."
(2) Includes 1,222,003 shares of Common Stock beneficially owned by various
affiliates of Mr. Jaro. Mr. Jaro's address is c/o the Company, 2215
Enterprise Drive, Suite 1502, Westchester, Illinois 60154.
(3) Includes 70,000 shares of Common Stock Mr. Jaro will receive in
connection with the Preferred Stock Merger.
(4) Includes 380,647 shares of Common Stock beneficially owned by various
affiliates of Mr. Osborn. Mr. Osborn's address is c/o the Company, 2215
Enterprise Drive, Suite 1502, Westchester, Illinois 60154.
(5) 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.
53
<PAGE>
(6) Includes 280,232 shares of Common Stock held by John W. Jordan II
Revocable Trust, of which Mr. Jordan is trustee and 1,802,834 shares of
Common Stock held by MCIT which is advised by Jordan Zalaznick
Advisors, Inc. ("JZAI"), an entity controlled by Messrs. Jordan and
Zalaznick. Mr. Jordan's address is c/o The Jordan Company, 9 West 57th
Street, New York, New York 10019.
(7) Mr. Caputo is a partner of The Jordan Company, an entity with which
Messrs. Jordan and Zalaznick are also affiliated.
(8) Includes 1,802,834 shares of Common Stock held by MCIT which is advised
by JZAI, an entity controlled by Messrs. Jordan and Zalaznick. Mr.
Zalaznick's address is c/o The Jordan Company, 9 West 57th Street, New
York, New York 10019.
(9) The terms of the option will be amended in connection with the Stock
Option Exercises to permit exercise upon consummation of the Offerings.
See "Management--Employee Benefit Plans."
(10) Includes all shares owned directly or beneficially by directors and
executive officers, including shares beneficially owned by affiliates
of Messrs. Jaro and Osborn.
(11) The principal address of Leucadia is 315 Park Avenue South, New York,
New York 10010.
(12) Represents immediately exercisable warrants to purchase 709,987 shares
of Non-Voting Common Stock (as hereinafter defined). The principal
address of BancBoston is 100 Federal Street, Boston, Massachusetts
02110. See "Description of Capital Stock--Non-Voting Common Stock."
(13) Represents immediately exercisable warrants to purchase 453,188 shares
of Common Stock. The address of PMI Mezzanine Fund, L.P. ("PMI") is 610
Newport Center Drive, Suite 1100, Newport Beach, California 92660.
(14) Upon the consummation of the Offerings, all of the warrants held by PMI
to purchase shares of Common Stock will terminate.
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summarizes certain provisions of the Certificate of
Incorporation, the Bylaws and the Stockholders Agreement (as hereinafter
defined), in each case after 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 25,000,000 shares of Common Stock,
2,000,000 shares of non-voting common stock (the "Non-Voting Common Stock"),
and 1,000,000 shares of serial Preferred Stock.
THE RECAPITALIZATION
The Company's capital structure as reflected in its historical
consolidated financial statements consists of four classes of common stock
(Classes A, B, C and D) (the "Original Common Stock") and four classes of
Original Preferred Stock (Special Voting Preferred Stock and Classes A(1, A(2
and B 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 its stockholders 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 all of its stockholders
prior to the Offerings (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
stockholders prior to the Offerings receiving 6,318.86 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 6,318.86 shares of Non-Voting Common Stock for each share of Class
B Common Stock originally owned; (iii) the outstanding classes of Original
Preferred Stock (other than those included in the Preferred Stock Merger)
will be redeemed with a portion of the net proceeds from the Offerings; and
(iv) the stockholders of the Company prior to the Offerings and the Company
will enter into an amended Stockholders Agreement pursuant to which such
stockholders (other than PMI) will continue to be entitled to incidental
registration rights and certain stockholders will be entitled to demand
registration rights with respect of the Common Stock described under "--
Registration Rights."
After giving effect to the Recapitalization and the redemption or
cancellation of the outstanding shares of Original Preferred Stock (including
pursuant to the Preferred Stock Merger), but not giving effect to the
Offerings, the Company will have outstanding 6,470,013 shares of Common Stock
(assuming the exercise of outstanding options which will be exercised upon
consummation of the Offerings), 709,987 shares of Non-Voting Common Stock,
and no shares of Preferred Stock. See "Use of Proceeds" and "Principal
Stockholders."
COMMON STOCK
Following the Offerings, 13,600,000 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
55
<PAGE>
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 Lenders and the restrictions, if any, imposed by other
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 June 30, 1996, there were 29
beneficial owners of Common Stock.
NON-VOTING COMMON STOCK
Immediately prior to the consummation of the Offerings, the Company
authorized 2,000,000 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. Upon transfer to an
entity not restricted from holding voting common stock, each share of
Non-Voting Common Stock may be converted into an equal number of shares of
Common Stock, entitling the holders thereof to voting rights. The Non-Voting
Common Stock will not be listed on the Nasdaq National Market or any other
exchange. Upon the close of the Offerings, BancBoston will be the only holder
of Non-Voting Common Stock.
PREFERRED STOCK
The Certificate of Incorporation will authorize the Board of Directors to
create and issue one or more series of Preferred Stock and determine the
rights and preferences of each series, to the extent permitted by the
Certificate of Incorporation and applicable law. Among other rights, the
Board of Directors may determine, without the further vote or action by the
Company's stockholders, (i) the number of shares constituting the series and
the distinctive designation of the series; (ii) the dividend rate on the
shares of the series, whether dividends will be cumulative and, if so, from
which date or dates, and the relative rights of priority, if any, of payment
of dividends on shares of the series; (iii) whether the series shall have
voting rights, in addition to the voting rights provided by law and, if so,
the terms of such voting rights; (iv) whether the series shall have
conversion privileges, and, if so, the terms and conditions of such
conversion, including provision for adjustment of the conversion rate in such
events as the Board of Directors shall determine; (v) whether or not the
shares of that series shall be redeemable or exchangeable and, if so, the
terms and conditions of such redemption or exchange, as the case may be,
including the date or dates upon or after which they shall be redeemable or
exchangeable, as the case may be, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at different
redemption dates; (vi) whether the series shall have a sinking fund for the
redemption or purchase of shares of that series and, if so, the terms and
amount of such sinking fund and (vii) the rights of the shares of the series
in the event of voluntary or involuntary liquidation, dissolution or winding
up of the Company and the relative rights or priority, if any, of payment of
shares of the series. Except for any difference so provided by the Board of
Directors, the shares of all series of Preferred Stock will rank on a parity
with respect to the payment of dividends and the distribution of assets upon
liquidation.
REGISTRATION RIGHTS
In connection with their prior acquisitions of securities of the Company,
the Jordan Investors (as defined) (other than MCIT), BancBoston and PMI have
been granted by the Company demand and incidental registration rights. All
other stockholders of the Company prior to the Offerings have been granted
incidental registration rights.
56
<PAGE>
In general, each of (i) the holders of a majority of shares of Common
Stock held by the Jordan Investors (other than MCIT) and (ii) BancBoston have
the right to cause the Company to register their holdings of Common Stock
under the Securities Act (such right being referred to as a "demand
registration right"), subject to certain exceptions. At any time after
September 1, 1999, the holders of a majority of shares of Common Stock held
by PMI will also be entitled to substantially comparable demand registration
rights as the Jordan Investors and BancBoston, subject to certain exceptions.
All stockholders of the Company prior to the Offerings 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. All holders of demand
and incidental registration rights have agreed not to exercise their
registration rights with respect to the Offerings and for a period of 180
days after the date of this Prospectus. All stockholders of the Company prior
to the Offerings are entitled to incidental registration rights with respect
to 7,180,000 shares of Common Stock and certain stockholders of the Company
are entitled to demand registration rights with respect to 2,913,437 shares
of Common Stock (assuming the consummation of the Preferred Stock Merger, the
exercise of all outstanding options and warrants and the conversion of the
Non-Voting Common Stock into Common Stock). See "Principal Stockholders" and
"Shares Eligible for Future Sale."
As a result of the cancellation of the related warrants to acquire such
shares in connection with the Offerings, PMI will no longer have demand or
incidental registration rights with respect to 453,189 shares of Common
Stock.
CERTIFICATE OF INCORPORATION AND BYLAWS
The rights of the Company's stockholders are governed by the Delaware
Corporation Law, the Certificate of Incorporation, and the Bylaws. Certain
provisions of the Certificate of Incorporation and the Bylaws, which are
summarized below, may discourage or make more difficult a takeover attempt
that a stockholder might consider in its best interest. Such provisions may
also adversely affect the prevailing market price for the Common Stock.
Preferred Stock. The Board of Directors will have the authority, without
action by the Company's stockholders, to fix the rights, privileges and
preferences of, and to issue up to 1,000,000 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.
Following the closing of the Offerings, there will be no shares of Preferred
Stock issued and outstanding and the Company currently has no plans to issue
any shares of Preferred Stock.
No Stockholder Action by Written Consent; Special Meetings. The
Certificate of Incorporation and Bylaws will prohibit stockholders from
taking action by written consent in lieu of an annual or special meeting. In
addition, special meetings of stockholders may be called only by the Chairman
of the Board, the President, or a majority of the Board of Directors. Special
meetings may not be called by stockholders.
Advance Notice Requirements for Stockholder Proposals. The Bylaws will
establish advance notice procedures with regard to stockholder proposals.
These procedures provide that the notice of stockholder proposals must be
received by the Company no later than (i) with respect to an annual meeting
of stockholders, 60 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders and (ii) with respect to a special
meeting of stockholders, no later than the close of business
57
<PAGE>
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 which 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 may be required for certain transfers or issuances by the
Company of its equity securities and for 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.
NASDAQ NATIONAL MARKET LISTING
The Common Stock has been approved for listing on the Nasdaq National
Market under the trading symbol "AKNG," subject to official notice of
issuance.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Harris Trust
Company of New York.
58
<PAGE>
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.
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 the 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,
Enterprises may use the commitments under of 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 April 1, 1996, the outstanding
principal balance under the Revolving Loans was $4.0 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.
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 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 April 1, 1996, the Company was in compliance
with all such covenants and restrictions.
The Term Loans may be prepaid without penalty, in full or in part, at any
time at the option of Enterprises.
NEW CREDIT FACILITY
The New Credit Facility will provide for up to $150.0 of senior secured
indebtedness, consisting of a term loan of $75.0 million (the "New Term
Loan"), an acquisition loan of $50.0 million (the "Acquisition Loan") and
$25.0 million of revolving loans (the "New Revolving Loans"). Subject to
certain restrictions, Enterprises may use the commitments under the New
Revolving Loans for the issuance of documentary or standby letters of credit.
Each of the New Term Loan, which together with a portion of the net
proceeds of the Offerings will replace Term Loan A and Term B, and the New
Revolving Loans, which will replace the Revolving Loans, will bear interest
upon the consummation of the Offerings at a rate the lower of either FNBB's
59
<PAGE>
annual rate of interest (the "Base Rate") plus an applicable margin or the
Eurodollar Rate (as defined in the New Credit Facility) plus an applicable
margin. The applicable margin for Base Rate loans ranges from .25% to 1.00%
and the applicable margin for Eurodollar Rate loans ranges from 1.50% to
2.25%. Each of the Base Rate loans and Eurodollar Rate loans is subject to
periodic adjustments based upon a leverage ratio of Enterprises on specified
dates. The Company anticipates that its New Term Loan and New Revolving Loans
will be priced at 1.625% above the Eurodollar Rate at closing.
The Acquisition Loan, which will finance certain Permitted Acquisitions
(as defined in the New Credit Facility), will also bear interest at a rate
equal to the lower of either the Base Rate plus an applicable margin or the
Eurodollar Rate plus an applicable margin. The applicable margin for the
Acquisition Loan is the same as for the New Term Loan and New Revolving Loans
and is subject to the same periodic adjustments as the New Term Loan and New
Revolving Loans.
Borrowings under the New Credit Facility will be secured by a first
priority security interest in all present and future acquired assets of
Enterprises and certain of the subsidiaries (other than real estate and the
franchise agreements) and Enterprises' repayment obligations will be
guaranteed by certain of its subsidiaries and the Company.
The other terms and provisions of the New Credit Facility will be
substantially similar to the Credit Agreement.
SENIOR SUBORDINATED NOTES
On February 7, 1996, the Company, Enterprises, and PMI entered into a note
purchase agreement (the "Senior Note Purchase Agreement") for the purchase by
PMI of $15.0 million aggregate principal amount of Senior Subordinated Notes
(collectively, the "Senior Subordinated 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 Senior Note Purchase Agreement contains certain financial and negative
covenants which, among other things, require the maintenance of certain
financial ratios and restrict the ability of the Company and Enterprises to
incur indebtedness, make investments, incur liens, enter into sales and
leasebacks, enter into transactions with affiliates, enter into mergers,
guarantee other indebtedness, consolidate or dispose of assets and make
capital expenditures. The Senior Note Purchase Agreement also restricts the
ability of Enterprises to distribute money to the Company. As of April 1,
1996, the Company was in compliance with all such covenants and restrictions.
Assuming net proceeds of the Offerings of $87.8 million at an assumed
initial public offering price of $15 per share (the mid-point of the price
range set forth on the cover of this Prospectus) and proceeds from borrowings
under the New Credit Facility of $82.6 million, the Company intends to use
$19.1 million of such total proceeds to prepay the Senior Subordinated Notes
in full (including a prepayment penalty of approximately $4.1 million). The
Company intends to amend the Senior Note Purchase Agreement in connection
with the Offering to cancel all of the outstanding warrants currently held by
PMI. See "Use of Proceeds."
60
<PAGE>
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 Subordinated Note Purchase Agreement contains negative covenants,
similar to those contained in the Senior Note Purchase Agreement, and
financial maintenance covenants.
Assuming net proceeds of the Offerings of $87.8 million at an assumed
initial public offering price of $15 per share (the mid-point of the price
range set forth on the cover of this Prospectus) and proceeds from borrowings
under the New Credit Facility of $82.6 million, the Company intends to use
$11.0 million of such total proceeds 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, 2004.
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).
Assuming net proceeds of the Offerings of $87.8 million at an assumed
initial public offering price of $15 per share (the mid-point of the price
range set forth on the cover of this Prospectus) and proceeds from borrowings
under the New Credit Facility of $82.6 million, the Company intends to use
$4.4 million of such total proceeds to prepay the Seller Notes in full. See
"Use of Proceeds."
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 Subordinated Notes, the Company's guarantee obligations in
respect of borrowings under the Credit Agreement, the Subordinated Notes and
the Seller 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
(which is defined to have the same meaning as set forth
61
<PAGE>
in the Subordinated Note Purchase Agreement). The Company is not subject to a
prepayment premium upon a voluntary or mandatory prepayment of the BBI Notes.
Assuming net proceeds of the Offerings of $87.8 million at an assumed
initial public offering price of $15 per share (the mid-point of the price
range set forth on the cover of this Prospectus) and proceeds from borrowings
under the New Credit Facility of $82.6 million, the Company intends to use
$600,000 of such total net proceeds to prepay the BBI Notes in full. See "Use
of Proceeds."
BKC NOTE
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 "BKC Note") to BKC in the principal amount of
$6.9 million. The BKC Note bears interest at a rate of 9.75% per annum,
payable monthly in arrears, and is secured by a pledge of all of the
outstanding capital stock of ATCI.
Pursuant to the terms of the BKC Note, on February 7, 1996 ATCI paid down
$816,702 of the principal from the proceeds of the sale of the building and
underlying real estate of one of its Burger King restaurants. ATCI may at its
option prepay the BKC Note, in whole or in part, and may be required to
prepay the BKC Note upon an Event of Default (as defined therein). Events of
Default under the BKC Note include, among other things, failure to make
required payments or failure by ATCI to meet BKC franchise agreement
requirements.
Borrowings under the BKC Note are secured by a pledge by Enterprises of
all of the issued and outstanding capital stock of ATCI.
The BKC Note matures on July 19, 1996 and is expected to be refinanced on
a long term basis.
FAC NOTE
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 "FAC Note") in the principal amount of
$1.87 million. Franchise Acceptance Corporation Limited is an affiliate of
BKC. The FAC Note bears an interest rate of the Program Rate (as defined
therein) plus 2.75% per annum, payable monthly in arrears. The FAC 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 FAC
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 FAC Note in full following any Event of Default
(as defined therein). Events of Default under the FAC Note include, among
other things, failure to make required payments or failure by ACCI to meet
BKC franchise agreement requirements.
Borrowings under the FAC Note are secured by a security interest in all
present and future restaurant-related assets of ACCI.
The FAC Note is expected to remain outstanding after consummation of the
Offerings.
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. The Senior
Subordinated Notes bear interest at a rate of 12.5% per annum, payable
quarterly in arrears, the Subordinated Notes and Seller Notes bear interest
at a rate of 12.75% per annum, payable semi-annually in arrears, and the BBI
Notes bear interest at a rate of 6% per annum, payable quarterly in arrears.
For the three-month period ended April 1, 1996, the Company accrued $286,000
of interest expense to PMI under the Senior Subordinated Notes and during
fiscal 1995, the Company paid to MCIT,
62
<PAGE>
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 $35.1
million from the net proceeds of the Offerings to prepay the principal amount
under each of the Senior Subordinated Notes, the Subordinated Notes, the
Seller Notes and the BBI Notes (including the prepayment penalty of
approximately $4.1 million to PMI as the holder of the Senior Subordinated
Notes). 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. Prior to
the consummation of the Offerings, the TJC Consulting Agreement provided for
an annual consulting fee payable on a quarterly basis equal to the higher of
(i) $500,000 or (ii) 2.5% of the Company's cash flow (as determined in the
TJC Consulting Agreement). In addition, the TJC Consulting Agreement provided
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% of any debt,
equity or other financing arranged by the Company with the assistance of TJC.
During fiscal 1995 and the three months ended April 1, 1996, the Company paid
consulting fees to the affiliate of The Jordan Company of $477,609 and
$104,000, 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. In connection with the
consummation of the Offerings, the Company intends to amend and restate the
TJC Consulting Agreement to provide for a reduced investment banking fee. If
the Michigan Acquisition and related financings are consummated by the
Company, the Company will pay to the affiliate of The Jordan Company an
investment banking fee of $1.0 million pursuant to the terms of the amended
and restated TJC Consulting Agreement. The Company believes that the terms of
the TJC Consulting Agreement are comparable to the terms that it would obtain
from non-affiliated parties for comparable services. Messrs. Jordan,
Zalaznick and Caputo are partners of The Jordan Company.
Original Preferred Stockholders. Simultaneously with the consummation of
the Offerings, the Company will (i) redeem certain of the issued and
outstanding shares of Original Preferred Stock for cash and (ii) acquire the
remaining shares of Original Preferred Stock with shares of Common Stock and
cash pursuant to the Preferred Stock Merger (as described below). BancBoston,
MCIT, affiliates of The Jordan Company and affiliates of Messrs. Jaro and
Osborn are the holders of all of the issued and outstanding shares of
Original Preferred Stock.
The Company will pay in cash to each of BancBoston, MCIT and affiliates of
The Jordan Company approximately $2.1 million, $3.8 million and $547,000,
respectively, as payment for their shares of Original Preferred Stock and all
accrued and unpaid dividends due thereon. In addition, BancBoston, MCIT,
Leucadia Investors, Inc. and affiliates of The Jordan Company will receive
790,987 shares of Non-Voting Common Stock (assuming the exercise of
BancBoston's warrants), 1,802,834 shares of Common Stock, 450,708 shares of
Common Stock and 1,161,230 shares of Common Stock, respectively, attributable
to the shares of Original Common Stock held by each.
63
<PAGE>
Simultaneously with the consummation of the Offerings certain corporations
affiliated with Messrs. Jaro and Osborn will be merged with and into the
Company, with the Company being the surviving entity (the "Preferred Stock
Merger"). In connection with the Preferred Stock Merger, (i) Mr. Jaro and a
minority shareholder will receive 80,000 shares of Common Stock and a cash
payment of approximately $136,000 attributable to the shares of Original
Preferred Stock held by the corporations affiliated with Mr. Jaro (of which
Mr. Jaro will receive 70,000 shares and $116,000) and (ii) Mr. Osborn will
receive a cash payment of approximately $416,000 attributable to the shares
of Original Preferred Stock held by the corporations affiliated with Mr.
Osborn. The $136,000 cash payment to Mr. Jaro and the minority shareholder in
connection with the Preferred Stock Merger will be adjusted downward or
upward to the extent that the initial public offering price (before
underwriting commissions or expenses) is greater than $15 per share or less
than $15 per share, respectively. In addition, Messrs. Jaro and Osborn will
receive 1,239,500 and 593,655 shares, respectively, of Common Stock
attributable to the shares of Original Common Stock held by Messrs. Jaro and
Osborn and corporations affiliated with Messrs. Jaro and Osborn,
respectively. Messrs. Jaro and Osborn have agreed to indemnify the Company
from any liability to the Company resulting from the Preferred Stock Merger.
See "Use of Proceeds" and "Description of Capital Stock--The
Recapitalization."
Burger King Corporation. In connection with certain of its previous
acquisitions of Burger King restaurants, the Company and its subsidiaries
have entered into certain agreements with BKC as a precondition to receiving
BKC approval of the acquisition. As part of its purchase agreement with BKC,
dated September 1, 1994, Enterprises committed to expend up to $2.25 million
by September 1, 1997 to upgrade the 68 Burger King restaurants it acquired.
As part of its November 21, 1995 acquisition of 11 Burger King restaurants,
the Company and ATCI agreed to (i) renew the Company's commitment, initially
made in connection with its November 30, 1994 acquisition, to sell up to 10
Burger King restaurants to a franchisee to be designated by BKC and (ii)
expend approximately $1.65 million by November 21, 1997 to upgrade certain of
the 11 Burger King restaurants so acquired. The commitment by ATCI to upgrade
the restaurants is subject to certain capital expenditures to be made by BKC.
As part of its acquisitions of 36 Burger King restaurants on February 7,
1996, the Company and ATCI (i) renewed the Company's commitment to sell up to
10 Burger King restaurants to a franchisee to be designated and (ii) agreed
to make the capital expenditures necessary to bring each of the Burger King
restaurants operated by the Company and its subsidiaries into compliance with
BKC current repair and maintenance standards by September 7, 1997.
In connection with the Offerings, the Company will be required to enter
into an agreement with BKC pursuant to which the Company will, among other
things, indemnify BKC for any claims against BKC arising out of the
Offerings.
Members of the Board of Directors. Enterprises leases the land and
buildings for two Burger King restaurants under noncancelable operating
leases from an entity which is owned by Mr. Jaro. The leases expire in March
2006 and January 2007, respectively, and require total monthly rental
payments of $20,600. For the year ended January 1, 1996 and for the three
month period ended April 1, 1996, the Company recorded rent expense of
$248,000 and $62,000, respectively, under these leases.
Pursuant to the provisions of BKC's franchise agreements, Messrs. Jaro,
Osborn and Hubert, as managing owners and owners, have guaranteed the
obligations of the Company and its subsidiaries under each franchise
agreement and each lease agreement in which BKC is the lessor. In addition,
Messrs. Jaro, Osborn and Hubert have personally guaranteed all obligations of
ATCI under the BKC Note. The Company intends to seek BKC's consent to
terminate the personal guarantees of Messrs. Jaro, Osborn and Hubert under
each of the franchise agreements, lease agreements and the BKC Note.
In connection with the September 1994 purchase of the Management
Restaurants, the Company (i) entered into a $700,000 revolving loan agreement
with Mr. Jaro whereby the Company loaned funds to Mr. Jaro and (ii) deferred
payment in full of the purchase price for one of the Management Restaurants
sold to the Company by a corporation controlled by Mr. Jaro. Effective upon
the consummation of the Offerings, the Company intends to cancel the
outstanding balance of the revolving loan to Mr. Jaro in exchange for Mr.
Jaro's cancellation of the outstanding balance of the deferred purchase price
for the restaurant.
64
<PAGE>
Upon the consummation of the Offerings, the Company will enter into
indemnification agreements with each member of the Board of Directors whereby
the Company will agree, subject to certain exceptions, to indemnify and hold
harmless each director from liabilities incurred as a result of such person's
status as a director of the Company. See "Management--Board of Directors."
The Company has adopted a policy, which will be effective simultaneously
with the consummation of the Offerings, 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.
65
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Immediately following the Offerings, there will be 13,600,000 shares of
Common Stock issued and outstanding (assuming the exercise of all currently
outstanding options and warrants and the conversion of the Non-Voting Common
Stock into Common Stock). Of such shares, only the 6,420,000 shares of Common
Stock to be sold in the Offerings will be immediately eligible for sale in
the public market, except for any of such shares owned at any time by an
"affiliate" of the Company within the meaning of Rule 144 under the
Securities Act. The remaining 7,180,000 outstanding shares are "restricted
securities" within the meaning of Rule 144 and may not be publicly resold,
except in compliance with the registration requirements of the Securities Act
or pursuant to an exemption from registration, including that provided by
Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted" shares
for at least two years, including a person who may be deemed an affiliate of
the Company, is entitled to sell within any three-month period a number of
shares of Common Stock that does not exceed the greater of 1% of the
then-outstanding shares of Common Stock of the Company, or the average weekly
trading volume of Common Stock on the Nasdaq National Market during the four
calendar weeks preceding the date on which notice of the sale is filed with
the Commission. Sales under Rule 144 are subject to certain restrictions
relating to manner of sale, notice and the availability of current public
information about the Company. A person who is not an "affiliate" of the
Company at any time during the 90 days preceding a sale, and who has
beneficially owned shares for at least three years, would be entitled to sell
such shares immediately following the Offerings under Rule 144(k) without
regard to the volume limitations, manner of sale provisions or notice or
other requirements of Rule 144. In addition, any employee, director or
officer of, or consultant to, the Company who purchased his shares pursuant
to a written compensatory plan or contract may be entitled to rely on the
resale provisions of Rule 701 under the Securities Act, which permit
non-affiliates to sell their Rule 701 shares without having to comply with
the public information, holding period, volume limitation or notice
provisions of Rule 144, and permit affiliates to sell their Rule 701 shares
without having to comply with Rule 144's holding period restrictions, in each
case commencing 90 days after the date of this Prospectus.
Each of (i) the Company and each of its executive officers and directors
and (ii) each holder of capital stock of the Company immediately prior to the
Offerings (including holders of options and warrants exercisable into shares
of Common Stock) have agreed that, for a period of 180 days after the date of
this Prospectus, they will not, without the prior written consent of Smith
Barney Inc., offer, sell, contract to sell or otherwise dispose of any Common
Stock or securities convertible, exercisable or exchangeable for Common Stock
or grant any options or warrants to purchase Common Stock, subject to certain
exceptions. Upon expiration of the 180-day period, 7,180,000 shares of Common
Stock (assuming the exercise of all currently outstanding options and
warrants and the conversion of the Non-Voting Common Stock into Common Stock)
will be eligible for immediate resale without restriction under the
Securities Act, subject to certain volume, timing and other requirements of
Rule 144 promulgated under the Securities Act.
All stockholders of the Company prior to the Offerings are entitled to
incidental registration rights with respect to 7,180,000 shares of Common
Stock (assuming the consummation of the Preferred Stock Merger, the exercise
of all currently outstanding options and warrants and the conversion of the
Non-Voting Common Stock into Common Stock) and certain stockholders of the
Company are entitled to demand registration rights with respect to 2,913,437
shares of Common Stock. All stockholders with registration rights have agreed
not to exercise such rights with respect to the Offerings and for a period of
180 days after the date of this Prospectus. However, after the expiration of
the 180 day period, such holders may choose to exercise their demand
registration rights, which could result in a large number of shares being
sold in the public market. See "Description of Capital Stock--Registration
Rights."
The Company intends to file immediately following the Offerings
registration statements on Form S-8 to register under the Securities Act an
aggregate of 680,000 shares of Common Stock reserved for
66
<PAGE>
issuance pursuant to the exercise of stock options granted under the
Incentive Plan and the Outside Directors' Plan. The stock registered under
such registration statements will thereafter be available for sale in the
public market upon vesting of such options, subject to the resale limitations
of Rule 144 applicable to "affiliates" of the Company.
Prior to the date of this Prospectus, there has been no public market for
the Common Stock. Trading of the Common Stock on the Nasdaq National Market
is expected to commence following the completion of the Offerings. No
prediction can be made as to the effect, if any, that future sales of shares,
or the availability of shares for future sale, will have on the market price
of the Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock, or the perception that such sales could occur, could
adversely affect the prevailing market price of the Common Stock.
67
<PAGE>
CERTAIN U.S. TAX CONSEQUENCES TO NON-U.S. STOCKHOLDERS
The following is a general discussion of certain Federal tax consequences
of the ownership and disposition of a share of Common Stock by the beneficial
owner of such shares that is not a U.S. person for U.S. Federal income tax
purposes (a "non-U.S. holder"). For purposes of this discussion, a "U.S.
person" means a citizen or resident of the United States, a corporation or
partnership created or organized in the United States or under the law of the
United States or of any State or political subdivision of the foregoing, or
any estate or trust whose income is includible in gross income for U.S.
Federal income tax purposes regardless of its source. This discussion does
not deal with all aspects of U.S. Federal income and estate taxation that may
be relevant to non-U.S. holders in light of their particular circumstances,
and does not address state, local or non-U.S. tax considerations.
Furthermore, the following discussion is based on current provisions of the
U.S. Internal Revenue Code of 1986, as amended (the "Code"), the regulations
promulgated thereunder and administrative and judicial interpretations as of
the date hereof, all of which are subject to change, possibly with
retroactive effect. Treasury regulations were recently proposed that would,
if adopted in their present form, revise in certain respects the rules
applicable to non-U.S. holders of Common Stock (the "Proposed Regulations").
The Proposed Regulations are generally proposed to be effective with respect
to payments made after December 31, 1997. It is not certain whether, or in
what form, the Proposed Regulations will be adopted as final regulations.
Each prospective investor is urged to consult its own tax adviser with
respect to the U.S. Federal, state and local consequences of owning and
disposing of a share of Common Stock, as well as any tax consequences arising
under the laws of any other taxing jurisdiction.
U.S. INCOME AND ESTATE TAX CONSEQUENCES
It is not currently contemplated that the Company will pay dividends on
the Common Stock in the foreseeable future. If the Company were to pay a
dividend in the future, such a dividend paid to a non-U.S. holder would be
subject to U.S. withholding tax at a 30% rate, or if applicable, a lower
treaty rate, unless the dividend is effectively connected with the conduct of
a trade or business in the United States by a non-U.S. holder (and, if
certain tax treaties apply, is attributable to a United States permanent
establishment maintained by such non-U.S. holder). A dividend that is
effectively connected with the conduct of a trade or business in the United
States by the non-U.S. holder (and, if certain tax treaties apply, is
attributable to a United States permanent establishment maintained by such
non-U.S. holder) will be exempt from the withholding tax described above and
subject instead (i) to the U.S. Federal income tax on net income that applies
to U.S. persons and (ii) with respect to corporate holders under certain
circumstances, a 30% (or, if applicable, lower treaty rate) branch profits
tax that in general is imposed on its "effectively connected earnings and
profits" (within the meaning of the Code) for the taxable year, as adjusted
for certain items.
Under current Treasury Regulations, dividends paid to an address in a
foreign country are presumed to be paid to a resident of that country (unless
the payor has knowledge to the contrary) for purposes of the withholding
discussed above and, under the current interpretation of the Treasury
Regulations, for purposes of determining the applicability of a tax treaty
rate. Under the Proposed Regulations, however, a non-U.S. holder of Common
Stock who wishes to claim the benefit of an applicable treaty rate would be
required to satisfy applicable certification and other requirements. In the
case of a foreign partnership, the certification requirement would generally
be applied to the partners of the partnership. In addition, the Proposed
Regulations would also require the partnership to provide certain
information, including a United States taxpayer identification number, and
would provide look-through rules for tiered partnerships. A non-U.S. holder
that is eligible for a reduced rate of U.S. withholding tax pursuant to an
income tax treaty may obtain a refund of any excess amounts withheld by
filing an appropriate claim for refund with the Internal Revenue Service (the
"IRS").
Under current law, a non-U.S. holder generally will not be subject to U.S.
Federal income tax on any gain recognized on a sale or other disposition of a
share of Common Stock unless (i) the Company is or has been during the
five-year period ending on the date of disposition a "United States real
property holding corporation" for U.S. Federal income tax purposes (which the
Company does not believe that it has been or is currently and does not
anticipate becoming), (ii) the gain is effectively connected with the conduct
of a trade or business within the United States of the non-U.S. holder and,
if certain tax treaties apply, is attributable to a United States permanent
establishment maintained by the non-U.S. holder, (iii) the gain is not
described in clause (ii) above, the non-U.S. holder is an individual who
holds the share as a capital asset, is present in the United States for 183
days or more in the taxable year of the disposition and either (a) such
individual has a "tax home" (as defined for U.S. Federal income tax purposes)
in the
68
<PAGE>
United States or (b) the gain is attributable to an office or other fixed
place of business maintained in the United States by such individual, or (iv)
the non-U.S. holder is subject to tax pursuant to the Code provisions
applicable to certain U.S. expatriates. In the case of a non-U.S. holder that
is described under clause (ii) above, its gain will be subject to the U.S.
Federal income tax on net income that applies to U.S. persons and, in
addition, if such non-U.S. holder is a foreign corporation, it may be subject
to the branch profits tax as described in the preceding paragraph. An
individual non-U.S. holder that is described under clause (iii) above will be
subject to a flat 30% tax on the gain derived from the sale, which may be
offset by U.S. capital losses (notwithstanding the fact that he or she is not
considered a resident of the United States). Thus, individual non-U.S.
holders who have spent 183 days or more in the United States in the taxable
year in which they contemplate a sale of the Common Stock are urged to
consult their tax advisers as to the tax consequences of such sale.
Shares of Common Stock owned at the time of his or her death by an
individual non-U.S. holder who is treated as a U.S. resident at such time for
U.S. Federal estate tax purposes will be includible in his or her gross
estate for U.S. Federal estate tax purposes unless an applicable estate tax
treaty provides otherwise.
BACK-UP WITHHOLDING AND INFORMATION REPORTING
Dividends
Except as provided below, the Company must report annually to the IRS and
to each non-U.S. holder the amount of dividends paid to and the tax withheld
with respect to such holder. These information reporting requirements apply
regardless of whether withholding was reduced or eliminated by an applicable
tax treaty. Copies of these information returns may also be available under
the provisions of a specific treaty or agreement with the tax authorities in
the country in which the non-U.S. holder resides. In general, backup
withholding at a rate of 31% and additional information reporting will apply
to dividends paid on shares of Common Stock to holders that are not "exempt
recipients" and that fail to provide in the manner required certain
identifying information (such as the holder's name, address and taxpayer
identification number). Generally, individuals are not exempt recipients,
whereas corporations and certain other entities generally are exempt
recipients. However, dividends that are subject to U.S. withholding tax at
the 30% statutory rate or at a reduced tax treaty rate are exempt from backup
withholding of U.S. Federal income tax and such additional information
reporting.
Broker Sales
If a non-U.S. holder sells shares of Common Stock through a U.S. office of
a U.S. or foreign broker, the broker is required to file an information
return and is required to withhold 31% of the sale proceeds unless the
non-U.S. holder is an exempt recipient or has provided the broker with the
information and statements, under penalties of perjury, necessary to
establish an exemption from backup withholding. If payment of the proceeds of
the sale of a share by a non-U.S. holder is made to or through the foreign
office of a broker, that broker will not be required to backup withhold or,
except as provided in the next sentence, to file information returns. In the
case of proceeds from a sale of a share by a non-U.S. holder paid to or
through the foreign office of a U.S. broker or a foreign office of a foreign
broker that is (i) a controlled foreign corporation for U.S. tax purposes or
(ii) a person 50% or more of whose gross income for the three-year period
ending with the close of the taxable year preceding the year of payment (or
for the part of that period that the broker has been in existence) is
effectively connected with the conduct of a trade or business within the
United States (a "Foreign U.S. Connected Broker"), information reporting is
required unless the broker has documentary evidence in its files that the
payee is not a U.S. person and certain other conditions are met, or the payee
otherwise establishes an exemption.
Refunds
Any amounts withheld under the backup withholding rules from a payment to
a non-U.S. holder may be refunded or credited against the non-U.S. holder's
U.S. Federal income tax liability, provided that the required information is
furnished to the IRS.
69
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions stated in the U.S.
Underwriting Agreement, each of the underwriters of the U.S. Offering named
below (the "U.S. Underwriters"), for whom Smith Barney Inc., PaineWebber
Incorporated and EVEREN Securities, Inc. are acting as the representatives
(the "Representatives"), has severally agreed to purchase, and the Company
has agreed to sell to each U.S. Underwriter, the number of shares of Common
Stock set forth opposite the name of such U.S. Underwriter below:
<TABLE>
<CAPTION>
U.S. UNDERWRITERS NUMBER OF SHARES
- ------------------------ ----------------
<S> <C>
Smith Barney Inc. .......
PaineWebber Incorporated
EVEREN Securities, Inc.
Total ................. 5,136,000
</TABLE>
Under the terms and subject to the conditions contained in the
International Underwriting Agreement, each of the managers of the concurrent
International Offering named below (the "Managers"), for whom Smith Barney
Inc., PaineWebber International (U.K.) Ltd., and EVEREN Securities, Inc. are
acting as lead managers (the "Lead Managers"), has severally agreed to
purchase, and the Company has agreed to sell to each Manager, the number of
shares of Common Stock set forth opposite the name of such Manager below:
<TABLE>
<CAPTION>
MANAGERS NUMBER OF SHARES
- ------------------------------------- ----------------
<S> <C>
Smith Barney Inc. ....................
PaineWebber International (U.K.) Ltd.
EVEREN Securities, Inc. ..............
Total .............................. 1,284,000
</TABLE>
Each of the U.S. Underwriting Agreement and the International Underwriting
Agreement provides that the obligations of the several U.S. Underwriters and
several Managers to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by
counsel and to certain other conditions. The U.S. Underwriters and the
Managers are obligated to take and pay for all shares of Common Stock offered
hereby (other than those covered by the over-allotment option described
below) if any such shares are taken.
The U.S. Underwriters and the Managers (collectively, the "Underwriters")
initially propose to offer part of the shares offered hereby directly to the
public at the public offering price set forth on the cover page of this
Prospectus and part of the shares offered hereby to certain dealers at a
price which represents a concession not in excess of $ per share under the
public offering price. The U.S. Underwriters and Managers may allow, and such
dealers may reallow, a concession not in excess of $ per share to other
U.S. Underwriters or Managers, respectively, or to certain other dealers.
After the initial public offering, the public offering price and such
concessions may be changed by the Underwriters.
The Representatives and Managers have advised the Company that they do not
intend to confirm sales to accounts over which they exercise discretionary
authority.
The Company has granted the Underwriters an option, exercisable at any
time and from time to time during a 30-day period from the date of this
Prospectus, to purchase up to an aggregate of 963,000 additional shares of
Common Stock at the public offering price set forth on the cover page hereof
less underwriting commissions. The U.S. Underwriters may exercise such option
to purchase additional shares solely for the purpose of covering
over-allotments, if any, incurred in connection with the sales of the shares
of Common Stock offered hereby. To the extent such option is exercised, each
U.S. Underwriter will be obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares as the
number of shares set forth opposite each U.S. Underwriter's name in the
preceding Underwriters table bears to the total number of shares of Common
Stock offered by the U.S. Underwriters hereby.
70
<PAGE>
The Company and the U.S. Underwriters and the Managers have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
Each of (i) the Company and each of its executive officers and directors
and (ii) each holder of capital stock of the Company immediately prior to the
Offerings (including holders of warrants exercisable into shares of Common
Stock) have agreed that, for a period of 180 days after the date of this
Prospectus, they will not, without the prior written consent of Smith Barney
Inc., offer, sell, contract to sell or otherwise dispose of any Common Stock
or securities convertible or exercisable or exchangeable for Common Stock or
grant any options or warrants to purchase Common Stock, subject to certain
exceptions.
At the Company's request, the U.S. Underwriters and the Managers have
reserved up to 321,000 shares of Common Stock (the "Directed Shares") for
sale at the public offering price to persons who are directors, officers or
employees of, or are otherwise associated with, the Company and who have
advised the Company of their desire to participate in its future growth.
Purchasers of Directed Shares will be required to agree to restrictions on
resale similar to those described in the preceding paragraph. The number of
shares of Common Stock available for sale to the general public will be
reduced to the extent of sales of Directed Shares to any of the persons for
whom they have been reserved. Any shares not so purchased will be offered by
the U.S. Underwriters and the Managers on the same basis as all other shares
offered hereby.
The U.S. Underwriters and the Managers have entered into an Agreement
Between U.S. Underwriters and Managers pursuant to which each U.S.
Underwriter has agreed that, as part of the distribution of the shares
offered in the U.S. Offering, (i) it is not purchasing any such shares for
the account of anyone other than a U.S. or Canadian Person and (ii) it has
not offered or sold, and will not offer, sell, resell or deliver, directly or
indirectly, any of such shares or distribute any prospectus relating to the
U.S. Offering outside the United States or Canada or to anyone other than a
U.S. or Canadian Person. In addition, each Manager has agreed that as part of
the distribution of the shares offered in the International Offering: (i) it
is not purchasing any such shares for the account of any U.S. or Canadian
Person and (ii) it has not offered or sold, and will not offer, sell, resell
or deliver, directly or indirectly, any of such shares or distribute any
prospectus relating to the International Offering in the United States or
Canada or to any U.S. or Canadian Person. Each Manager has also agreed that
it will offer to sell shares only in compliance with all relevant
requirements of any applicable laws.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the U.S. Underwriting Agreement, the
International Underwriting Agreement and the Agreement Between U.S.
Underwriters and Managers, including: (i) certain purchases and sales between
the U.S. Underwriters and the Managers, (ii) certain offers, sales, resales,
deliveries or distributions to or through investment advisors or other
persons exercising investment discretion, (iii) purchases, offers or sales by
a U.S. Underwriter who is also acting as Manager or by a Manager who is also
acting as a U.S. Underwriter and (iv) other transactions specifically
approved by the Representatives and the Lead Managers. As used herein, "U.S.
or Canadian Person" means any resident or national of the United States or
Canada, any corporation, partnership or other entity created or organized in
or under the laws of the United States or Canada or any estate or trust the
income of which is subject to U.S. or Canadian income taxation regardless of
the source of its income (other than the foreign branch of any U.S. or
Canadian Person), and includes any U.S. or Canadian branch of a person other
than a U.S. or Canadian Person.
Any offer of shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the relevant province of Canada
in which such offer is made.
Each Manager has represented and agreed that (i) it has not offered or
sold and will not offer or sell in the United Kingdom, by means of any
document, any shares other than to persons whose ordinary business it is to
buy or sell shares or debentures, whether as principal or agent or in
circumstances which do not constitute an offer to the public within the
meaning of the Public Offering of Securities Regulation 1995, (ii) it has
complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
shares in, from, or otherwise involving, the United Kingdom and (iii) it has
only issued or passed on and will only issue or pass on to any person in the
United
71
<PAGE>
Kingdom any document received by it in connection with the issue of the
shares if that person is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1995 or is a person to whom the document may otherwise lawfully be issued or
passed on.
No action has been or will be taken in any jurisdiction by the Company,
the U.S. Underwriters or the Managers that would permit any offering to the
general public of the Common Stock offered hereby in any jurisdiction other
than the United States.
Purchasers of the Common Stock offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practices of the
country of purchase in addition to the offering price set forth on the cover
page hereof.
Pursuant to the Agreement Between U.S. Underwriters and Managers, sales
may be made between the U.S. Underwriters and the Managers of such number of
shares of Common Stock as may be mutually agreed. The price of any shares so
sold shall be the public offering price as then in effect for Common Stock
being sold by the U.S. Underwriters and the Managers, less all or any part of
the selling concession, unless otherwise determined by mutual agreement. To
the extent that there are sales between the U.S. Underwriters and the
Managers pursuant to the Agreement Between U.S. Underwriters and Managers,
the number of shares initially available for sale by the U.S. Underwriters
and by the Managers may be more or less than the number of shares appearing
on the front cover of this Prospectus.
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price of the shares was negotiated between
the Company and the Representatives. Among the factors considered in
determining such price were the history of and prospects for the Company's
business and the industry in which it competes, an assessment of the
Company's management and the present state of the Company's development, the
past and present revenues and earnings of the Company, the prospects for
growth of the Company's revenues and earnings, the current state of the
economy in the United States and the current level of economic activity in
the industry in which the Company competes and in related or comparable
industries, and currently prevailing conditions in the securities markets,
including current market valuations of publicly traded companies which are
comparable to the Company.
72
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the legality of the Common Stock
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 U.S. Underwriters and the Managers by
Cravath, Swaine & Moore, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of January 1, 1996
and December 31, 1994 and for the periods then ended and the historical
schedules of restaurant contribution for each of the periods from January 1,
1993 to the earlier of the date of purchase by the Company or December 31,
1995, appearing in this Prospectus and Registration Statement have been
audited by Deloitte & Touche LLP, independent certified public accountants,
as set forth in their reports thereon appearing elsewhere herein, and are
included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-1 (the "Registration Statement") under the Securities Act, with respect to
the shares of Common Stock 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 Common Stock, 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.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by independent accountants and with
quarterly reports containing updated summary financial information for each
of the first three quarters of each fiscal year.
73
<PAGE>
NEITHER BKC NOR ANY OF ITS SUBSIDIARIES, AFFILIATES, OFFICERS, DIRECTORS,
AGENTS, EMPLOYEES, ACCOUNTANTS OR ATTORNEYS ARE IN ANY WAY PARTICIPATING IN,
APPROVING OR ENDORSING THESE OFFERINGS OF SECURITIES, ANY OF THE UNDERWRITING
OR ACCOUNTING PROCEDURES USED IN THE OFFERINGS, OR ANY REPRESENTATIONS MADE
IN CONNECTION WITH THE COMPANY. THE GRANT BY BKC OF ANY FRANCHISE OR OTHER
RIGHTS TO THE COMPANY IS NOT INTENDED AS, AND SHOULD NOT BE INTERPRETED AS,
AN EXPRESS OR IMPLIED APPROVAL, ENDORSEMENT OR ADOPTION OF ANY STATEMENT
REGARDING ACTUAL OR PROJECTED FINANCIAL OR OTHER PERFORMANCE WHICH MAY BE
CONTAINED IN THE COMPANY'S OFFERING MATERIALS. ALL FINANCIAL AND OTHER
PROJECTIONS HAVE BEEN PREPARED BY, AND ARE THE SOLE RESPONSIBILITY OF, THE
COMPANY.
ANY REVIEW BY BKC OF THE OFFERING MATERIALS OR THE INFORMATION INCLUDED
THEREIN HAS BEEN CONDUCTED SOLELY FOR THE BENEFIT OF BKC TO DETERMINE
CONFORMANCE WITH BKC'S INTERNAL POLICIES, AND NOT TO BENEFIT OR PROTECT ANY
OTHER PERSON. NO INVESTOR SHOULD INTERPRET SUCH REVIEW BY BKC AS AN APPROVAL,
ENDORSEMENT, ACCEPTANCE OR ADOPTION OF ANY REPRESENTATION, WARRANTY, COVENANT
OR PROJECTION CONTAINED IN THE MATERIALS REVIEWED.
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.
74
<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 April 1, 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 periods January 2, 1996 to April 1, 1996 and
January 1, 1995 to March 31, 1995 (unaudited) ............................................... F-5
Consolidated Statements of Stockholders' Equity for the period January 2, 1996 to April 1,
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 periods January 2, 1996 to April 1, 1996 and
January 1, 1995 to March 31, 1995 (unaudited) ............................................... F-8
Notes to Consolidated Financial Statements ................................................... F-9
INDEX TO THE HISTORICAL SCHEDULES OF RESTAURANT CONTRIBUTION
INITIAL ACQUISITIONS
Independent Auditors' Report ................................................................ F-18
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-19
Historical Schedules of Restaurant Contribution for the BKC Restaurants, Jaro restaurants
and Osborn restaurants for the year ended December 31, 1993 ................................ F-20
Notes to the Historical Schedules of Restaurant Contribution ................................ F-21
ACQUISITIONS
Independent Auditors' Report ................................................................ F-22
Historical Schedules of Restaurant Contribution for Curtis James Investments, Inc., C&N
Dining, Inc. and Stuart Ray Investments, Inc. for the quarter ended April 1, 1996 or the
period January 1, 1996 through the date of acquisition ..................................... F-23
Historical Schedules of Restaurant Contribution for DMW, Inc., BKC, QSC, Inc. and Ro-Lank,
Inc., Curtis James Investments, Inc., C&N Dining, Inc. and Stuart Ray Investments, Inc. for
the year ended December 31, 1995 or the period January 1, 1995 through date of acquisition F-24
Historical Schedules of Restaurant Contribution for Friedman, QSC, Inc. and Ro-Lank, Inc.,
Curtis James Investments, Inc., C&N Dining, Inc. and Stuart Ray Investments, Inc. for the
year ended December 31, 1994 or the period January 1, 1994 through date of acquisition .... F-25
Historical Schedules of Restaurant Contribution for Friedman, QSC, Inc. and Ro-Lank, Inc.,
Curtis James Investments, Inc., C&N Dining, Inc. and Stuart Ray Investments, Inc. for the
year ended December 31, 1993 ............................................................... F-26
Notes to the Historical Schedules of Restaurant Contribution ................................ F-27
</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
APRIL 1, 1996 (UNAUDITED), JANUARY 1, 1996 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
APRIL 1, JANUARY 1, DECEMBER 31,
1996 1996 1994
-------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................... $ 4,580,000 $ 1,887,000 $ 7,650,000
Accounts receivable .......................... 771,000 1,118,000 134,000
Inventory .................................... 1,236,000 1,009,000 1,001,000
Prepaid expenses ............................. 1,667,000 1,218,000 775,000
-------------- -------------- --------------
Total current assets ........................ 8,254,000 5,232,000 9,560,000
PROPERTY AND EQUIPMENT ........................ 35,172,000 28,457,000 23,471,000
GOODWILL ...................................... 97,326,000 66,847,000 61,739,000
OTHER ASSETS:
Deferred financing costs ..................... 5,531,000 3,096,000 3,509,000
Deferred organization costs .................. 205,000 220,000 272,000
Franchise agreements ......................... 4,270,000 3,384,000 3,239,000
-------------- -------------- --------------
Total other assets .......................... 10,006,000 6,700,000 7,020,000
-------------- -------------- --------------
TOTAL ......................................... $150,758,000 $107,236,000 $101,790,000
============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued expenses . $ 8,378,000 $ 5,399,000 $ 6,037,000
Accrued payroll .............................. 2,145,000 802,000 1,193,000
Accrued sales tax payable .................... 1,395,000 1,047,000 924,000
Accrued interest payable ..................... 1,505,000 346,000 1,041,000
Current portion of long-term debt (Note 5) .. 12,126,000 10,741,000 3,450,000
Current portion of capital leases (Note 6) .. 105,000 105,000 99,000
-------------- -------------- --------------
Total current liabilities ................... 25,654,000 18,434,000 12,645,000
LONG-TERM DEBT -- Less current portion (Note
5) ........................................... 84,812,000 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) ......... 149,000 176,000
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 ............................ 754,000 1,143,000 241,000
-------------- -------------- --------------
Total stockholders' equity .................. 8,354,000 8,743,000 7,841,000
-------------- -------------- --------------
TOTAL ......................................... $150,758,000 $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 88.8
-------------- ------------ -------------- ------------
RESTAURANT CONTRIBUTION ....................... 16,391,000 11.7 4,055,000 12.0
GENERAL AND ADMINISTRATIVE
EXPENSES ..................................... 5,176,000 3.7 1,227,000 3.6
OTHER OPERATING EXPENSES:
Depreciation expense -- office ............... 199,000 0.1 15,000 0.1
Management and directors' fees ............... 529,000 0.4 132,000 0.4
-------------- ------------ -------------- ------------
Operating income ........................... 10,487,000 7.5 2,681,000 7.9
OTHER INCOME (EXPENSE):
Interest expense ............................. (6,296,000) (4.4) (1,256,000) (3.7)
Interest expense -- related party ............ (2,027,000) (1.5) (669,000) (2.0)
Amortization of deferred costs ............... (511,000) (0.4) (104,000) (0.3)
Other income ................................. 209,000 0.1 16,000 0.1
Other expense ................................ (135,000) (0.1) (236,000) (0.7)
-------------- ------------ -------------- ------------
Total other expense ........................ (8,760,000) (6.3) (2,249,000) (6.6)
-------------- ------------ -------------- ------------
INCOME BEFORE PROVISION FOR INCOME TAXES ..... 1,727,000 1.2 432,000 1.3
PROVISION FOR INCOME TAXES .................... 825,000 0.6 191,000 0.6
-------------- ------------ -------------- ------------
NET INCOME .................................... $ 902,000 0.6% $ 241,000 0.7%
============== ============ ============== ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD JANUARY 2, 1996 TO APRIL 1, 1996 AND
THE PERIOD JANUARY 1, 1995 TO MARCH 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
JANUARY 2 JANUARY 1,
1996 TO 1995 TO
APRIL 1, PERCENTAGE MARCH 31, PERCENTAGE
1996 OF SALES 1995 OF SALES
------------- ------------ ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
RESTAURANT SALES .............................. $43,103,000 100.0% $30,967,000 100.0%
RESTAURANT OPERATING EXPENSES:
Cost of sales ................................ 14,033,000 32.6 9,938,000 32.1
Restaurant labor and related costs ........... 11,059,000 25.6 8,291,000 26.8
Occupancy .................................... 4,817,000 11.2 3,683,000 11.9
Depreciation and amortization of goodwill and
franchise agreements ........................ 1,669,000 3.9 1,182,000 3.8
Advertising .................................. 2,094,000 4.9 1,324,000 4.3
Royalties .................................... 1,479,000 3.4 1,069,000 3.4
Other operating expenses ..................... 3,711,000 8.6 2,851,000 9.2
------------- ------------ ------------- ------------
Total restaurant operating expenses ....... 38,862,000 90.2 28,338,000 91.5
------------- ------------ ------------- ------------
RESTAURANT CONTRIBUTION ....................... 4,241,000 9.8 2,629,000 8.5
GENERAL AND ADMINISTRATIVE
EXPENSES ..................................... 1,721,000 3.9 1,036,000 3.3
OTHER OPERATING EXPENSES:
Depreciation expense -- office ............... 93,000 0.2 48,000 0.2
Management and directors' fees ............... 118,000 0.3 119,000 0.4
------------- ------------ ------------- ------------
Operating income ........................... 2,309,000 5.4 1,426,000 4.6
OTHER INCOME (EXPENSE):
Interest expense ............................. (1,950,000) (4.5) (1,536,000) (4.9)
Interest expense -- related party ............ (792,000) (1.9) (500,000) (1.7)
Amortization of deferred costs ............... (224,000) (0.5) (123,000) (0.4)
Other income ................................. 70,000 0.2
Other expense ................................ (3,000) (0.0) (34,000) (0.1)
------------- ------------ ------------- ------------
Total other expense ........................ (2,969,000) (6.9) (2,123,000) (6.9)
------------- ------------ ------------- ------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES ........................................ (660,000) (1.5) (697,000) (2.3)
PROVISION FOR INCOME TAXES .................... (271,000) (0.6) (333,000) (1.1)
------------- ------------ ------------- ------------
NET INCOME (LOSS) ............................. $ (389,000) (0.9)% $ (364,000) (1.2)%
============= ============ ============= ============
</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 APRIL 1, 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) .............. (389,000) (389,000)
----------- -------- ------------ ----------- ------------
BALANCE -- April 1, 1996
(unaudited) ....................... $75 $10 $7,599,915 $ 754,000 $8,354,000
=========== ======== ============ =========== ============
</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
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 APRIL 1, 1996 AND
THE PERIOD JANUARY 1, 1995 TO MARCH 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
JANUARY 2, 1996 JANUARY 1, 1995
TO TO
APRIL 1, 1996 MARCH 31, 1995
(UNAUDITED) (UNAUDITED)
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................. $ (389,000) $ (364,000)
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation and amortization ........................... 1,986,000 1,353,000
Changes in:
Accounts receivable .................................... 347,000 12,000
Inventory .............................................. (227,000) 40,000
Prepaid expenses ....................................... (449,000) (647,000)
Accounts payable and accrued expenses .................. 5,828,000 (1,297,000)
--------------- ---------------
Net cash flows from operating activities .............. 7,096,000 (903,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of restaurant franchise agreements, equipment
and goodwill ............................................ (39,205,000)
Cash paid for franchise agreements ....................... (81,000)
Cash paid for property and equipment ..................... (1,372,000) (624,000)
Proceeds from disposal of property and equipment ........ 817,000
---------------
Net cash flows from investing activities .............. (39,841,000) (624,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ............................. 85,000,000
Proceeds from subordinated debt .......................... 15,000,000
Cash paid for financing costs ............................ (2,644,000)
Advances under line of credit ............................ 5,000,000
Payments on line of credit ............................... (1,000,000) (862,000)
Payments on long-term debt ............................... (65,896,000)
Payments on capital leases ............................... (22,000)
--------------- ---------------
Net cash flows from financing activities .............. 35,438,000 (862,000)
--------------- ---------------
NET CHANGE IN CASH AND CASH EQUIVALENTS ................... 2,693,000 (2,389,000)
CASH AND CASH EQUIVALENTS -- Beginning of period ......... 1,887,000 7,650,000
--------------- ---------------
CASH AND CASH EQUIVALENTS -- End of period ................ $ 4,580,000 $ 5,261,000
=============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest ................. $ 1,583,000 $ 1,897,000
=============== ===============
</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 APRIL 1, 1996 AND THE PERIOD
JANUARY 1, 1995 TO MARCH 31, 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 April 1, 1996 included 91 days of
operating activity while the comparative period ended March 31, 1995 included
90 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 APRIL 1, 1996 AND THE PERIOD
JANUARY 1, 1995 TO MARCH 31, 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 April 1,
1996 was approximately $391,000 (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 April 1, 1996 was approximately $2,829,000 (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 April 1, 1996 was approximately $90,000 for deferred
organization costs and approximately $758,000 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 April 1, 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
----------------------------------------
APRIL 1, JANUARY 1, DECEMBER 31,
1996 1996 1994
---------- ------------ --------------
<S> <C> <C> <C>
Net sales .............. $56,851 $153,971 $37,891
Restaurant contribution 5,324 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 APRIL 1, 1996 AND THE PERIOD
JANUARY 1, 1995 TO MARCH 31, 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>
APRIL 1, JANUARY 1, DECEMBER 31,
1996 1996 1994
------------- ------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Restaurant equipment and furnishings $35,647,000 $28,020,000 $23,663,000
Office furniture and equipment ..... 2,491,000 1,941,000 302,000
Leasehold improvements .............. 869,000 756,000 67,000
Land ................................ 423,000
Buildings ........................... 456,000 850,000
New restaurant development .......... 468,000 313,000 98,000
------------- ------------- --------------
Total ............................... 39,931,000 32,303,000 24,130,000
Less accumulated depreciation ...... 4,759,000 3,846,000 659,000
------------- ------------- --------------
Property and equipment -- net ...... $35,172,000 $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 APRIL 1, 1996 AND THE PERIOD
JANUARY 1, 1995 TO MARCH 31, 1995 (UNAUDITED) (CONTINUED)
5. LONG TERM DEBT
Debt consists of the following: 1995 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
APRIL 1, 1996 JANUARY 1, 1996 DECEMBER 31, 1994
---------------------------- ---------------------------- ---------------------------
CURRENT LONG-TERM CURRENT LONG-TERM CURRENT LONG-TERM
------------- ------------- ------------- ------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Term Loan A, at a variable interest rate,
8.687% at January 1, 1996, due 2001 ..... $ 1,500,000 $43,500,000 $ 3,500,000 $41,750,000 $3,250,000 $45,250,000
Term Loan B, at a variable interest rate,
9.187% at January 1, 1996, due 2002 ..... 400,000 39,600,000 200,000 19,600,000 200,000 19,800,000
Letter of Credit, at a variable interest
rate, 8.6871, at January 1, 1996,
due 2002 ................................. 4,000,000
Franchise Acceptance Corporation
Limited note, at a variable interest
rate, 8.56% at January 1, 1996,
due 2005 ................................ 123,000 1,712,000 121,000 1,744,000
Burger King Corporation note,
9.75%, due 1996 .......................... 6,103,000 6,920,000
------------- ------------- ------------- ------------- ------------ -------------
Total ..................................... $12,126,000 $84,812,000 $10,741,000 $63,094,000 $3,450,000 $65,050,000
============= ============= ============= ============= ============ =============
</TABLE>
Debt to related parties consists of the following:
<TABLE>
<CAPTION>
APRIL 1, 1996 JANUARY 1, 1996 DECEMBER 31, 1994
--------------------------- ------------------------ ------------------------
CURRENT LONG-TERM CURRENT LONG-TERM CURRENT LONG-TERM
------------ ------------- --------- ------------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Senior subordinated debentures,
12.75%, due 2004 ..................... $15,400,000 $15,400,000 $15,400,000
Junior subordinated debentures,
6.00%, due 2005 ...................... 600,000 600,000 600,000
Subordinated debenture, 12.5% due 2005 15,000,000
------------ ------------- --------- ------------- --------- -------------
Total ................................. $31,000,000 $16,000,000 $16,000,000
============ ============= ========= ============= ========= =============
</TABLE>
On September 1, 1994, the Company entered into a revolving credit and term
loan agreement with a lender (the "Agent Bank"). On November 30, 1994, the
loan agreement was amended and restated (the "Loan Agreement"). Under the
terms of the Loan Agreement, a consortium of banks led by the Agent Bank (the
"Consortium") provided two term loans, one for $48,500,000 ("Term Loan A")
and one for $20,000,000 ("Term Loan B"), and a $6,000,000 revolving credit
facility to the Company (collectively, the "Loans"). The original proceeds
from the Loans were used to acquire the BKC Restaurants and the Management
Restaurants, and the additional proceeds from the Loans were used to acquire
the Franchise Restaurants (see Note 1). The Loans are secured by all of the
assets of Enterprises and a guaranty from AmeriKing.
Term Loan A and Term Loan B (collectively, the "Term Loans") provide for
quarterly principal payments as provided by the Loan Agreement until final
maturity. Term Loan A matures November 30, 2001. Term Loan B matures November
30, 2002. The Company may prepay the Term Loans, in whole or in part, at any
time, provided such prepayments are at least $500,000 or a larger multiple of
$100,000.
The Term Loans bear interest at the lower of two variable rates which are
determined by reference to either (i) the Agent Bank's prime rate, or (ii)
the adjusted Eurodollar rate as determined by the Agent Bank, plus certain
interest rate spreads as specified in the Loan Agreement.
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
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 APRIL 1, 1996 AND THE PERIOD
JANUARY 1, 1995 TO MARCH 31, 1995 (UNAUDITED) (CONTINUED)
5. LONG TERM DEBT (CONTINUED)
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 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 quarterly through December 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 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 APRIL 1, 1996 AND THE PERIOD
JANUARY 1, 1995 TO MARCH 31, 1995 (UNAUDITED) (CONTINUED)
5. LONG TERM DEBT (CONTINUED)
Aggregate maturities of the Company's long-term debt are as follows:
APRIL 1, JANUARY 1,
1996 1996
-------------- -------------
(UNAUDITED)
1996 ........ $ 12,126,000 $10,741,000
1997 ........ 4,035,000 5,832,000
1998 ........ 6,048,000 6,944,000
1999 ........ 9,561,000 11,673,000
Thereafter . 96,168,000 46,237,000
-------------- -------------
Total ....... $127,938,000 $89,835,000
============== =============
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:
JANUARY 1, DECEMBER 31,
1996 1994
------------ -------------
Minimum rentals under operating leases $11,072,000 $2,691,000
Contingent rentals .................... 958,000 253,000
------------ -------------
Total ................................. $12,030,000 $2,944,000
============ =============
APRIL 1, MARCH 31,
1996 1995
----------- -------------
(UNAUDITED) (UNAUDITED)
Minimum rentals under operating leases $3,473,000 $2,705,000
Contingent rentals .................... 332,000 140,000
------------ ------------
Total ................................. $3,805,000 $2,845,000
============ ============
Future minimum lease payments under noncancelable operating leases are as
follows:
APRIL 1, JANUARY 1,
1996 1996
-------------- -------------
(UNAUDITED)
1996 ........ $ 11,631,000 $ 12,229,000
1997 ........ 15,489,000 12,164,000
1998 ........ 15,317,000 11,997,000
1999 ........ 15,075,000 11,748,000
2000 ........ 14,472,000 11,157,000
Thereafter . 132,902,000 93,921,000
-------------- -------------
Total ....... $204,886,000 $153,216,000
-------------- -------------
F-14
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994; AND
FOR THE PERIOD JANUARY 2, 1996 TO APRIL 1, 1996 AND THE PERIOD
JANUARY 1, 1995 TO MARCH 31, 1995 (UNAUDITED) (CONTINUED)
6. LEASES (CONTINUED)
Future minimum lease payments under noncancelable capital leases are as
follows:
APRIL 1, JANUARY 1,
1996 1996
----------- ------------
(UNAUDITED)
1996 .............................. $ 99,000 $129,000
1997 .............................. 129,000 129,000
1998 .............................. 66,000 66,000
----------- ------------
Total minimum lease payments ..... 294,000 324,000
Less amount representing interest 40,000 49,000
----------- ------------
Present value of the minimum lease
obligation ....................... $254,000 $275,000
=========== ============
Payments on capital leases for the period ended April 1, 1996 (unaudited)
and January 1, 1996 were $32,000 and $63,000, respectively; no payments were
made in the period ended December 31, 1994.
7. CAPITAL STOCK
At April 1, 1996 (unaudited), January 1, 1996 and December 31, 1994, the
Company's authorized capital stock was as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NUMBER OF ISSUED VOTING
VALUE SHARES AND RIGHTS
PER SHARE AUTHORIZED OUTSTANDING PER SHARE
----------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Class A Common Stock .......... $0.01 2,000.0 634.0 1
Class B Common Stock .......... 0.01 100.0 0.0 0
Class C Common Stock .......... 0.01 700 0.0 0
Class D Common Stock .......... .01 700 366.0 1
Total common stock ............ 3,500.0 1,000.0
============ ============= ===========
Special Voting Preferred Stock $0.00 1.0 1.0 716
Class A1 Preferred Stock ..... 0.00 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
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 APRIL 1, 1996 AND THE PERIOD
JANUARY 1, 1995 TO MARCH 31, 1995 (UNAUDITED) (CONTINUED)
7. CAPITAL STOCK (Continued)
of the Agent Bank. The warrants are exercisable at any time and expire the
earlier of (i) the date such warrants are exercised in full, or (ii) November
30, 2002.
During 1994, the Company granted stock options to purchase 11.24 shares of
Class D Common Stock at $100 per share in connection with employment
agreements with two members of the Company's management. All of these options
vest ratably over a two-year period ending September 1, 1996 at which time
all become exercisable. The options expire at the earlier of (i) 90 to 180
days after separation of the employee from the Company, or (ii) December 31,
2004. At January 1, 1996, all of these options remained outstanding; fifty
percent (50%) of such options were currently excercisable as of September,
1995.
The Company has never declared or paid dividends on its capital stock, as
stipulated by the Loan Agreement.
8. INCOME TAXES
The components of the income tax provision are as follows:
APRIL 1, MARCH 31, JANUARY 1, DECEMBER 31,
1996 1995 1996 1994
---------- ---------- ---------- -----------
(UNAUDITED)
Current -- state .... $290,000 $ 20,000 $290,000 $ 20,000
Deferred -- federal... 535,000 171,000 535,000 171,000
---------- ---------- ---------- -----------
Total ................ $825,000 $191,000 $825,000 $191,000
========== ========== ========== ============
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 April 1, 1996 and March 31, 1995, the Company
recorded interest expense on the Subordinated Notes totaling $496,000 and
$491,000, 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,
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 APRIL 1, 1996 AND THE PERIOD
JANUARY 1, 1995 TO MARCH 31, 1995 (UNAUDITED) (CONTINUED)
9. RELATED PARTIES (Continued)
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 April 1, 1996 and March 31, 1995, the Company
recorded rent expense of $62,000 under those leases (unaudited).
The Company has entered into a management consulting agreement with an
affiliate of a stockholder. Under the terms of the agreement, the Company is
required to pay the consultant an annual management fee equal to the higher
of (i) $300,000, or (ii) 0.35% of food sales. During the periods ended
January 1, 1996 and December 31, 1994, the Company recorded expense of
$479,000 and $116,000, respectively, under this agreement. On February 7,
1996, the Company amended the management consulting agreement changing the
annual management fee calculation to the higher of $500,000 or 2.5% of
EBITDA. During the periods ended April 1, 1996 and March 31, 1995, the
Company recorded expense of $104,000 and $106,000 respectively, under this
agreement (unaudited).
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-17
<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-18
<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-19
<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-20
<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 ............................ 10-20 years
Furniture, fixtures and restaurant equipment .... 5-10 years
</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-21
<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., C&N Dining, Inc. and Stuart
Ray Investments, 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-22
<PAGE>
HISTORICAL SCHEDULES OF RESTAURANT CONTRIBUTION
<TABLE>
<CAPTION>
CURTIS JAMES STUART RAY
INVESTMENTS, INC. C&N DINING, INC. INVESTMENTS, INC.
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
JANUARY 1, 1996 JANUARY 1, 1996 JANUARY 1, 1996
THROUGH FEBRUARY THROUGH FEBRUARY THROUGH APRIL 1,
6, 1996 6, 1996 1996
----------------- ---------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
RESTAURANT SALES ...................................... $1,372,000 $2,082,000 $10,294,000
RESTAURANT OPERATING EXPENSES:
Cost of sales ........................................ 458,000 663,000 3,344,000
Restaurant labor and related costs ................... 395,000 543,000 2,841,000
Occupancy ............................................ 129,000 392,000 1,369,000
Depreciation and amortization of franchise agreements 32,000 12,000 222,000
Advertising .......................................... 66,000 97,000 423,000
Royalties ............................................ 47,000 72,000 355,000
Other operating expenses ............................. 123,000 243,000 818,000
----------------- ---------------- -----------------
Total restaurant operating expenses ................. 1,250,000 2,022,000 9,372,000
----------------- ---------------- -----------------
RESTAURANT CONTRIBUTION ............................... $ 122,000 $ 60,000 $ 922,000
================= ================ =================
</TABLE>
See notes to historical schedules of restaurant contribution.
F-23
<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
SEPTEMBER 12, 1995 OCTOBER 24, 1995 NOVEMBER 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 STUART RAY
INVESTMENTS, INC. C&N DINING, INC. INVESTMENTS, INC.
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1995 DECEMBER 31, 1995
------------------ ------------------ ------------------
<S> <C> <C> <C>
RESTAURANT SALES .................... $14,766,000 $26,955,000 $41,697,000
RESTAURANT OPERATING EXPENSES:
Cost of sales ...................... 4,753,000 8,363,000 13,450,000
Restaurant labor and related costs 4,100,000 6,154,000 12,239,000
Occupancy .......................... 1,369,000 4,274,000 4,855,000
Depreciation and amortization of
franchise agreements .............. 353,000 83,000 926,000
Advertising ........................ 616,000 1,159,000 1,819,000
Royalties .......................... 509,000 926,000 1,438,000
Other operating expenses ........... 1,276,000 2,264,000 3,220,000
------------------ ------------------ ------------------
Total restaurant operating
expenses ......................... 12,976,000 23,223,000 37,947,000
------------------ ------------------ ------------------
RESTAURANT CONTRIBUTION ............. $ 1,790,000 $ 3,732,000 $ 3,750,000
================== ================== ==================
</TABLE>
See notes to historical schedules of restaurant contribution.
F-24
<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.
1994 THROUGH THE YEAR ENDED FOR THE YEAR ENDED
NOVEMBER 30, 1994 DECEMBER 31, 1994 DECEMBER 31, 1994
----------------- ------------------ ------------------
<S> <C> <C> <C>
RESTAURANT SALES .................... $43,494,000 $10,627,000 $13,242,000
RESTAURANT OPERATING EXPENSES:
Cost of sales ...................... 14,133,000 3,451,000 4,203,000
Restaurant labor and related costs 10,733,000 2,810,000 3,664,000
Occupancy .......................... 3,607,000 903,000 1,234,000
Depreciation and amortization of
franchise agreements .............. 4,294,000 257,000 221,000
Advertising ........................ 2,166,000 475,000 538,000
Royalties .......................... 1,499,000 365,000 457,000
Other operating expenses ........... 3,486,000 1,002,000 1,261,000
----------------- ------------------ ------------------
Total restaurant operating
expenses ......................... 39,918,000 9,263,000 11,578,000
----------------- ------------------ ------------------
RESTAURANT CONTRIBUTION ............. $ 3,576,000 $ 1,364,000 $ 1,664,000
================= ================== ==================
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
STUART RAY
C&N DINING, INC. INVESTMENTS, INC.
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1994
------------------ ------------------
<S> <C> <C>
RESTAURANT SALES .................... $23,918,000 $36,968,000
RESTAURANT OPERATING EXPENSES:
Cost of sales ...................... 7,221,000 11,866,000
Restaurant labor and related costs 5,428,000 10,199,000
Occupancy .......................... 3,991,000 4,416,000
Depreciation and amortization of
franchise agreements .............. 40,167 776,000
Advertising ........................ 1,027,000 1,839,000
Royalties .......................... 822,000 1,275,000
Other operating expenses ........... 2,048,000 3,019,000
------------------ ------------------
Total restaurant operating
expenses ......................... 20,577,167 33,390,000
------------------ ------------------
RESTAURANT CONTRIBUTION ............. $ 3,340,833 $ 3,578,000
================== ==================
</TABLE>
See notes to historical schedules of restaurant contribution.
F-25
<PAGE>
HISTORICAL SCHEDULES OF RESTAURANT CONTRIBUTION
<TABLE>
<CAPTION>
QSC, INC. AND CURTIS JAMES
FRIEDMAN FOR THE RO-LANK, INC. FOR INVESTMENTS, INC.
YEAR ENDED THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1993 DECEMBER 31, 1993 DECEMBER 31, 1993
------------------ ------------------ ------------------
<S> <C> <C> <C>
RESTAURANT SALES .................... $33,365,000 $9,035,000 $11,252,000
RESTAURANT OPERATING EXPENSES:
Cost of sales ...................... 10,825,000 2,857,000 3,618,000
Restaurant labor and related costs 8,319,000 2,529,000 3,188,000
Occupancy .......................... 3,037,000 794,000 1,047,000
Depreciation and amortization of
franchise agreements .............. 4,299,000 481,000 226,000
Advertising ........................ 1,870,000 407,000 481,000
Royalties .......................... 1,151,000 310,000 388,000
Other operating expenses ........... 2,686,000 965,000 1,091,000
------------------ ------------------ ------------------
Total restaurant operating
expenses ......................... 32,187,000 8,343,000 10,039,000
------------------ ------------------ ------------------
RESTAURANT CONTRIBUTION ............. $ 1,178,000 $ 692,000 $ 1,213,000
================== ================== ==================
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
STUART RAY
C&N DINING, INC. INVESTMENTS, INC.
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1993 DECEMBER 31, 1993
------------------ ------------------
<S> <C> <C>
RESTAURANT SALES .................... $21,635,000 $34,327,000
RESTAURANT OPERATING EXPENSES:
Cost of sales ...................... 6,440,000 10,923,000
Restaurant labor and related costs 5,129,000 9,703,000
Occupancy .......................... 3,778,000 4,568,000
Depreciation and amortization of
franchise agreements .............. 39,000 959,000
Advertising ........................ 978,000 2,170,000
Royalties .......................... 743,000 1,201,000
Other operating expenses ........... 2,024,000 2,624,000
------------------ ------------------
Total restaurant operating
expenses ......................... 19,131,000 32,148,000
------------------ ------------------
RESTAURANT CONTRIBUTION ............. $ 2,504,000 $ 2,179,000
================== ==================
</TABLE>
See notes to historical schedules of restaurant contribution.
F-26
<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. On May 11, 1996, the
Company executed purchase agreements to acquire 40 Burger King restaurants
located in Michigan from Stuart Ray Investments, Inc. for $35,600,000 in
cash.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Historical Schedules of Restaurant Contribution (the "Schedules")
include operations of the acquired restaurants for the periods to the earlier
of the date of purchase by the Company or December 31, 1995, and have been
prepared pursuant to Article 3 of Regulation S-X, Section 210.3-02(a).
SALES -- Sales consist primarily of food and premium sales.
COST OF SALES -- Costs of sales consist primarily of restaurant and food
supplies, determined using the first-in, first-out (FIFO) method of inventory
valuation.
RESTAURANT LABOR AND RELATED COSTS --Restaurant labor and related costs
include managers' salaries, hourly wages and related payroll taxes and
benefits.
OCCUPANCY -- Occupancy costs consist of rents, licenses and permits, real
estate taxes and common area maintenance.
DEPRECIATION AND AMORTIZATION OF FRANCHISE AGREEMENTS -- Depreciation is
recorded using accelerated methods permissible under generally accepted
accounting principles over the following useful lives:
BUILDING IMPROVEMENTS ........................... 10-20 YEARS
FURNITURE, FIXTURES AND RESTAURANT EQUIPMENT ... 5-10 YEARS
The franchise agreements with BKC require the Entities to pay a franchise
fee for each restaurant opened. Amortization is recorded on the straight-line
method over the terms of the related franchise agreements. The franchise
agreements generally provide for a term of 20 years with renewal options upon
expiration.
ADVERTISING -- Under the franchise agreements with BKC, monthly
advertising fees are to be paid at 4% of restaurant food sales.
ROYALTIES -- Under the franchise agreements with BKC, monthly royalties
are to be paid at 3.5% of restaurant food sales.
OTHER OPERATING EXPENSES -- Other operating expenses include utilities,
repairs and maintenance, cleaning, security, uniforms, workmen's compensation
and training expenses.
GENERAL AND ADMINISTRATIVE EXPENSES (UNAUDITED) -- The Schedules of
Restaurant Contribution do not include amounts relative to general and
administrative expenses, such as supervisory management 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
F-27
<PAGE>
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
================= ================== ================== ===================
PROPOSED ACQUISITION
Stuart Ray ................ $281,000 $1,443,000 $1,294,000 $1,201,000
================= ================== ================== ===================
</TABLE>
* * * * * *
F-28
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO
WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH OFFER IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES
NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary ................................... 3
Summary Consolidated Financial Information .......... 6
Risk Factors ......................................... 8
Use of Proceeds ...................................... 15
Dividend Policy ...................................... 16
Dilution ............................................. 16
Capitalization ....................................... 17
Pro Forma Consolidated Financial Statements ......... 18
Selected Consolidated Financial Information ......... 25
Management's Discussion and Analysis of Financial
Condition and Results of Operations ................. 27
Business ............................................. 34
Management ........................................... 45
Principal Stockholders ............................... 53
Description of Capital Stock ......................... 55
Description of Certain Indebtedness .................. 59
Certain Transactions ................................. 62
Shares Eligible for Future Sale ...................... 66
Certain U.S. Tax Consequences to Non-U.S.
Stockholders ........................................ 68
Underwriting ......................................... 70
Legal Matters ........................................ 73
Experts .............................................. 73
Available Information ................................ 73
Index to Consolidated Financial Statements .......... F-1
</TABLE>
- -----------------------------------------------------------------------------
UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERINGS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, 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.
6,420,000 SHARES
[AMERIKING LOGO]
COMMON STOCK
P R O S P E C T U S
, 1996
SMITH BARNEY INC.
PAINEWEBBER INCORPORATED
EVEREN SECURITIES, INC.
<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 INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION, DATED JULY 10, 1996
PROSPECTUS
6,420,000 SHARES
[AMERIKING LOGO]
COMMON STOCK
All of the shares of common stock (the "Common Stock") of AmeriKing, Inc.
(the "Company") offered hereby are being sold by the Company. Of the
6,420,000 shares of Common Stock offered hereby, a total of 1,284,000 shares
are being offered hereby in an international offering outside the United
States and Canada (the "International Offering") by the Managers (as defined)
and a total of 5,136,000 shares are being offered by the U.S. Underwriters
(as defined) in a concurrent offering in the United States and Canada (the
"U.S. Offering" and, together with the International Offering, the
"Offerings").
Prior to the Offerings, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will
be between $14.00 and $16.00 per share. See "Underwriting" for information
relating to the factors considered in determining the initial public offering
price. The Common Stock has been approved for trading on the Nasdaq National
Market under the symbol "AKNG," subject to official notice of issuance.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
THESE 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 DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share $ $ $
------------- ----------------- ---------------
Total (3) $ $ $
</TABLE>
- -----------------------------------------------------------------------------
(1) For information regarding indemnification of the Managers and the U.S.
Underwriters, see "Underwriting."
(2) Before deducting expenses estimated at $ payable by the Company.
(3) The Company has granted the U.S. Underwriters a 30-day option to
purchase up to 963,000 additional shares of Common Stock solely to
cover over-allotments, if any. See "Underwriting." If such option is
exercised in full, the total Price to Public, Underwriting Discounts
and Commissions and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
The shares of Common Stock are being offered by the several Managers named
herein, subject to prior sale, when, as and if accepted by them and subject
to certain conditions. It is expected that certificates for the shares of
Common Stock offered hereby will be available for delivery on or about
, 1996, at the offices of Smith Barney Inc., 333 West 34th Street, New
York, New York 10001.
SMITH BARNEY INC.
PAINEWEBBER INTERNATIONAL
EVEREN SECURITIES, INC.
, 1996
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO
WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH OFFER IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES
NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary ................................... 3
Summary Consolidated Financial Information .......... 6
Risk Factors ......................................... 8
Use of Proceeds ...................................... 15
Dividend Policy ...................................... 16
Dilution ............................................. 16
Capitalization ....................................... 17
Pro Forma Consolidated Financial Statements ......... 18
Selected Consolidated Financial Information ......... 25
Management's Discussion and Analysis of Financial
Condition and Results of Operations ................. 27
Business ............................................. 34
Management ........................................... 45
Principal Stockholders ............................... 53
Description of Capital Stock ......................... 55
Description of Certain Indebtedness .................. 59
Certain Transactions ................................. 62
Shares Eligible for Future Sale ...................... 66
Certain U.S. Tax Consequences to Non-U.S.
Stockholders ........................................ 68
Underwriting ......................................... 70
Legal Matters ........................................ 73
Experts .............................................. 73
Available Information ................................ 73
Index to Consolidated Financial Statements .......... F-1
</TABLE>
- -----------------------------------------------------------------------------
UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERINGS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, 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.
<PAGE>
6,420,000 SHARES
[AMERIKING LOGO]
COMMON STOCK
P R O S P E C T U S
, 1996
SMITH BARNEY INC.
PAINEWEBBER INTERNATIONAL
EVEREN SECURITIES, INC.
APITAL PRINTING SYSTEMS]
<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 ....................................... 12,000
Printing and Engraving Expenses ....................... 150,000
Accounting Fees and Expenses .......................... 300,000
Attorneys' Fees and Expenses .......................... 600,000
Transfer Agent's and Registrar's Fees ................. 20,000
Blue Sky Fees and Expenses (including attorneys' fees) 20,000
NASDAQ Listing Fee .................................... 50,000
Miscellaneous ......................................... 1,047,766
Total ............................................... $2,240,500
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) The Delaware General Corporation Law (Section 145) gives Delaware
corporations broad powers to indemnify their present and former directors and
officers and those of affiliated corporations against expenses incurred in
the defense of any lawsuit to which they are made parties by reason of being
or having been such directors or officers, subject to specified conditions
and exclusions; gives a director or officer who successfully defends an
action the right to be so indemnified; and authorizes the Company to buy
directors' and officers' liability insurance. Such indemnification is not
exclusive of any other rights to which those indemnified may be entitled
under any by-laws, agreement, vote of stockholders or otherwise.
(b) The Amended and Restated Certificate of Incorporation of the Company
requires, and the Amended and Restated By-Laws of the Company provides for,
indemnification of directors, officers, employees and agents to the full
extent permitted by law.
(c) The U.S. Underwriting Agreement and the International Underwriting
Agreement (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
II-1
<PAGE>
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 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 U.S.
Underwriters and the Managers at the closings specified in the Underwriting
Agreement and the International Underwriting Agreement, respectively,
certificates in such denominations and registered in such names as required
by the U.S. Underwriters and the Managers 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
II-2
<PAGE>
contained in a form of prospectus filed by the Company pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<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 July 10, 1996.
AMERIKING, INC.
By /s/ Lawrence E. Jaro
-----------------------------------
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 statement has been signed by the following persons
in the capacities indicated on the 10th day of July, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------- ---------------------------------------------------
<S> <C>
*
- ----------------------------- Managing Owner, Chairman and Chief Executive
Lawrence E. Jaro Officer (Principal Executive Officer)
*
- -----------------------------
William C. Osborn Vice Chairman
*
- -----------------------------
Gary W. Hubert Director and Senior Vice President
*
- ----------------------------- 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/ Lawrence E. Jaro
- -----------------------------
As Attorney-in-Fact
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
1.1 Form of U.S. Underwriting Agreement .................................................. *
1.2+ Form of International Underwriting Agreement .........................................
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 ................................................. *
2.19 Form of Agreement and Plan of Merger, dated , 1996, by and among AmeriKing and
Jaro Enterprises, Inc., Jaro Restaurants, Inc., JB Restaurants, Inc., Castleking,
Inc. and White-Osborn Restaurants, Inc.
<PAGE>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
3.1 Amended and Restated Certificate of Incorporation of AmeriKing .......................
3.2 Amended and Restated Bylaws of AmeriKing .............................................
4.1 Stockholders Agreement, dated September 1, 1994, by and among AmeriKing and the
stockholders appearing on the signature pages thereto .............................. *
4.2 Consent and Amendment No. 1 to Stockholders Agreement, dated November 30, 1994, by
and among AmeriKing and the stockholders appearing on the signature pages thereto .. *
4.3 Consent and Amendment No. 2 to Stockholders Agreement, dated February 7, 1996, by and
among AmeriKing and the stockholders appearing on the signature pages thereto ...... *
4.4 Form of Amended and Restated Stockholders Agreement, dated , 1996, by and among
AmeriKing and the stockholders appearing on the signature pages thereto ............
4.5 Management Subscription Agreement, dated September 1, 1994, by and among AmeriKing,
Tabor Restaurant Associates, Inc., Jaro Enterprises, Inc., Jaro Restaurants, Inc.,
JB Restaurants, Inc., Castleking, Inc., White-Osborn Restaurants, Inc., Osburger,
Inc., Lawrence Jaro, William Osborn, Gary Hubert, Joel Aaseby, Donald Stahurski and
Scott Vasatka ...................................................................... *
4.6 Stock Option Agreement, dated September 1, 1994, between AmeriKing and Scott Vasatka *
4.7 Stock Option Agreement, dated September 1, 1994, between AmeriKing and Donald
Stahurski .......................................................................... *
4.8 Warrant Agreement, dated September 1, 1994, between AmeriKing and The First National
Bank of Boston ..................................................................... *
4.9 Common Stock Purchase Warrant, dated September 1, 1994, between AmeriKing and
BancBoston Investments Inc. ........................................................ *
4.10 First Amendment to Common Stock Purchase Warrant, dated November 30, 1994 ........... *
4.11 Second Amendment to Common Stock Purchase Warrant, dated February 7, 1996 ........... *
4.12 Amended and Restated Note, dated February 7, 1996, from AmeriKing to MCIT PLC in the
aggregate principal amount of $11,000,000 .......................................... *
4.13 Amended and Restated Deferred Limited Interest Guaranty, dated February 7, 1996, from
Enterprises to MCIT PLC ............................................................ *
4.14 Amended and Restated Note, dated February 7, 1996, from AmeriKing to Jaro
Enterprises, Inc. in the aggregate principal amount of $1,224,000 .................. *
4.15 Amended and Restated Note, dated February 7, 1996, from AmeriKing to Jaro
Restaurants, Inc. in the aggregate principal amount of $112,000 .................... *
4.16 Amended and Restated Note, dated February 7, 1996, from AmeriKing to JB Restaurants,
Inc. in the aggregate principal amount of $2,019,000 ............................... *
4.17 Amended and Restated Note, dated February 7, 1996, from AmeriKing to CastleKing, Inc.
in the aggregate principal amount of $385,769 ...................................... *
4.18 Amended and Restated Note, dated February 7, 1996, from AmeriKing to White-Osborn
Restaurants, Inc. in the aggregate principal amount of $659,231 .................... *
4.19 Securities Purchase Agreement, dated November 30, 1994, between AmeriKing and
BancBoston Investments, Inc. ....................................................... *
4.20 Common Stock Purchase Warrant, dated November 30, 1994, between AmeriKing and
BancBoston Investments, Inc. ....................................................... *
<PAGE>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
4.21 Junior Subordinated Note, dated November 30, 1994, from AmeriKing to BancBoston
Investments, Inc. in the aggregate principal amount of $600,000 .................... *
4.22 Secured Promissory Note, dated November 21, 1995, from AmeriKing Tennessee
Corporation I to BKC in the aggregate principal amount of $6,920,700 ............... *
4.23 Amendment to Second Promissory Note, dated May 21, 1996, from AmeriKing Tennessee
Corporation I to BKC in the aggregate principal amount of $6,093,067 ...............
4.24 Guaranty, dated November 21, 1995, from Lawrence Jaro and William Osborn to BKC ..... *
4.25 Ratification of Guaranty, May 21, 1996, from Lawrence Jaro and William Osborn to BKC
4.26 Promissory Note, dated November 29, 1995, from AmeriKing Colorado Corporation I to
Franchise Acceptance Corporation Limited in the aggregate principal amount of
$1,865,000 ......................................................................... *
4.27 Amendment to Promissory Note, dated December 14, 1995, from AmeriKing Colorado
Corporation I to Franchise Acceptance Corporation Limited .......................... *
4.28 Common Stock Purchase Warrant, dated February 7, 1996, from AmeriKing to PMI
Mezzanine Fund, L.P. ............................................................... *
4.29 Senior Subordinated Note, dated February 7, 1996, from Enterprises to PMI Mezzanine
Fund, L.P in the aggregate principal amount of $15,000,000. ........................ *
4.30 Subordinated Guaranty, dated February 7, 1996, from AmeriKing Virginia Corporation I
and AmeriKing Cincinnati Corporation I to PMI Mezzanine Fund, L.P. ................. *
4.31 Second Amended and Restated Revolving Credit Note, dated February 7, 1996, from
Enterprises to The First National Bank of Boston, the other lending institutions
listed on Schedule 1 thereto, and The First National Bank of Boston, as agent ...... *
4.32 Second Amended and Restated Term Loan A Note, dated February 7, 1996, from
Enterprises to The First National Bank of Boston, the other lending institutions
listed on Schedule 1 thereto, and The First National Bank of Boston, as agent ...... *
4.33 Second Amended and Restated Term Loan B Note, dated February 7, 1996, from
Enterprises to The First National Bank of Boston, the other lending institutions
listed on Schedule 1 thereto, and The First National Bank of Boston, as agent ...... *
4.34 Limited Guaranty, dated September 1, 1994, from AmeriKing to The First National Bank
of Boston, the other lending institutions listed on Schedule 1 thereto, and The
First National Bank of Boston, as agent ............................................ *
4.35 Guaranty, dated February 7, 1996, from AmeriKing Virginia Corporation I and AmeriKing
Cincinnati Corporation I to the First National Bank of Boston, the other lending
institutions listed on Schedule 1 thereto, and The First National Bank of Boston, as
agent .............................................................................. *
4.36 Unconditional Guaranty of Payment and Performance, dated February 7, 1996, from
Enterprises to FFCA Acquisition Corporation ........................................ *
4.37 Form of Amendment No. 1 to Common Stock Purchase Warrant, dated , 1996, from
AmeriKing to PMI Mezzanine Fund, L.P. ..............................................
4.38 Form of Amendment No. 1 to Option Agreement, dated , 1996, by and among
AmeriKing, Donald Stahurski and Scott Vasatka
<PAGE>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
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 .......................................................................... *
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 ........................... *
<PAGE>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
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 Amendment No. 1 to Management Consulting Agreement, dated February 7, 1996, by and
among TJC Management Corporation, AmeriKing and Enterprises ........................ *
10.33 Intercompany Management Consulting Agreement, dated September 1, 1994 between
Enterprises and AmeriKing .......................................................... *
10.34 Amended and Restated Tax Sharing Agreement, dated February 7, 1996, between
Enterprises and AmeriKing .......................................................... *
10.35 Employment and Non-Interference Agreement, dated September 1, 1994, between Lawrence
Jaro and Enterprises ............................................................... *
10.36 Employment and Non-Interference Agreement, dated September 1, 1994, between William
Osborn and Enterprises ............................................................. *
10.37 Employment and Non-Interference Agreement, dated September 1, 1994, between Gary
Hubert and Enterprises ............................................................. *
10.38 Employment and Non-Interference Agreement, dated September 1, 1994, between Joel
Aaseby and Enterprises ............................................................. *
<PAGE>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
10.39 Employment and Non-Interference Agreement, dated September 1, 1994, between Scott
Vasatka and Enterprises ............................................................ *
10.40 Form of Amended and Restated TJC Management Consulting Agreement, by and among
AmeriKing, Enterprises and TJC Management Corporation ..............................
10.41 Form of Indemnification Agreement by and among AmeriKing and each of the signatories
to this Registration Statement ..................................................... *
10.42 AmeriKing 1996 Outside Directors' Plan ...............................................
10.43 AmeriKing 1996 Long-Term Incentive Plan ..............................................
10.44 Lease Agreement for Westchester, Illinois headquarters ............................... *
10.45 Form of Recapitalization Agreement among AmeriKing and the stockholders appearing on
the signature pages thereto ........................................................
10.46 Form of Third Amended and Restated Revolving Credit and Term Loan Agreement, dated
, 1996, among AmeriKing, Enterprises, The First National Bank of Boston, the
other lending institutions listed thereto and The First National Bank of Boston, as
Agent ..............................................................................
10.47 Form of Employment and Non-Interference Agreement, dated as of , 1996, between
Lawrence Jaro and Enterprises ......................................................
10.48 Form of Employment and Non-Interference Agreement, dated as of , 1996, between
William Osborn and Enterprises .....................................................
10.49 Form of Employment and Non-Interference Agreement, dated as of , 1996, between
Gary Hubert and Enterprises ........................................................
10.50 Form of Employment and Non-Interference Agreement, dated as of , 1996, between
Joel Aaseby and Enterprises ........................................................
10.51 Form of Employment and Non-Interference Agreement, dated as of , 1996, between
Scott Vasatka and Enterprises ......................................................
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)
27 Financial Data Schedule .............................................................. *
</TABLE>
- ------------
* Previously filed.
+ To be filed by amendment.
++ 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.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of
_____, 1996, by and among AmeriKing, Inc., a Delaware corporation
("AmeriKing") and Jaro Enterprises, Inc., a [Colorado] corporation ("Jaro
Enterprises"), Jaro Restaurants, Inc., a [Colorado] corporation ("Jaro
Restaurants"), JB Restaurants, Inc., a [Colorado] corporation ("JB
Restaurants"), Castleking, Inc., a [Colorado] corporation ("Castleking"), and
White- Osborn Restaurants, Inc., a [Colorado] corporation ("White-Osborn," and
together with Jaro Enterprises, Jaro Restaurants, JB Restaurants and
Castleking, the "Merged Companies"). AmeriKing and the Merged Companies are
sometimes referred to herein as the "Constituent Corporations."
WHEREAS, Jaro Enterprises has an authorized capital of ________
shares of common stock, par value of $[.01] per share;
WHEREAS, Jaro Restaurants has an authorized capital of ________
shares of common stock, par value of $[.01] per share;
WHEREAS, JB Restaurants has an authorized capital of ________ shares
of common stock, par value of $[.01] per share;
WHEREAS, Castleking has an authorized capital of ________ shares of
common stock, par value of $[.01] per share;
WHEREAS, White-Osborn has an authorized capital of ________ shares of
common stock, par value of $[.01] per share;
WHEREAS, the Constituent Corporations propose that each of the Merged
Companies be merged with and into AmeriKing, with AmeriKing being the
surviving corporation (the "Merger"); and
WHEREAS, the respective boards of directors of the Constituent
Corporations deem it advisable and in the best interests of each such
corporation and their respective stockholders that each of the Merged
Companies be merged with and into AmeriKing as provided in this Agreement, and
they have accordingly taken all steps necessary in order to effectuate this
Agreement in accordance with the provisions of Section 252 of the General
Corporation Law of the State of Delaware (the "DGCL"). The boards of directors
of the Constituent Corporations intend that the adoption of such resolutions
and the execution of this Agreement constitute the adoption of a plan of
reorganization for each of the Constituent Corporation for purposes of Section
368 of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the
mutual covenants and agreements contained herein, the parties hereto covenant
and agree as follows:
<PAGE>
ARTICLE I
THE MERGER
On the Effective Date (as defined in Section 5.1 hereof) of the
Merger, each of the Merged Companies shall be merged with and into AmeriKing,
and AmeriKing shall continue to be governed by the laws of the State of
Delaware, and that the separate corporate existence of each of the Merged
Companies shall thereupon cease. A Certificate of Merger ("Certificate") in
the form attached hereto as Exhibit A shall be filed to effectuate and
evidence the Merger.
ARTICLE II
CERTIFICATE OF INCORPORATION AND BY-LAWS
On the Effective Date, the Certificate of Incorporation and By-laws
of AmeriKing, as in effect immediately after the Effective Date, shall be the
Certificate of Incorporation and By-laws for each of the Merged Companies
until duly amended in accordance with the DGCL. Such Certificate of
Incorporation and By-laws shall constitute the Certificate of Incorporation
and By-laws of each of the Merged Companies separate and apart from this
Agreement and may be separately certified as the Certificate of Incorporation
and By-laws of each of the Merged Companies.
ARTICLE III
MANNER AND BASIS OF CONVERTING SHARES
On the Effective Date of the Merger, the shareholders of each of the
Merged Companies shall receive those number of nonassessable shares of common
stock, par value $.01 per share, of AmeriKing as are set forth on Annex I
hereto. Thereafter, each class of common stock of each of the Merged Companies
shall be retired and no longer represent a class of equity securities of the
respective Merged Company.
ARTICLE IV
RIGHTS AND DUTIES OF AMERIKING
At the Effective Date of the Merger, the separate existence of each
of the Merged Companies shall cease for all purposes, and each of the Merged
Companies shall be merged with and into AmeriKing, which shall thereupon and
thereafter possess all the rights, privileges, powers and franchises, of a
public as well as of a private nature, and be subject to all the restrictions,
disabilities and duties of each of the Merged Companies; and all property,
real, personal and mixed and all debts due to any of the Merged Companies on
whatever account, as well for stock subscriptions and all other things in
action or belonging to each of
-2-
<PAGE>
such Merged Company shall be vested in AmeriKing; and all property, rights,
privileges, powers and franchises, and all and every other interest shall be
thereafter as effectively the property of AmeriKing as they were of the
several and respective Merged Companies, and the title to any real estate
vested by deed or otherwise, under the laws of the State of Delaware in any
way impaired by reason of the DGCL; provided that all rights of creditors and
all liens upon any property of any of the Merged Companies shall be preserved
unimpaired, and all debts, liabilities and duties of the respective Merged
Companies shall thenceforth attach to AmeriKing, and may be enforced against
it to the same extent as if said debts, liabilities and duties had been
incurred or contracted by it. If at any time AmeriKing shall consider or be
advised that any further assignment or assurances in law or any things are
necessary or desirable to vest in AmeriKing, according to the terms hereof,
the title of any property or rights of any of the Merged Companies, the last
acting officers and directors of any of the Merged Companies or the
corresponding officers and directors of AmeriKing shall and will execute and
make all such proper assignments and assurances and do all things necessary or
proper to vest title in such property or rights in AmeriKing, and otherwise to
carry out the purposes of this Agreement.
ARTICLE V
EFFECTIVE DATE
5.1 As used in this Agreement, the term "Effective Date" shall mean
the consummation of the initial public offering of common stock of AmeriKing
pursuant to the Registration Statement.
5.2 The Secretaries of each of the Merged Companies, by attesting to
and executing this Agreement, hereby certify that the requisite stockholder
vote for approval of the Merger by the stockholders of such Merged Company has
been obtained.
5.3 The Secretary of AmeriKing, by attesting to and executing this
Agreement, hereby certifies that no stockholder vote for approval of the
Merger by the stockholders of AmeriKing is required pursuant to Section 251(f)
of the DGCL and that the conditions specified in the first sentence of Section
251(f) have been satisfied.
ARTICLE VI
TERMINATION
This Agreement may be terminated at any time prior to the Effective
Date by the board of directors of either the Merged Companies or AmeriKing,
notwithstanding the stockholders of the Merged Companies have previously
approved this Agreement. In such event, this Agreement shall have no further
force or effect and there shall be no liability on the part of the parties
hereto except to the extent otherwise provided in this Agreement.
ARTICLE VII
-3-
<PAGE>
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, and all of such counterparts together shall
constitute one and the same instrument.
ARTICLE VIII
AMENDMENT
Subject to applicable law, this Agreement may be amended, modified or
supplemented only by written agreement of the Constituent Corporations, duly
authorized by each of their respective board of directors, at any time prior
to the Effective Date; provided, however, that no such amendment, modification
or supplement shall reduce the amount or change the form of the consideration
to be paid to the stockholders in accordance with Article III hereof.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
AMERIKING, INC.
By
---------------------------------------------
Name: Lawrence E. Jaro
Title: Chairman, Chief Executive Officer and
Managing Owner
ATTEST:
By
---------------------------
Name: Joel D. Aaseby
Title: Secretary
JARO ENTERPRISES, INC.
By
---------------------------------------------
Name:
Title:
ATTEST:
By
---------------------------
Name:
Title:
-5-
<PAGE>
JARO RESTAURANTS, INC.
By
------------------------------------
Name:
Title:
ATTEST:
By
---------------------------
Name:
Title:
JB RESTAURANTS, INC.
By
------------------------------------
Name:
Title:
ATTEST:
By
---------------------------
Name:
Title:
-6-
<PAGE>
CASTLEKING, INC.
By
------------------------------------
Name:
Title:
ATTEST:
By
---------------------------
Name:
Title:
WHITE-OSBORN RESTAURANTS, INC.
By
------------------------------------
Name:
Title:
ATTEST:
By
---------------------------
Name:
Title:
-7-
<PAGE>
ANNEX I
SHARE DISTRIBUTION
JARO ENTERPRISES, INC.
Percentage Ownership/ Number of AmeriKing
Shareholders Number of Shares Shares to Receive
- ------------ --------------------- -------------------
Larry Jaro
JARO RESTAURANTS, INC.
Percentage Ownership/ Number of AmeriKing
Shareholders Number of Shares Shares to Receive
- ------------ --------------------- -------------------
Larry Jaro
JB RESTAURANTS, INC.
Percentage Ownership/ Number of AmeriKing
Shareholders Number of Shares Shares to Receive
- ------------ --------------------- -------------------
Larry Jaro
CASTLEKING, INC.
Percentage Ownership/ Number of AmeriKing
Shareholders Number of Shares Shares to Receive
- ------------ --------------------- -------------------
Bill Osborn
WHITE-OSBORN RESTAURANTS, INC.
Percentage Ownership/ Number of AmeriKing
Shareholders Number of Shares Shares to Receive
- ------------ --------------------- -------------------
Bill Osborn
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
AMERIKING, INC.
The undersigned, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, as amended
(the "GCL"), DOES HEREBY CERTIFY as follows:
1. The Certificate of Incorporation of AmeriKing, Inc. (the
"Corporation") was filed in the Office of the Secretary of State of the State
of Delaware on August 17, 1994. The original name under which the Corporation
was incorporated was "NRE Holdings, Inc."
2. In the manner prescribed by Sections 242 and 245 of the GCL,
resolutions were duly adopted by the Board of Directors and the stockholders
of the Corporation, respectively, duly adopting this Amended and Restated
Certificate of Incorporation.
3. Pursuant to the provisions of Section 103(d) of the GCL, this
Amended and Restated Certificate of Incorporation is not to become effective
until 10:00 AM New York time on ________, 1996 (the "Effective Date").
4. On ______, 1996 the Corporation's shareholders approved a
___-to-___ stock split of the Corporation securities (the "Stock Split").
5. The text of the Certificate of Incorporation, as amended and
restated herein, shall, at the Effective Date read as follows:
* * *
FIRST: The name of the Corporation is "AmeriKing, Inc."
SECOND: The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, in the city of Wilmington, County of
New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
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
<PAGE>
organized under the GCL; provided that, as long as the Corporation owns,
directly or indirectly, Burger King restaurants, the sole business purpose
shall be for the investment in and operation of restaurants in which the
Burger King Corporation is either (i) the exclusive franchisor or (ii)
co-franchisor in a dual-use restaurant.
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 __________ (____) shares, consisting of:
(i) _______ shares of common stock, par value of $.01 per
share (the "Common Stock");
(ii) ______ shares of non-voting common stock, par value of
$.01 per share (the "Non-Voting Common Stock"); and
(iii) 1,000,000 shares of preferred stock, par value of $.01
per share (the "Preferred Stock").
4.1 Common Stock. A statement of the designations, powers,
preferences, rights, qualifications, limitations and restriction in respect to
the shares of Common Stock is as follows:
(a) Dividends. The Board of Directors of the Corporation may
cause dividends to be paid to the holders of shares of Common Stock out of
funds legally available for the payment of dividends by declaring an amount
per share as a dividend. When and as dividends are declared, whether payable
in cash, in property or in shares of stock or other securities of the
Corporation, the holders of Common Stock shall be entitled to share ratably
according to the number of shares of Common Stock held by them, in such
dividends. The board of directors may set apart fund legally available for the
payment of dividends, a reserve or reserves for any proper purpose, and may
from time to time, in its absolute judgment an discretion, increase, abolish,
diminish and vary any reserve or reserves so set apart.
(b) Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of Common Stock shall be entitled to share ratably,
according to the number of shares of Common Stock held by them, in all
remaining assets of the Corporation available for distribution to its
shareholders.
(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 shareholders of the Corporation shall be
entitled to vote, and each holder of Common Stock shall be entitled to one
vote for each share of such stock held by him.
-2-
<PAGE>
4.2 Nonvoting Common Stock. Except with respect to the following
rights, all designations, powers, preferences, rights, qualifications,
limitations and restriction in respect of the shares of Non-Voting Common
Stock are identical to those of the shares of the Common Stock:
(a) Dividends. Whenever the Board of Directors of the
Corporation declares a dividend on the Common Stock, the Board of Directors of
the Corporation shall simultaneously declare a dividend on the Non-Voting
Common Stock in an amount per share equal to the dividend declared per share
of Common Stock, except that any dividends payable on the Common Stock in
additional shares of capital stock of the Corporation shall be payable to
holders of Non-Voting Common Stock in non-voting capital stock of the
Corporation which is otherwise identical to capital stock to be issued to the
holders of Common Stock. When and as dividends are declared, whether payable
in cash, in property or in shares of stock or other securities of the
Corporation, the holders of Non-Voting Common Stock shall be entitled to share
ratably according to the number of shares of NonVoting 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 Non-Voting 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 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
-3-
<PAGE>
power to vote under any applicable law, regulation, rule or other governmental
requirement (and such statement will obligate the Corporation to issue such
Common Stock). Such conversion will be deemed to have been effected as of the
close of business on the date on which such certificate or certificates have
been surrendered and such notice has been received, and at such time the
rights of the holder will cease and the person or persons in whose name or
names the certificate or certificates for shares of Common Stock are to be
issued upon such conversion will be deemed to have become the holder or holder
of record of the shares of Common Stock represented thereby.
(iii) Promptly after such surrender and the receipt of such written
notice, the Corporation will issue and deliver in accordance with the
surrendering holder's instructions (i) the certificate or certificates for the
Common Stock issuable upon such conversion and (ii) a certificate representing
any Non-Voting Common Stock which was represented by the certificate or
certificates delivered to the Corporation in connection with such conversion
but which was not converted.
(iv) The Corporation will at all times reserve and keep available out
of its authorized but unissued shares of Common Stock or its treasury shares,
solely for the purpose of issue upon the conversion of the Non-Voting Common
Stock as provided in this paragraph (c), such number of shares of Common Stock
as shall then be issuable upon the conversion of all then outstanding shares
of Non-Voting Common Stock (assuming that all such shares of Non-Voting Common
Stock are held by persons entitled to convert such shares into Common Stock).
(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.
4.3 Preferred Stock. The Board of Directors is authorized, subject to
limitation prescribed by law and the provisions of this ARTICLE FOURTH, to
provide for the issuance of the shares of Preferred Stock in series, and by
filing an article of amendment pursuant to Section 151 of the GCL, to
establish from time to time the number of shares to be included in each such
class or series within a class, and to fix the designation, powers,
preferences and rights of the shares of each such class or series within a
class and the qualifications, limitations or restrictions thereof.
The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
-4-
<PAGE>
(a) The number of shares constituting the series and the
distinctive designation of the series;
(b) The dividend rate (or the method of calculation of
dividends) on the shares of the series, whether dividends will be cumulative,
and if so, from which date or dates, and the relative rights of priority, if
any, of payment of dividends on shares of the series;
(c) Whether the series shall have voting rights, in addition
to the voting rights provided by law, and if so, the terms of such voting
rights;
(d) Whether the series shall have conversion privileges,
and, if so, the terms and conditions of such conversion, including provision
for adjustment of the conversion rate in such events as the Board of Directors
shall determine;
(e) Whether or not the shares of that series shall be
redeemable or exchangeable, and, if so, the terms and conditions of such
redemption or exchange, as the case may be, including the date or dates upon
or after which they shall be redeemable or exchangeable, as the case may be,
and the amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates;
(f) Whether the series shall have a sinking fund for the
redemption or purchase of shares of that series, and if so, the terms and
amount of such sinking fund;
(g) The rights of the shares of the series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and the relative rights or priority, if any, of payment of shares
of the series;
(h) The par value for any shares of the series; and
(i) Any other relative rights, preferences and limitations
of that series.
Except for any difference so provided by 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.
-5-
<PAGE>
FIFTH: At all meetings of shareholders, each shareholder shall be
entitled to vote, in person or by proxy, each share of voting stock owned by
such shareholder of record on the record date for the meeting. At each meeting
of the shareholders, except where otherwise provided by these Articles, the
By-laws of the Corporation, or required by law, the holders of at least
one-third of the issued and outstanding shares of stock of the Corporation
entitled to vote at such meeting, present in person or represented by proxy,
shall constitute a quorum for the transaction of business. When a quorum is
present or represented at any meeting, the affirmative vote of the holders of
a majority of the stock having voting power present in person or represented
by proxy shall decide any question, matter or proposal brought before such
meeting unless the question is one upon which, by express provision of law,
these Articles, the By-laws or, with respect to a class or series of Preferred
Stock, the terms of the resolution or resolutions adopted by the Board of
Directors pursuant to ARTICLE FOURTH applicable thereto, a different vote is
required, in which case such express provision shall govern and control the
decision of such question. Any shareholder who is in attendance at a meeting
of shareholders either in person or represented by proxy, but who abstains
from the vote on any matter, shall not be deemed present or represented at
such meeting for purposes of the preceding sentence with respect to such vote,
but shall be deemed present or represented at such meeting for all other
purposes.
SIXTH:
6.1 Location for Shareholder Meetings; Keeping of Books and Records.
Meetings of shareholders may be held within or outside the State of Illinois
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 Illinois 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.
6.2 Shareholder Action. Any action required or permitted to be taken
by the shareholders must be effected at a duly called annual or special
meeting of such shareholders, and may not be effected by a consent in writing
by any such shareholders.
6.3 Special Shareholders Meetings. Except as otherwise required by
law, special meetings of the Corporation's shareholders may be called only by
(i) the Board of Directors pursuant to a resolution approved by the
affirmative vote of a majority of the directors then in office, (ii) the
Chairman of the Board, if one is elected, or (iii) the President. Only those
matters set forth in the notice of the special meeting may be considered or
acted upon at such special meeting, unless otherwise provided by law.
Notwithstanding the foregoing, whenever 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, such holders may call, pursuant to the terms of
the resolution or resolutions adopted by the Board of Directors pursuant to
ARTICLE FOURTH hereto, special meetings of holders of such Preferred Stock.
SEVENTH:
-6-
<PAGE>
7.1 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, except as may be provided by the resolution or resolutions
adopted by the directors of the Corporation in respect of Preferred Stock
adopted pursuant to ARTICLE FOURTH hereto, but such number shall in no case be
less than one (1) and nor more than thirteen (13). 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.
7.2 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 if less than a quorum, and shall hold office until the
next shareholder's meeting at which directors are elected and his successor is
elected and qualified or until his earlier death, resignation, retirement,
disqualification or removal from office.
7.3 Removal. Any director may be removed only for cause 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 shareholders for which notice, stating the
purpose, or purposes, of the meeting is the removal of the director, is given.
7.4 No Written Ballot. Election of directors need not be by written
ballot, unless the By-laws of the Corporation provide otherwise.
7.5 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
applicable thereto, and each director so elected shall not be subject to the
provisions of this ARTICLE SEVENTH unless otherwise provided therein.
EIGHTH: 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
shareholders or any class thereof, as the case may be, it is further provided:
-7-
<PAGE>
(1) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
(2) The directors shall have the power to make, alter, amend, change,
add to or repeal the By-laws of the Corporation.
(3) 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, these Articles, and the By-laws.
NINTH:
9.1 Limits on Director Liability. Directors of the Corporation shall
have no personal liability to the Corporation or its shareholders for monetary
damages for breach of conduct as a director; provided that nothing contained
in this ARTICLE NINTH shall 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. This 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. If the GCL is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then by virtue of
this ARTICLE NINTH the liability of a Director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the GCL, as so
amended.
9.2 Indemnification.
(a) 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 is or was a director or officer of the Corporation (and the
Corporation, in the discretion of the Board, may so indemnify a person by
reason of the fact that he 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 in connection with such
action, suit or proceeding if, in the case of conduct in his official capacity
with the Corporation, he acted in good faith and in the Corporation's best
interests, and in all other cases, he acted in good faith and was at least not
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
-8-
<PAGE>
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 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.
(b) Actions By or in the Right of the Company. 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 is or was a director or officer of the
Corporation (and the Corporation, in the discretion of the Board, may so
indemnify a person by reason of the fact that he 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 in connection with the defense or settlement of such action or suit if,
in the case of conduct in his official capacity with the Corporation, he acted
in good faith and in the Corporation's best interests, and in all other cases,
he acted in good faith and was at least not 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 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 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.
Notwithstanding the foregoing, the Corporation shall be required to indemnify
an officer or director in connection with an action, suit or proceeding
-9-
<PAGE>
initiated by such person only if such action, suit or proceeding was
authorized by the Board 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.
(c) Indemnify if 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 (a) and (b) of this Section 2, or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
(d) Standard of Conduct. Except in a situation governed by subsection
(c) of this Section 2, any indemnification under subsections (a) and (b) of
this Section 2 (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 has met the applicable standard of conduct set forth
in subsections (a) and (b) of this Section 2. Such determination shall be made
(1) by the Board 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
shareholders, 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 (d) may in
either event be made by the written consent of the majority required by each
clause.
(e) Advancement of Expenses. Expenses (including attorneys' fees) of
each officer and directory 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 he is not entitled to be
indemnified by the Corporation as authorized in the Article and (ii) a written
affirmation of director's good faith belief that he has performed his duty to
the company, 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 deems appropriate.
(f) Nonexclusivity. The indemnification and advancement of expenses
provided by, or granted pursuant to, this ARTICLE NINTH 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 shareholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office.
-10-
<PAGE>
(g) 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 his
status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of the GCL.
(h) Definitions.
(1) For purposes of this ARTICLE NINTH, 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 NINTH with respect to the resulting or surviving Corporation as he
would have with respect to such constituent Corporation if its separate
existence had continued.
(2) 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 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 NINTH.
(3) The indemnification and advancement of expenses provided by, or
granted pursuant to, this ARTICLE NINTH 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.
(4) The right to indemnification conferred by this ARTICLE NINTH
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
-11-
<PAGE>
of such person for or with respect to any act or omission of such person
occurring prior to such amendment or repeal.
(5) A person shall be deemed to have acted in good faith and in a
manner he 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 conduct was unlawful, if his
action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him 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 2(a) or Section 2(b) of this ARTICLE
NINTH, as the case may be.
(i) 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.
(j) Effect of Amendments. Neither the amendment, change, alteration
nor repeal of this ARTICLE NINTH, nor the adoption of any provision of these
Articles, the By-laws of the Corporation, nor, to the fullest extent permitted
by the GCL, any modification of law, shall eliminate or reduce the effect of
this ARTICLE NINTH or the rights or any protections afforded under this
ARTICLE NINTH in respect of any acts or omissions occurring prior to such
amendment, repeal, adoption or modification.
TENTH: The Corporation reserves the right to repeal, alter or amend
these Articles in the manner now or hereafter prescribed by statute. No
repeal, alteration or amendment of these Articles 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 shareholders.
ELEVENTH: The Corporation has elected to not be governed by Section
203 of the GCL.
-12-
<PAGE>
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.
-13-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by its President and
attested to by its Secretary.
AMERIKING, INC.
By:
-----------------------------------
Name: Lawrence E. Jaro
Title: President
ATTEST:
By:
--------------------------
Name: Joel Aaseby
Title: Secretary
-14-
=============================================================================
AMERIKING, INC.
Incorporated under the laws
of the State of Delaware
-------------------------
AMENDED AND RESTATED BY-LAWS
-------------------------
Effective as of ___________, 1996
=============================================================================
<PAGE>
AMENDED AND RESTATED BY-LAWS
of
AMERIKING, INC.
PREAMBLE
These By-laws are subject to, and governed by, the General
Corporation Law of the State of Delaware (the "GCL") and the Amended and
Restated Certificate of Incorporation of Ameriking, Inc., a Delaware
corporation (the "Corporation") then in effect (the "Certificate"). In the
event of a direct conflict between the provisions of these By-laws and (i) the
mandatory provisions of the GCL or the provisions of the Certificate, such
provisions of the GCL or the Certificate, as the case may be, will be
controlling or (ii) a permissive provision of the GCL, such provision of the
GCL shall be controlling unless otherwise decided by the Corporation's Board
of Directors (the "Board").
ARTICLE I
Offices
SECTION 1. Registered Office. The registered office of Ameriking,
Inc. in the State of Delaware shall be at Corporation Trust Center, 1209
Orange Street, City of Wilmington, County of New Castle, and the registered
agent in charge thereof shall be The Corporation Trust Company.
SECTION 2. Other Offices. The Corporation may also have an office or
offices at any other place or places within or outside the State of Delaware.
ARTICLE II
Meetings of Shareholders
SECTION 1. Annual Meetings. The annual meeting of the shareholders
for the election of directors, and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, date and
hour as shall be fixed by the Board, within or without the State of Delaware,
and designated in the notice or waiver of notice thereof.
SECTION 2. Special Meetings. Except as otherwise required by law,
special meetings of the shareholders may be called only in accordance with
the provisions of the Certificate.
<PAGE>
SECTION 3. Notice of Meetings. Except as otherwise required by law or
by the Certificate or these By-laws, notice of each annual or special meeting
of the shareholders shall be given to each shareholder of record entitled to
vote at such meeting and, if and to the extent required by law, to each
shareholder of the corporation, not less than ten (10) nor more than sixty
(60) days before the day on which the meeting is to be held, except that
notice of a meeting to act on an amendment to the Certificate, a plan of
merger or share exchange, a proposed sale, lease, exchange or other
disposition of all or substantially all of the assets of the Corporation other
than in the usual or regular course of business, or the dissolution of the
Corporation shall be given no fewer than thirty (30) days nor more than sixty
(60) days before the meeting date. Written notice may be transmitted by mail
(postage prepaid), private carrier, or personal delivery; telegraph or
teletype; cable or other telephonic transmission to the shareholder at his
address as it appears in the records of the Corporation. If these forms of
written notice are impracticable in the view of the Board, the Chairman of the
Board, the Chief Executive Officer or the Secretary, written notice may be
transmitted by an advertisement in a newspaper of general circulation in the
area where published. If mailed, such notice shall be deemed effective when
deposited in the United States mail, first-class postage prepaid, properly
addressed to the shareholder at his address as it appears in the Corporation's
records. Notice dispatched by telegraph, teletype, or facsimile equipment
shall be deemed effective when dispatched to the shareholder's address,
telephone number or other number appearing on the records of the corporation.
Any notice given by publication as herein provided shall be deemed effective
five (5) days after first publication. Every such notice shall state the
place, the date and hour of the meeting, and, in case of a special meeting,
the purpose or purposes for which the meeting is called. Except as otherwise
required by law, notice of any meeting of shareholders shall not be required
to be given to any shareholder who shall attend such meeting in person or by
proxy, or who shall, in person or by attorney thereunto authorized, waive such
notice in writing to be delivered to the Corporation (for inclusion in the
minutes or the corporate records), either before or after such meeting. Except
as otherwise provided in these By-laws, neither the business to be transacted
at, nor the purpose of, any meeting of the shareholders need be specified in
any such notice or waiver of notice. Notice of any adjourned meeting of
shareholders shall not be required to be given, except when expressly required
by law.
SECTION 4. Quorum. At each meeting of the shareholders, except where
otherwise provided by the Certificate or these By-laws, the holders of at
least one-third of the issued and outstanding shares of stock of the
Corporation entitled to vote at such meeting, present in person or represented
by proxy, shall constitute a quorum for the transaction of business, except as
otherwise required by law, these By-laws or the Certificate. In the absence of
a quorum a majority in interest of the shareholders present in person or
represented by proxy and entitled to vote, or, in the absence of all the
shareholders entitled to vote, any officer entitled to preside at, or act as
secretary of, such meeting, shall have the power to adjourn the meeting to
another time and/or place, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At any such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
called. If the adjournment is for more than
-2-
<PAGE>
one hundred and thirty (30) 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 shareholder of record entitled to vote at the meeting.
Once a share is represented for any purpose at a meeting other than solely to
object to holding the meeting or transacting business thereat, it is deemed
present for quorum purposes for the remainder of the meeting and any
adjournment thereof (unless a new record date is or must be set for the
adjourned meeting) notwithstanding the withdrawal of enough shareholders to
leave less than a quorum.
SECTION 5. Organization. At each meeting of the shareholders, one
of the following shall act as chairman of the meeting and preside thereat, in
the following order of precedence:
(a) the Chairman;
(b) the Chief Executive Officer;
(c) the President;
(d) any Vice President;
(e) any officer of the Corporation designated by the Board
to act as chairman of such meeting and to preside thereat; or
(f) a shareholder of record who shall be chosen chairman of
such meeting by a majority in voting interest of the shareholders
present in person or by proxy and entitled to vote thereat.
The Secretary or, if he shall be presiding over such meeting in
accordance with the provisions of this Section 5 or if he shall be absent from
such meeting, the person (who shall be an Assistant Secretary, if an Assistant
Secretary has been appointed and is present) whom the chairman of such meeting
shall appoint, shall act as secretary of such meeting and keep the minutes
thereof.
SECTION 6. Order of Business. The order of business at each meeting
of the shareholders shall be determined by the chairman of such meeting, but
such order of business may be changed by a majority in voting interest of
those present in person or by proxy at such meeting and entitled to vote
thereat.
SECTION 7. Voting. Except as may otherwise be required by law or
these By-laws, shareholders shall have the voting rights specified in the
Certificate.
SECTION 8. Informal Action by Shareholders. Any action required or
permitted to be taken by the shareholders must be effected at a duly called
annual or special meeting of such shareholders and may not be effected by a
consent in writing by any such shareholders.
-3-
<PAGE>
SECTION 9. Voting Procedures and Inspections of Elections.
(a) The Corporation shall, in advance of any meeting of
shareholders, appoint one or more inspectors to act at the meeting
and make a written report thereof. The Corporation may designate one
or more persons as alternate inspectors to replace any inspector who
fails to act. If no inspector or alternate is able to act at a
meeting of shareholders, the person presiding at the meeting shall
appoint one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his ability.
(b) The inspectors shall (i) ascertain the number of shares
outstanding and the voting power of each, (ii) determine the shares
represented at a meeting and the validity of proxies and ballots,
(iii) count all votes and ballots, (iv) determine and retain for a
reasonable period a record of the disposition of any challenges made
to any determination by the inspectors, and (v) certify their
determination of the number of shares represented at the meeting, and
their count of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the
performance of the duties of the inspectors.
(c) The date and time of the opening and the closing of the
polls for each matter upon which the shareholders will vote at a
meeting shall be announced at the meeting. No ballot, proxies or
votes, nor any revocations thereof or changes thereto, shall be
accepted by the inspectors after the closing of the polls unless a
state court in Washington, upon application by a shareholder, shall
determine otherwise.
(d) In determining the validity and counting of proxies and
ballots, the inspectors shall be limited to an examination of the
proxies, any envelopes submitted with those proxies, ballots and the
regular books and records of the Corporation, except that the
inspectors may consider other reliable information for the limited
purpose of reconciling proxies and ballots submitted by or on behalf
of banks, brokers, their nominees or similar persons which represent
more votes than the holder of a proxy is authorized by the record
owner to cast or more votes than the shareholder holds of record. If
the inspectors consider other reliable information for the limited
purpose permitted in this Section 9, the inspectors at the time they
make their certification pursuant to subsection (b)(v) of this
Section 9 shall specify the precise information considered by them
including the person or persons from whom they obtained the
information, when the information was obtained, the means by which
the information was obtained and the basis for the inspectors' belief
that such information is accurate and reliable.
SECTION 10. Advance Notification of Proposals at Shareholders'
Meetings. If a shareholder desires to submit a proposal for consideration at
an annual or special shareholders' meeting, or to nominate persons for
election as directors at any shareholders'
-4-
<PAGE>
meeting duly called for the election of directors, written notice of such
shareholders' intent to make such a proposal or nomination must be given and
received by the Secretary of the Corporation at the principal executive
offices of the Corporation either by personal delivery or by United States
mail not later than (i) with respect to an annual meeting of shareholders, 60
days prior to the anniversary date of the immediately preceding annual
meeting, and (ii) with respect to a special meeting of shareholders, the close
of business on the tenth day following the date on which notice of such
meeting is first sent or given to shareholders. Each notice shall describe the
proposal or nomination in sufficient detail for the proposal or nomination to
be summarized on the agenda for the meeting and shall set forth: (i) the name
and address, as it appears on the books of the Corporation, of the shareholder
who intends to make the proposal or nomination; (ii) a representation that the
shareholder is a holder of record of stock of the Corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
present such proposal or nomination; and (iii) the class and number of shares
of the Corporation which are beneficially owned by the shareholder. In
addition, in the case of a shareholder proposal, the notice shall set forth
the reasons for conducting such proposed business at the meeting and any
material interest of the shareholder in such business. In the case of a
nomination of any person for election as a director, the notice shall set
forth: (i) the name and address of any person to be nominated; (ii) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder; (iii) such other information regarding such nominee proposed by
such shareholder as would be required to be included in a proxy statement
filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended; and (iv) the consent of each nominee to serve as a director of the
Corporation if so elected. The presiding officer of the annual or special
meeting shall, if the facts warrant, refuse to acknowledge a proposal or
nomination not made in compliance with the foregoing procedure, and any such
proposal or nomination not properly brought before the meeting shall not be
considered.
SECTION 11. Advisory Shareholder Votes. In order for the shareholders
to adopt or approve any precatory proposal submitted to them for the purpose
of requesting the Board to take certain actions, a majority of the outstanding
stock of the Corporation entitled to vote thereon must be voted in favor of
the proposal in accordance with Section 7 of this Article II.
SECTION 12. List of Shareholders. It shall be the duty of the
Secretary or other officer of the Corporation who shall have charge of its
stock ledger to prepare and make, at least 10 days before every meeting of the
shareholders, a complete list of the shareholders entitled to vote thereat,
arranged in alphabetical order, and showing the address of each shareholder
and the number of shares registered in the name of each shareholder. Such list
shall be open to the examination of any shareholder, shareholder's agent, or
shareholder's attorney, for any purpose germane to any such meeting, during
ordinary business hours, for a period of at least 10 days prior to such
meeting, either at a place within the city where such meeting is to be held,
which place shall be specified in the notice of the meeting or, if
-5-
<PAGE>
not so specified, at the place where the meeting is to be held. Such 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 shareholder, shareholder's
agent or shareholder's attorney during the meeting or adjournment.
SECTION 13. Proxies. A shareholder may vote his shares either in
person or by proxy. A shareholder may appoint a proxy to vote or otherwise act
for the shareholder (including authorizing the proxy to receive, or to waive,
notice of any shareholders' meeting within the effective period of such proxy)
by signing an appointment form, either personally or by the shareholders'
attorney-in-fact. An appointment of a proxy is effective when received by the
Secretary or other office or agent authorized to tabulate votes and is
effective for eleven (11) months unless a longer period is expressly provided
in the appointment form. The proxy's authority may be limited to a particular
meeting or may be general and authorize the proxy to represent the shareholder
at any meeting of shareholders held within the time provided in the
appointment form. Subject to the GCL and to any express limitation on the
proxy's authority appearing on the face of the appointment form, the
Corporation is entitled to accept the proxy's vote or other action as that of
the shareholder making the appointment.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business, property and affairs of the
Corporation shall be managed by or under the direction of the Board, 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 directed or required to be
exercised or done by the shareholders.
SECTION 2. Number and Term of Office. The number of directors shall
be fixed in accordance with the Certificate. Directors need not be
shareholders. Each director shall hold office until his successor is elected
and qualified, or until his earlier death, resignation, retirement,
disqualification or removal in the manner hereinafter provided. The number of
directors may be changed from time to time by amendment to these By-laws or
the Certificate, but no decrease in the number of directors shall have the
effect of shortening the term of any incumbent director.
SECTION 3. Election of Directors. At each meeting of the shareholders
for the election of directors at which a quorum is present, the persons
receiving the greatest number of votes, up to the number of directors to be
elected, of the shareholders present in person or by proxy and entitled to
vote thereon, shall be the directors; provided that for purposes of such vote
no shareholder shall be allowed to cumulate his votes.
SECTION 4. Resignation and Vacancies. Any director may resign at
any time by giving written notice to the Board, the Chairman, the Chief
Executive Officer or the Secretary. Such resignation shall take effect at the
time specified therein or, if the time be
-6-
<PAGE>
not specified, upon delivery thereof; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it
effective.
Except as otherwise required by law, vacancies on the Board and newly
created directorships 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 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 5. Meetings.
(a) Regular Meetings. As soon as practicable after each
annual election of directors, the Board shall meet for the purpose of
organization and the transaction of other business, unless it shall
have transacted all such business by written consent pursuant to
Section 6 of this Article III.
(b) Special Meetings. Other meetings of the Board shall
be held at such times and places as the Board, the Chairman, the
Chief Executive Officer or any two directors shall from time to time
determine.
(c) Notice of Meetings. Notice shall be given to each
director for each regular and special meeting, including the time,
place and purpose of such meeting. Notice of each such meeting shall
be mailed to each director, addressed to him at his residence or
usual place of business, at least two days before the date on which
such meeting is to be held, or shall be sent to him at such place by
telegraph, cable, wireless or other form of recorded communication,
or be delivered personally or by telephone not later than the day
before the day on which such meeting is to be held, but notice need
not be given to any director who shall attend such meeting. A written
waiver of notice, signed by the person entitled thereto and delivered
to the Corporation, whether before or after the time of the meeting
stated therein, shall be deemed equivalent to notice.
(d) Place of Meetings. The Board may hold its meetings at
such place or places within or outside the State of Delaware as the
Board may from time to time determine, or as shall be designated in
the respective notices or waivers of notice thereof.
(e) Quorum and Manner of Acting. A majority of the total
number of directors then in office shall be present in person at any
meeting of the Board in order to constitute a quorum for the
transaction of business at such meeting, and the vote of a majority
of those directors present at any such meeting at which a quorum is
present shall be necessary for the passage of any resolution or act
of the Board, except as otherwise expressly required by law, the
Certificate or these By-laws. In the absence of a quorum for any such
meeting, a majority of the directors present thereat may
-7-
<PAGE>
adjourn such meeting from time to time until a quorum shall be
present and no further notice thereof need be given. A director who
is in attendance at a meeting of the Board but who abstains from the
vote on any matter by announcing his abstention to the person acting
as secretary of the meeting for inclusion in the minutes and not
voting on such matter shall not be deemed present at such meeting for
purposes of the preceding sentence with respect to such vote, but
shall be deemed present at such meeting for all other purposes.
(f) Organization. At each meeting of the Board, one of the
following shall act as chairman of the meeting and preside thereat,
in the following order of precedence:
(1) the Chairman;
(2) the Chief Executive Officer (if a director); or
(3) a person designated by the Board.
The Secretary or, in the case of his absence, any person (who shall
be an Assistant Secretary, if an Assistant Secretary has been
appointed and is present) whom the chairman of the meeting shall
appoint shall act as secretary of such meeting and keep the minutes
thereof.
SECTION 6. Directors' Consent in Lieu of Meeting. Unless otherwise
restricted by the Certificate or these By-laws, any action required or
permitted to be taken at any meeting of the Board or of any committee thereof
may be taken without a meeting, without prior notice and without a vote, if
one or more written consents, setting forth the action so taken, are signed by
all the members of the Board or committee, either before or after the action
taken, and such consent is filed with the minutes of proceedings of the Board
or committee. Action taken by written consent of Directors without a meeting
is effective when the last Director signs the consent, unless the consent
specifies a later effective date.
SECTION 7. Action by Means of Conference Telephone or Similar
Communications Equipment. Any one or more members of the Board or any
committee thereof, may participate in a meeting of such Board or 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
participation in a meeting by such means shall constitute presence in person
at such meeting.
SECTION 8. Committees. The Board, by resolution adopted by a majority
of the whole Board, may designate one or more committees, each such committee
to consist of one or more directors. Except as expressly limited by the GCL or
the Certificate, any such committee shall have and may exercise such powers as
the Board may determine and specify in the resolution designating such
committee. The Board, 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
-8-
<PAGE>
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 and report the same to the Board
to such extent and in such form as the Board 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.
SECTION 9. 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 10. 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 applicable thereto, and each director so elected shall not be
subject to the provisions of this ARTICLE III unless otherwise provided
therein.
ARTICLE IV
Officers
SECTION 1. Executive Officers. The executive officers of the
Corporation shall be a Chairman, a Chief Executive Officer, a President, a
Managing Owner, Vice-Presidents, a Secretary and a Chief Financial Officer,
and may include such other officers as the Board may appoint pursuant to
Section 3 of this Article IV. Any two or more offices may be held by the same
person.
SECTION 2. Authority and Duties. All officers, as between themselves
and the Corporation, shall have such authority and perform such duties in the
management of the Corporation as may be provided in these By-laws or, to the
extent so provided, by the Board.
SECTION 3. Other Officers. The Corporation may have such other
officers, agents and employees as the Board may deem necessary, and Burger
King Corporation may require, including one or more Assistant Secretaries, one
or more Assistant Chief Financial Officers one or more Vice-Presidents and one
or more Managing Directors, each of whom shall hold office for such period,
have such authority, and perform such duties as the Board, the Chairman, or
the Chief Executive Officer may from time to time determine. The Board may
-9-
<PAGE>
delegate to any principal officer the power to appoint and define the
authority and duties of, or remove, any such officers, agents or employees.
SECTION 4. Term of Office, Resignation and Removal. All executive
officers shall be elected or appointed by the Board and shall hold office for
such term as may be prescribed by the Board. Each executive officer shall hold
office until his successor has been elected or appointed and qualified or
until his earlier death or resignation or removal in the manner hereinafter
provided. The Board may require any executive officer to give security for the
faithful performance of his duties.
Any officer, other than the then-designated Managing Owner, may
resign at any time by delivering written notice to the Board, the Chairman,
the Chief Executive Officer or the Secretary. Such resignation shall take
effect at the time specified therein or, if the time be not specified, at the
time notice is given. Except as aforesaid, the acceptance of such resignation
shall not be necessary to make it effective. Acceptance of the resignation of
the then-designated Managing Owner shall not be effective without the consent
of a majority of the Board.
All officers and agents elected or appointed by the Board shall be
subject to removal at any time by the Board with or without cause, subject to
any agreements to the contrary.
SECTION 5. Vacancies. If the office of Chairman, Chief Executive
Officer, President, Secretary or Chief Financial Officer becomes vacant for
any reason, the Board shall fill such vacancy, and if any other office becomes
vacant, the Board may fill such vacancy. Except as otherwise provided in these
By-laws, any officer so appointed or elected by the Board shall serve only
until such time as the unexpired term of his predecessor shall have expired
and until his successor shall have been duly elected and qualified, unless
reelected or reappointed by the Board.
SECTION 6. The 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 and shareholders unless another officer is
appointed or designated by the Board as Chairman of such meeting.
SECTION 7. 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 or by these Bylaws 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 shall from time to time make
such reports of the affairs of the Corporation as the Board may require and
shall perform such other duties as may from time to time be assigned to him by
the Board or the Chairman.
-10-
<PAGE>
SECTION 8. 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, 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, with all the
powers of and subject to all the restrictions upon the Chief Executive
Officer.
Section 9. Managing Owner. The Managing Owner or Owners for purposes
of the Franchise Agreements and regulations of Burger King Corporation shall
be authorized by the Board 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 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 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 10. Managing Director. The Managing Director or Directors,
for purposes of the Franchise Agreements and regulations of 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 11. 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, 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.
SECTION 12. The Secretary. The Secretary shall, to the extent
practicable, attend all meetings of the Board and all meetings of the
shareholders and shall record the minutes of all proceedings in a book to be
kept for that purpose. He may give, or cause to be given, notice of all
meetings of the shareholders and of the Board, and shall perform such other
duties as may be prescribed by the Board, the Chairman or the Chief Executive
Officer, under whose supervision he 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
signature or by the signature of the Chief Financial Officer
-11-
<PAGE>
or, if appointed, an Assistant Secretary or an Assistant Chief Financial
Officer. The Board 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 shareholder records, including
registers of the post office address of each shareholder and director, and
such other books and records as the Board 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 by the Board, the Chairman or the Chief
Executive Officer.
SECTION 13. 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. The
Chief Financial Officer shall disburse the funds of the Corporation as may be
ordered by the Board, taking proper vouchers for such disbursements, and shall
render to the Chairman, Chief Executive Officer and directors, at the regular
meetings of the Board, or whenever they may require it, an account of all his
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, the Chairman or the Chief Executive Officer.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 1. Execution of Documents. The Board 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 Bylaws, 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 2. 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 or Chief Financial Officer, or any other officer of
the Corporation to whom power in this respect shall have been given by the
Board, shall select.
SECTION 3. Proxies in Respect of Stock or Other Securities of Other
Corporations. The Board 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
-12-
<PAGE>
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.
ARTICLE VI
Shares and Their Transfer; Fixing Record Date
SECTION 1. Certificates for Shares. Every owner of stock of the
Corporation shall be entitled to have a certificate certifying the number and
class of shares owned by him in the Corporation, which shall be in such form
as shall be prescribed by the Board. The Board may provide by resolution or
resolutions that some or all of any or all classes or series of the
Corporation's stock shall be uncertificated shares. Each certificate for
shares shall be numbered and issued in consecutive order. Certificates of
stock in the Corporation, if any, shall be signed, either manually or in
facsimile by two of the following officers in the name of the Corporation: the
Chairman, or the Chief Executive Officer or President, or any Vice President
and by the Chief Financial Officer (or an Assistant Chief Financial Officer,
if appointed) or the Secretary (or an Assistant Secretary, if appointed).
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 or the Chief Executive Officer or President 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. All certificates shall include written
notice of any restrictions which may be imposed on the transferability of
shares.
SECTION 2. Shares without Certificates. The Board 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 shareholder 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 3. Transfer of Stock. 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
-13-
<PAGE>
certificate therefor issued by the Corporation to the person entitled thereto,
cancel the old certificate and record the transaction in its stock transfer
books.
SECTION 4. Addresses of Shareholders. Each shareholder shall
designate to the Secretary an address at which notices of meetings and all
other corporate notices may be served or mailed to him, and, if any
shareholder shall fail to designate such address, corporate notices may be
served upon him by mail directed to him at his post office address, if any, as
the same appears on the share record books of the Corporation or at his last
known post office address.
SECTION 5. Replacement. In case of the loss, destruction, mutilation
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, mutilation 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, mutilated 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 the
certificate alleged to have been lost, destroyed, mutilated or stolen.
SECTION 6. Regulations. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with these By-laws, concerning the
issue, transfer and registration of certificates for stock of the Corporation.
SECTION 7. Fixing Date for Determination of Shareholders of Record.
The Board may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board, in
order that the Corporation may determine which shareholders are entitled to
(i) notice of or to vote at any meeting of shareholders or any adjournment
thereof, (ii) receive payment of any dividend, or (iii) notice for any other
purpose. Such record date shall be not more than sixty (60) days, and in the
case of a meeting of shareholders not less than ten (10) days prior to the
date on which the particular action requiring such determination is to be
taken. If no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting, the record date shall be the
day immediately preceding the date on which notice of the meeting is first
given to shareholders. Such a determination shall apply to any adjournment of
the meeting unless the Board fixes a new record date, which it shall do if the
meeting is adjourned to a date more than 120 days after the date fixed for the
original meeting. If no record date is set for the determination of
shareholders entitled to receive payment of any stock dividend or distribution
(other than one involving a purchase, redemption, or other acquisition of the
corporation's shares) the record date shall be the date the Board authorizes
the stock dividend or distribution.
-14-
<PAGE>
ARTICLE VII
Seal
----
The corporate seal shall be in such form as may be approved from time
to time by the Board. The seal may be used by causing it or a facsimile
thereof, to be impressed or affixed or in any other manner reproduced.
ARTICLE VIII
Fiscal Year
-----------
The fiscal year of the Corporation shall be fixed by resolution of
the Board.
ARTICLE IX
Indemnification and Insurance
-----------------------------
SECTION 1. Indemnification.
----------------
(a) 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 is or was a director or officer of the Corporation (and
the Corporation, in the discretion of the Board, may so indemnify a
person by reason of the fact that he 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 in connection with such
action, suit or proceeding if, in the case of conduct in his official
capacity with the corporation, he 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 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
-15-
<PAGE>
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 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.
(b) 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 is or was a director or officer of the Corporation
(and the Corporation, in the discretion of the Board, may so
indemnify a person by reason of the fact that he 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 in connection with the
defense or settlement of such action or suit if, in the case of
conduct in his official capacity with the corporation, he 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
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 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. 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 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.
(c) Indemnify if Successful or Partially Successful. To
the extent that a director, officer, employee or agent of the
Corporation has been successful on the
-16-
<PAGE>
merits or otherwise in defense of any action, suit or proceeding
referred to in subsections (a) and (b) of this Section 1, or in
defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him 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 (a) and (b) of this Section 1, 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, the Corporation shall nevertheless
provide indemnification to the extent he has been partially
successful.
(d) Standard of Conduct. Except in a situation governed by
subsection (c) of this Section 1, any indemnification under
subsections (a) and (b) of this Section 1 (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
has met the applicable standard of conduct set forth in subsections
(a) and (b) of this Section 1. Such determination shall be made (1)
by the Board 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 shareholders, 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 (d) may in either
event be made by the written consent of the majority required by each
clause.
(e) Advancement of Expenses. Expenses (including attorneys'
fees) of each officer and directory 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 he is not entitled to be
indemnified by the Corporation as authorized in the Article and (ii)
a written affirmation of director's good faith belief that he has
performed his duty to the company, 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 deems appropriate.
(f) Nonexclusivity. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article IX shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses
-17-
<PAGE>
may be entitled under any law, by-law, agreement, vote of
shareholders or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another capacity
while holding such office.
SECTION 2. 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 his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of the GCL.
SECTION 3. Definitions.
(a) For purposes of this Article IX, 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 IX with respect to the resulting or
surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(b) 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 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 IX.
(c) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article IX 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.
-18-
<PAGE>
(d) The right to indemnification conferred by this Article
IX 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.
(e) A person shall be deemed to have acted in good faith and
in a manner he 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
conduct was unlawful, if his action is based on the records or books
of account of the Corporation or another enterprise, or on
information supplied to him 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 1(a) or Section
1(b) of this Article IX, as the case may be.
ARTICLE X
Amendment
---------
These By-laws may be altered, amended or repealed or new By-laws may
be adopted by the Board, subject to the provisions of these By-laws and the
Certificate. The fact that the power to amend, alter, repeal or adopt the
By-laws has been conferred upon the Board shall not divest the shareholders of
the same powers.
-19-
<PAGE>
TABLE OF CONTENTS
Page
----
I Offices........................................................... 1
II Meetings of Shareholders.......................................... 1
SECTION 1. Annual Meetings......................................... 1
SECTION 2. Special Meetings........................................ 1
SECTION 4. Notice of Meetings...................................... 2
SECTION 5. Quorum.................................................. 2
SECTION 6. Organization............................................ 3
SECTION 7. Order of Business....................................... 3
SECTION 8. Voting.................................................. 3
SECTION 9. Informal Action by Shareholders......................... 3
SECTION 10. Voting Procedures and Inspections of Elections.......... 4
SECTION 11. Advance Notification of Proposals
at Shareholders' Meetings............................. 5
SECTION 12. Advisory Shareholder Votes.............................. 5
SECTION 13. List of Shareholders.................................... 5
III Board of Directors................................................ 6
SECTION 1. General Powers.......................................... 6
SECTION 2. Number and Term of Office............................... 6
SECTION 3. Election of Directors................................... 6
SECTION 4. Resignation and Vacancies............................... 6
SECTION 5. Meetings................................................ 7
SECTION 6. Directors' Consent in Lieu of Meeting................... 8
SECTION 7. Action by Means of Conference Telephone or
Similar Communications Equipment...................... 8
SECTION 8. Committees.............................................. 8
SECTION 9. Compensation............................................ 9
SECTION 10. Preferred Stock Directors............................... 9
-i-
<PAGE>
Page
------
IV Officers............................................................. 9
SECTION 1. Executive Officers......................................... 9
SECTION 2. Authority and Duties....................................... 9
SECTION 3. Other Officers............................................. 9
SECTION 4. Term of Office, Resignation and Removal.................... 10
SECTION 5. Vacancies.................................................. 10
SECTION 6. The Chairman............................................... 10
SECTION 7. The Chief Executive Officer................................ 10
SECTION 8. The President.............................................. 11
SECTION 9. Vice Presidents............................................ 11
SECTION 10. The Secretary.............................................. 11
SECTION 11. The Chief Financial Officer................................ 12
V Contracts, Checks, Drafts, Bank Accounts, Etc........................ 11
SECTION 1. Execution of Documents..................................... 11
SECTION 2. Deposits................................................... 12
SECTION 3. Proxies in Respect of Stock or Other
Securities of Other Corporations......................... 12
VI Shares and Their Transfer; Fixing Record Date........................ 13
SECTION 1. Certificates for Shares.................................... 13
SECTION 3. Transfer of Stock.......................................... 14
SECTION 4. Addresses of Shareholders.................................. 14
SECTION 5. Replacement................................................ 14
SECTION 6. Regulations................................................ 14
SECTION 7. Fixing Date for Determination
of Shareholders of Record................................ 14
VII Seal................................................................ 15
VIII Fiscal Year......................................................... 15
IX Indemnification and Insurance....................................... 15
-ii-
<PAGE>
Page
------
SECTION 1. Indemnification............................................ 15
SECTION 2. Insurance.................................................. 18
SECTION 3. Definitions................................................ 18
X Amendment............................................................ 19
-iii-
- -----------------------------------------------------------------------------
AMERIKING, INC.
-------------------------------------
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
-------------------------------------
Dated as of June __, 1996
- -----------------------------------------------------------------------------
<PAGE>
STOCKHOLDERS AGREEMENT
----------------------
STOCKHOLDERS AGREEMENT, dated as of June __, 1996, is made by and
among AmeriKing, Inc., a Delaware corporation (the "Company"), National
Restaurant Enterprises, Inc., a Delaware corporation ("NRE"), The First
National Bank of Boston, a national banking association, 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
an initial public offering of its Common Stock; and
WHEREAS, the parties to the Original Stockholders Agreement desire
(i) to waive certain rights granted to them under the original Stockholders
Agreement and (ii) to make certain amendments to the Original Stockholders
Agreement, as set forth below.
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 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:
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
<PAGE>
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 and any Permitted Transferee.
Bank of Boston shall mean The First National Bank of Boston, a
national banking association, FNBB Affiliate, and any of their respective
Permitted Transferees.
BKC means Burger King Corporation, a Florida corporation.
BKC Regulations means the rules, regulations and requirements,
policies and procedures of BK 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 Agreements, the BKC Franchise Offering Circular (October 1995)
or other agreements between the Company and/or its subsidiaries, on the one
hand, and BKC, on the other hand.
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.
By-Laws shall mean the By-Laws of the Company as amended and
in effect on the date hereof, substantially in the form of
-2-
<PAGE>
Exhibit A hereto, and as hereafter further amended or restated in accordance
with the terms hereof and pursuant to applicable law.
Certificate of Incorporation shall mean the Certificate of
Incorporation of the Company as in effect on the date hereof, substantially in
the form of Exhibit B hereto, and as hereafter from time to time amended,
restated, modified or supplemented in accordance with the terms hereof and
pursuant to applicable law.
Closing Date shall mean the date of the closing of the Company's
initial public offering.
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.
Consolidated Total Capitalization shall mean consolidated total
stockholders' equity plus consolidated total long-term debt of the Company and
its Subsidiaries.
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.
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.
FNBB Affiliate shall mean BancBoston Investments Inc.
Franchise Agreements shall mean the franchise agreements in effect
from time to time between NRE and its subsidiaries on the one hand, and BKC 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.
Indebtedness shall mean with respect to any Person any obligation of
such Person for borrowed money, but in any event shall include (i) any
obligation incurred for all or any part of the purchase price of property or
other assets or for the cost of property or other assets constructed or of
improvements thereto, other than accounts payable included in current
liabilities and
-3-
<PAGE>
incurred in respect of property purchased in the ordinary course of business,
(ii) the face amount of all letters of credit issued for the account of such
Person and all drafts drawn thereunder, without duplication (iii) obligations
(whether or not such Person has assumed or become liable for the payment of
such obligation) secured by liens, (iv) Capitalized Leases, and (v) all
guarantees of such Person; provided, that the terms liens, Capitalized Lease
as used herein are as defined in the Revolving Credit and Term Loan Agreement
as in effect on the date hereof.
Initial Public Offering shall mean the initial public offer and sale
of Common Stock of the Company, pursuant to a registration statement filed and
declared effective under the Securities Act.
Institutional Lender shall mean any bank, savings and loan
association, insurance company, or other institutional lender.
Intercompany Agreements shall mean the Intercompany Consulting
Agreement dated September 1, 1994 between the Company and NRE; and the Tax
Allocation Agreement dated September 1, 1994 between the Company and NRE all
in substantially the forms
attached hereto as Exhibit I.
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 Purchase Agreement shall have the meaning specified in the
Original Stockholders Agreement.
JII Partners means JII Partners, an Illinois partnership.
Jordan Investors shall mean JZCC, MCIT and the Persons listed on the
Schedule of Jordan Investors including the signatories to the Jordan Investor
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 between certain Jordan Investors and the
Company, dated as of September 1, 1994.
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.
-4-
<PAGE>
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 [Amended and Restated] Management
Consulting Agreement dated as of the Closing Date between TJC Management
Corporation and the Company, substantially in the form of Exhibit C hereto, as
such agreement may from time to time hereafter be 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 who hereafter acquires any shares of
Common Stock from the Company, 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 and Joel Aaseby.
Management Subscription Agreement shall mean the Management
Subscription Agreement dated as of September 1, 1994 between the Company and
each Management Investor, Jaro Investor and Osborn Investor, as the case may
be, as such agreement may from time to time hereafter be 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 $0.01 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).
Offered Shares shall have the meaning specified in Section 5.1.
Osborn Investors shall mean William Osborn, the Persons so listed on
the Stockholder Schedule and any Permitted Transferee
-5-
<PAGE>
of any of them who becomes a Stockholder in accordance with the
terms hereof.
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
BKC regulations.
Permitted Transferee shall mean, (i) Jordan Investor, the Bank of
Boston, or any Management Investor and (ii) those Persons to whom Transfers of
Common 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.
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, NRE and BKC.
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' 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 Bank of Boston 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.
-6-
<PAGE>
Registrable Securities shall mean:
(a) all shares of Common Stock and Non-Voting Common Stock
outstanding on the date hereof, and all shares of Common Stock issued or
issuable upon (x) the conversion or exchange of outstanding shares of
Non-Voting 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 NonVoting 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 which 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.
Requesting Holder shall have the meaning specified in Section 6.5.
Revolving Credit and Term Loan Agreement shall mean the Amended and
Restated Revolving Credit and Term Loan Agreement, dated as of the Closing
Date, as amended or supplemented from
-7-
<PAGE>
time to time, by and among the Company, NRE and the Bank of Boston and such
other Banks as may become party to the agreement.
Securities shall mean (i) any capital stock of the Company and (ii)
any instrument evidencing indebtedness of the Company or NRE 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 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).
Stock shall mean the Common Stock.
Stockholder shall mean any of the Jordan Investors, MCIT, The Bank of
Boston, 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
as of September 1, 1994, between each of Scott Vasatka and Don Stauursky and
the Company, as amended hereto.
Stock Option Plans shall mean the stock option plans in substantially
the form attached as Exhibit G hereto.
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.
-8-
<PAGE>
Transaction Documents shall mean this Agreement, each of the
agreements that are exhibits hereto and thereto, and all agreements,
instruments and documents contemplated thereby.
Underwritten Offering shall have the meaning given to it in Section
6.1(b).
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 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 the Warrant, initially exercisable to purchase
shares of Non-Voting Common Stock as set forth in the Stockholder Schedule
hereto, issued to the Bank of Boston or its designee pursuant to the Revolving
Credit and Term Loan Agreement, as such Warrants may from time to time be
amended, modified or supplemented in accordance with the terms hereof and
thereof.
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,
-9-
<PAGE>
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 $100,000 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 BKC
Regulations.
Section 2.2 BKC Authorization. Each management stockholder agree and
acknowledge that they may be subject to the terms and conditions set forth in
the Franchise Agreements and the BKC Regulations and that stop-transfer orders
reflecting this restriction may be issued with respect to any shares of Common
Stock held by any of them.
Section 2.3 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 AN AMENDED AND
RESTATED STOCKHOLDERS AGREEMENT, DATED JULY __, 1996, AMONG
THE COMPANY AND ITS STOCKHOLDERS, SUBSCRIPTION AGREEMENTS,
DATED SEPTEMBER 1, 1994, AMONG THE COMPANY AND CERTAIN
INVESTORS THEREIN AND THE TERMS AND CONDITIONS OF FRANCHISE
AND OTHER AGREEMENTS WITH BKC. REFERENCE IS MADE TO SUCH
AGREEMENTS AND THE RESTRICTIVE PROVISIONS OF THE CERTIFICATE
OF INCORPORATION AND BY-LAWS OF THE CORPORATION. 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.
-10-
<PAGE>
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
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 2.4 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 III
Registration Rights
-------------------
Section 3.1 Demand Registrations.
--------------------
(a) At any time and from time to time that the Initial Public
Offering by the Company, holders of a majority of the shares of Stock held by
the Jordan Investors (other than MCIT) and Bank of Boston 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").
-11-
<PAGE>
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
3.1(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 3 thereafter;
(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 3.1(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 3.1;
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 3.1(a), the filing or effectiveness of a
registration statement under this Section 3.1(a) if the Company and a majority
of the Jordan
-12-
<PAGE>
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 3.1. In any event, the Company will pay all
Registration Expenses in connection with any registration initiated under this
Section 3.1.
(b) [INTENTIONALLY OMITTED]
(c) Notwithstanding the foregoing provisions of Section 3.1 (a) and
(b), the Company shall not be obligated to effect more than one registration
pursuant to this Section 3.1 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 3.1 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.
(e) A registration requested pursuant to Section 3.1.(a) or (b) 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 3.1.
(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").
-13-
<PAGE>
(h) In connection with any offering pursuant to this Section 3.1, 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 3.1. 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:
(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 3.1 or 3.2) 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 3.1(a) by
Persons 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
(3) the Registrable Securities requested to be
included in such offering pursuant to Section
3.1(a) by Persons other than the Bank of
Boston 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
(3) the Registrable Securities requested to be
included in such offering the Bank of
Boston pursuant to Section 3.1(b)(ii)
shall be excluded pro rata, based on the
respective number of Registrable
Securities as to which
-14-
<PAGE>
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 3.1. shall not be outstanding but shall be issuable
upon conversion of shares of Non-Voting Common Stock which are outstanding,
then the Bank of Boston 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 3.2 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 3.1.), 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 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
-15-
<PAGE>
Expenses in connection therewith), without prejudice, however, to the
rights, of the Jordan Investors and the Bank of Boston to request
that such registration be effected as a registration under Section
3.1.
(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 3.2 shall relieve the Company of
its obligation to effect registration upon request under Section 3.1.
(b) The Company shall not be obligated to effect any registration of
Registrable Securities under this Section 3.2 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 3.2.
shall be paid by the Company.
(d) If a registration pursuant to this Section 3.2. involves an
Underwritten Offering and the Managing Underwriter advises the issuer that, in
its opinion, the number of securities proposed to be included in such
registration should be limited due to market conditions, then the Company will
include in such registration (i) first, the securities the Company proposes to
sell and (ii) second, the number of Registrable Securities requested by
holders thereof to be included in such registration that, in the opinion of
such Managing Underwriter, can be sold, such amount to be allocated among all
such holders of Registrable Securities pro rata on the basis of the respective
number of Registrable Securities each such holder has requested to be included
in such registration.
(e) In connection with any Underwritten Offering with respect to
which holders of Registrable Securities shall have requested registration
pursuant to this Section 3.2, 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.
-16-
<PAGE>
(f) If any shares of Common Stock requested to be included in a sale
pursuant to this Section 3.2. shall not be outstanding but shall be issuable
upon conversion of shares of Non-Voting Common Stock which are outstanding,
then the Bank of Boston 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 3.3 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 3.1 or 3.2, 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 3.1. or 3.2, 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 effected pursuant to Section 3.2 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
-17-
<PAGE>
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 3.3(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.
(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
3.3(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
-18-
<PAGE>
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.
(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 3.3(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 3.3(a)(vi).
(c) If a registration pursuant to Section 3.1 or 3.2 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.
-19-
<PAGE>
(d) If a registration pursuant to Section 3.1 or 3.2 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 3.1 or 3.2 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 3.3.
(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 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 3.1(h) or 3.2(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.
-20-
<PAGE>
Notwithstanding anything in this Article VI to the contrary, in lieu of
converting any share of Class D 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 Class D Common
Stock may sell such Class D Common Stock to the underwriter of the offering
being registered upon the undertaking of such underwriter to convert such
Class D 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. Notwithstanding anything in this Article VI to the contrary, in
lieu of converting any share of Class C 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 Class C Common
Stock may sell such Class C Common Stock to the underwriter of the offering
being registered upon the undertaking of such underwriter to convert such
Class C 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. The Company agrees to cause such Common Stock to be included among
the securities being offered pursuant to such registration statement to be
issued within such time as will permit the underwriter to make and complete
the distribution contemplated by the underwriting.
Section 3.4 Indemnification.
(a) In the event of any registration of any securities of the Company
under the Securities Act pursuant to Section 3.1 or 3.2, 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
-21-
<PAGE>
thereto) or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein not
misleading;
(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 3.4(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
-22-
<PAGE>
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 accordance with
Section 3.1 or 3.2, 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 3.4(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 3.4 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 3.4 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 3.4, 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 3.4, 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
-23-
<PAGE>
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 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 3.5 Contribution. In order to provide for just and equitable
contribution in circumstances under which the indemnity contemplated by
Section 3.4 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 3.4(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
-24-
<PAGE>
discount bears to the initial public offering price of the Registrable
Securities. For purposes of this Section 3.5, 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 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 3.6 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 IV
Transfer of Stock; Termination
------------------------------
Section 4.1 Restrictions on Transfer. Each Stockholder who is an
Owner agrees that such Stockholder will not, directly or indirectly, offer,
sell, transfer, assign or otherwise dispose of (or make any exchange, gift,
assignment or pledge of) (collectively, for purposes of Articles IV only, a
"transfer") any Securities or Warrants, as the case may be, unless the Company
receives the consent of BKC.
Section 4.2 Transfers by an Owner.
---------------------
(a) 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
-25-
<PAGE>
Warrants being referred to herein as a "Selling Stockholder"), then such
Selling Stockholder shall deliver written notice of its desire to transfer
such Securities or Warrants )a "Notice of Intention"), accompanied by a copy
of a proposal relating to such sale (the "Sale Proposal"), to each of BKC and
to the Company, setting forth such Selling Stockholder's desire to make such
sale, the number and the class of shares of Securities or Warrants proposed to
be transferred (the "Offered Securities") and other terms applicable thereto.
(b) Upon receipt of the Notice of Intention, the Company will use its
best efforts to cause BKC to consent to the Transfer Proposal.
Section 4.3 Certain Terminations.
(a) The provisions of Article III shall terminate ten years
from the date of this Agreement.
(b) 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 V
Miscellaneous
-------------
Section 5.1 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 5.1(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 Bank of Boston 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
-26-
<PAGE>
such exchange, the aggregate number of shares of Common Stock held by the Bank
of Boston 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 Bank of Boston 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 Bank of
Boston 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 5.1(b). Any shares of Non-Voting Common
Stock acquired by the Company in exchange for shares of Common Stock pursuant
to this Section 5.1(b) shall be cancelled and retired.1
Section 5.2 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 this Agreement. 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 5.3 Amendment and Modification; Waiver of
Compliance; Conflicts.
(a) This Agreement may be amended only by a written instrument duly
executed by (i) a Majority of the Jordan Investors, (ii) to the extent
required under [Section 10.8] under the Credit Agreement that such proposed
amendment would materially adversely affect the rights of the Bank of Boston
under this Agreement, the Bank of Boston and (iii) to the extent that such
proposed amendment would materially adversely affect the rights of the
Management Investors under this Agreement as a
- ----------------
1 Note that the take along has been deleted.
-27-
<PAGE>
group, the holders of a majority of the shares of Voting Stock owned by the
Management Investors. 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 5.4 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 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
-28-
<PAGE>
(answer back received) or telecopy, or five business days after being so
mailed.
Section 5.5 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 5.6 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 5.7 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 5.8 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.
Section 5.9 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 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
-29-
<PAGE>
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 5.10 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 Initial Public
Offering and the transactions contemplated thereby. Nothing in this Agreement
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 5.11 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 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 5.11 SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN
-30-
<PAGE>
ANY OTHER FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE
SAME IN ANY OTHER APPROPRIATE JURISDICTION.
Section 5.12 ARBITRATION. SUBJECT TO THE RIGHT OF THE COMPANY TO
PURSUE INJUNCTIVE RELIEF PURSUANT TO SECTION 5.12, 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 5.13 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 5.14 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.
-31-
<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:
THE FIRST NATIONAL BANK OF BOSTON
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
---------------------------------
David W. Zalaznick
---------------------------------
Jonathan F. Boucher
-32-
<PAGE>
---------------------------------
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
MANAGEMENT STOCKHOLDERS:
---------------------------------
Lawrence Jaro
-33-
<PAGE>
---------------------------------
William Osborn
---------------------------------
Gary Hubert
---------------------------------
Joel Aaseby
---------------------------------
Dan Stahurski
---------------------------------
Scott Vasatka
JARO INVESTORS:
Tabor Restaurants Associates, Inc.
By:
-----------------------------------
Lawrence Jaro
President
Jaro Enterprises, Inc.
By:
-----------------------------------
Lawrence Jaro
President
Jaro Restaurants Associates, Inc.
By:
-----------------------------------
Lawrence Jaro
President
-34-
<PAGE>
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
-35-
<PAGE>
EXHIBIT A
By-Laws of the Company
<PAGE>
EXHIBIT B
Certificate of Incorporation
<PAGE>
EXHIBIT C
TJC Management Consulting Agreement
<PAGE>
EXHIBIT D
Management Subscription Agreement
<PAGE>
EXHIBIT E
Jordan Investors Subscription Agreement
<PAGE>
EXHIBIT F
The Bank of Boston Warrant
<PAGE>
EXHIBIT G
Form of Stock Option Agreements
<PAGE>
EXHIBIT H
Directors Indemnification Agreement
<PAGE>
EXHIBIT I
Intercompany Agreements
<PAGE>
EXHIBIT K
Executive and Advisors Subscription Agreement
<PAGE>
SCHEDULE OF JORDAN INVESTORS
----------------------------
Jordan Zalaznick Capital Company
Leucadia Investors, Inc.
John W. Jordan, II Revocable Trust
David W. Zalaznick
Jonathan F. Boucher
John R. Lowden
Adam E. Max
John M. Camp
A. Richard Caputo
James E. Jordan
Paul Rodzevik
Thomas H. Quinn
JII Partners
Jerry Dunn
Dennis Hogerty
Total
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
Page
RECITALS............................................................. 1
ARTICLE I
Certain Definitions
-------------------
Affiliate............................................................ 1
Agreement............................................................ 2
Bank of Boston....................................................... 2
Bank of Boston....................................................... 2
BKC.................................................................. 2
BKC Regulations...................................................... 2
Board of Directors................................................... 2
By-Laws.............................................................. 2
Certificate of Incorporation......................................... 3
Closing Date ........................................................ 3
Commission .......................................................... 3
Common Stock ........................................................ 3
Consolidated Total Capitalization ................................... 3
Exchange Act ........................................................ 3
Executive and Advisors Subscription Agreement........................ 3
First Offer Price ................................................... 3
FNBB Affiliate....................................................... 3
Franchise Agreements................................................. 3
GAAP ................................................................ 3
Indebtedness ........................................................ 3
Initial Public Offering ............................................. 4
Institutional Lender................................................. 4
Intercompany Agreements ............................................. 4
Jaro Investors....................................................... 4
Jaro Proxy Agreement................................................. 4
Jaro Purchase Agreement.............................................. 4
JII Partners......................................................... 4
Jordan Investors..................................................... 4
Jordan Investors Subscription Agreement ............................. 5
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
-i-
<PAGE>
Page
Non-Voting Common Stock.............................................. 5
Notice of Exercise .................................................. 6
Notice of Intention ................................................. 6
Offered Shares ...................................................... 6
Osborn Investors..................................................... 6
Osborn Proxy Agreement............................................... 6
Owner................................................................ 6
Permitted Transferee................................................. 6
Person............................................................... 6
Public Offering...................................................... 6
Purchase and Sale Agreement.......................................... 6
Registration Expenses ............................................... 6
Registrable Securities .............................................. 7
Requesting Holder ................................................... 8
Revolving Credit and Term Loan Agreement............................. 8
Securities........................................................... 8
Securities Act ...................................................... 8
Securities Purchase Agreement........................................ 8
Selling Investors ................................................... 8
Selling Stockholder ................................................. 8
Stock ............................................................... 8
Stockholder.......................................................... 8
Stock Option Agreements.............................................. 8
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................................... 9
2.2 BKC Authorization..................................... 10
2.3 Endorsement of Certificates........................... 10
2.4 Improper Transfer..................................... 11
ARTICLE III
Registration Rights
-------------------
3.1 Demand Registrations.................................. 12
3.2 Piggyback Registrations............................... 15
3.3 Registration Procedures............................... 17
3.4 Indemnification....................................... 21
3.5 Contribution.......................................... 24
-ii-
<PAGE>
PAGE
3.6 Rule 144........................................................ 25
ARTICLE IV
Transfer of Stock; Termination
------------------------------
4.1 Restrictions on Transfer........................................ 26
4.2 Transfers by an Owner........................................... 26
4.3 Certain Terminations............................................ 26
ARTICLE V
Miscellaneous
-------------
5.1 Other Covenants................................................. 26
5.2 Successors and Assigns.......................................... 27
5.3 Amendment and Modification; Waiver of Compliance; Conflicts..... 28
5.4 Notices......................................................... 28
5.5 Entire Agreement................................................ 29
5.6 Injunctive Relief............................................... 29
5.7 Inspection...................................................... 29
5.8 Headings........................................................ 30
5.9 Recapitalizations, Exchanges, Etc., Affecting the Common
Stock; New Issuances......................................... 30
5.10 Ratification of Prior Acts of Board of Directors of Company;
Right to Negotiate........................................... 30
5.11 LITIGATION...................................................... 30
5.12 ARBITRATION..................................................... 31
5.13 No Strict Construction.......................................... 31
5.14 Counterparts.................................................... 31
5.15 Obligations Under the MCIT Purchase Agreement................... 32
-iii-
<PAGE>
SCHEDULES AND EXHIBITS
Jordan Investors
Schedules
Stockholder Schedule
Exhibit A By-Laws of Company
Exhibit B Certificate of Incorporation of Company
Exhibit C TJC Management Consulting Agreement
Exhibit D Management Subscription Agreement
Exhibit E Jordan Investors Subscription Agreement
Exhibit F Warrant for First National Bank of Boston
Exhibit G Stock Option Agreements
Exhibit H Directors Indemnification Agreement
Exhibit I-1 Intercompany Tax Sharing Agreement
Exhibit I-2 Intercompany Consulting Agreement
Exhibit J-1 Osborn Proxy Agreement
Exhibit J-2 Jaro Proxy Agreement
Exhibit K Executive and Advisors Subscription Agreement
-iv-
EXTENSION AGREEMENT
This EXTENSION AGREEMENT, dated as of May 21, 1996 (the "Agreement"),
is by and between BURGER KING CORPORATION, a Florida corporation ("BKC"), and
AMERIKING TENNESSEE CORPORATION I, a Delaware corporation (the "Company").
R E C I T A L S
A. The Company has executed a note dated November 21, 1995 in favor
of BKC in the original principal amount of $6,920,700, which amount has been
reduced to $6,093,067.16 by an optional prepayment of $827,632.84 (the
"Secured Promissory Note").
B. The Secured Promissory Note is secured by a pledge of all of the
outstanding capital stock of the Company pursuant to a Stock Pledge Agreement
dated November 21, 1995 between BKC and National Restaurant Enterprises, Inc.,
d/b/a AmeriKing, a Delaware corporation and the holder of all of the
outstanding capital stock of the Company.
C. The Company has requested BKC to extend the term of the Secured
Promissory Note until July 19, 1996, and BKC has required, as a condition
precedent to extending the Secured Promissory Note, that the Company execute
and deliver this Agreement.
NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00)
and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, BKC and the Company do hereby covenant and agree
as follows:
1. Recitations. The foregoing recitals are true, complete
and correct in all respects and are incorporated herein by
reference and made a part hereof.
2. Extension. BKC hereby agrees to extend the term of the Secured
Promissory Note until July 19, 1996, at which time the principal amount
thereof shall be due and payable in one (1) BALLOON payment of SIX MILLION
NINETY-THREE THOUSAND SIXTY-SEVEN DOLLARS AND 16/100 ($6,093,067.16), together
with all accrued but unpaid interest.
3. Representations and Warranties, The Company represents and
warrants as follows:
(a) There are no actions, suits or proceedings pending or threatened
against or affecting the Company which, if adversely determined, would have a
material adverse effect on the financial condition or operations of the
Company or would otherwise impair its ability to perform its obligations under
the Secured Promissory Note, or involving the validity or enforceability of
the Secured Promissory Note before any court of law or equity or
<PAGE>
any administrative board or before or by any governmental authority, and the
Company is not in default under the terms of any order, writ, injunction,
decree or demand of any court or any governmental authority.
(b) The Company agrees with, and for the benefit of BKC, that the
Company has no claims, offsets or defenses against BKC or against the
enforcement of the terms of the Secured Promissory Note through the date of
the Company's execution of this Agreement.
(c) The Company releases and relieves BKC of and from any claims of,
or liabilities or obligations whatsoever to, the Company in any way arising
from or growing out of any actions of BKC relating to the Secured Promissory
Note and the documents executed in connection therewith through the date of
the Company's execution of this Agreement.
4. Miscellaneous. Except as hereinabove specifically amended, the
Secured Promissory Note shall remain unchanged and in full force and effect in
accordance with its terms. This Agreement may be executed in any number of
counterparts, with each executed counterpart constituting an original, but all
together one and the same instrument.
THE COMPANY AND BKC HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF UNDER OR IN CONNECTION WITH THIS
AGREEMENT, THE SECURED PROMISSORY NOTE AND ANY AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
written above.
AMERIKING TENNESSEE CORPORATION I
By:
-----------------------------------
Title:
--------------------------------
BURGER KING CORPORATION
By:
-----------------------------------
Title:
--------------------------------
-2-
RATIFICATION OF GUARANTY
This RATIFICATION OF GUARANTY, dated as of May 21, 1996 (the
"Agreement"), is made by LAWRENCE JARO and WILLIAM OSBORN (collectively, the
"Guarantors"), in favor of BURGER KING CORPORATION, a Florida corporation
("BKC").
R E C I T A L S
A. AmeriKing Tennessee Corporation I, a Delaware corporation (the
"Company"), has executed a note dated November 21, 1995 in favor of BKC in the
original principal amount of $6,920,700, which amount has been reduced to
$6,093,067.16 by an optional prepayment of $827,632.84 (the "Secured
Promissory Note").
B. The Secured Promissory Note is secured by a pledge of all of the
outstanding capital stock of the Company pursuant to a Stock Pledge Agreement
dated November 21, 1995 (the "Stock Pledge Agreement") between BKC and
National Restaurant Enterprises, Inc., d/b/a AmeriKing, a Delaware corporation
and the holder of all of the outstanding capital stock of the Company ("NRE").
C. The Guarantors own a direct or indirect interest in NRE.
D. Pursuant to the terms of a guaranty dated November 21,
1995 (the "Guaranty"), the Guarantors made certain guarantees of
payment and performance in connection with the Secured Promissory
Note and the Stock Pledge Agreement,
E. The Company has requested BKC to extend the term of the Secured
Promissory Note until July 19, 1996, and BKC has required, as a condition
precedent to entering into an extension agreement of even date herewith (the
"Extension Agreement") with the Company, that the Guarantors execute and
deliver this Agreement.
NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00)
and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Guarantors, intending to be legally bound,
do hereby covenant and agree as follows:
1. Recitations. The foregoing recitals are true, complete
and correct in all respects and are incorporated herein by
reference and made a part hereof.
2. Ratification of Guaranty. The Guarantors hereby consent
to the execution by the Company of the Extension Agreement and
all documents, instruments and certificates executed in
<PAGE>
connection therewith. The Guarantors hereby ratify all of the provisions of
the Guaranty and agree that the Guaranty shall remain in full force and effect
in accordance with its terms.
3. Representations and Warranties. Each of the Guarantors
represents and warrants as follows:
(a) There are no actions, suits or proceedings pending or threatened
against or affecting him which, if adversely determined, would have a material
adverse effect on his financial condition or would otherwise impair his
ability to perform his obligations under the Guaranty, or involving the
validity or enforceability of the Guaranty before any court of law or equity
or any administrative board or before or by any governmental authority, and he
is not in default under the terms of any order, writ, injunction, decree or
demand of any court or any governmental authority.
(b) He agrees with, and for the benefit of BKC, that he has no
claims, offsets or defenses against BKC or against the enforcement of the
terms of the Guaranty through the date of Guarantor's execution of this
Agreement.
(c) He releases and relieves BKC of and from any claims of, or
liabilities or obligations whatsoever to, Guarantor in any way arising from or
growing out of any actions of BKC relating to the Guaranty or any of the
documents executed in connection therewith through the date of Guarantor's
execution of this Agreement.
4. Counterparts. This Agreement may be executed in any
number of counterparts, with each executed counterpart
constituting an original, but all together one and the same
instrument.
GUARANTORS AND BKC HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF UNDER OR IN CONNECTION WITH THIS
AGREEMENT, THE GUARANTY AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY.
WITNESS the due execution hereof as of date set forth above.
---------------------------
LAWRENCE JARO
---------------------------
WILLIAM OSBORN
-2-
<PAGE>
AMENDMENT NO. 1
TO
COMMON STOCK PURCHASE WARRANTS
THIS AMENDMENT NO. 1 TO COMMON STOCK PURCHASE WARRANTS (This
"Amendment No. 1"), dated as of June __, 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 of the
Warrants shall be deleted in its entirety and replaced with the following:
<PAGE>
18.1 At any time in connection or concurrent with the close
of a Termination Event (as defined below), the Company shall
have the right to terminate the Warrant (the "Right of
Termination"); provided that prior to the exercise of its
Right of Termination the Company shall have paid in full to
the Holder (i) the outstanding principal of the Subordinated
Notes (as defined in the Purchase Agreement), (ii) the
accrued interest on such outstanding Subordinated Notes up
to the date of prepayment, (iii) the Applicable Prepayment
Premium (as defined in the Purchase Agreement), (iv) any and
all fees and expenses payable under the Purchase Agreement
and (v) a premium that shall be a minimum of $2.7 million
for the early termination of the Warrant (the "Termination
Payment Premium").
18.2 For purposes of this Section 18, "Termination Event"
means a public offering of the Common Stock pursuant to a
registration statement filed with the Commission under the
Securities Act.
18.3 The Company shall exercise the Right of Termination by
providing a written notice to the Holder ("Termination
Notice") no sooner than thirty (30) days prior to nor no
later than thirty (30) days after the occurrence of the
Termination Event, which Termination Notice shall expressly
state: (a) that the Termination Event has closed or shall
close; (b) the date and time of the termination of the
Warrant, which termination shall be no later than thirty
(30) days after the close of the Termination Event; and (c)
the place of the termination of the Warrant. At such
termination, the Company shall deliver to the Holder the
amounts described in Section 18.1 in consideration for the
termination of the Warrant and the surrender of any and all
Securities issued pursuant to the Warrant.
18.4 If, for any reason, the Termination Event does not
close, then the amounts described in Section 18.1 shall not
be due on the proposed date of termination, and the
Subordinated Notes shall continue to be due and payable in
accordance with the terms of the Purchase Agreement as if
the Company had never given to the Holder such Termination
Notice.
SECTION 2. 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 3. 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).
-2-
<PAGE>
SECTION 4. Necessary Documents. The parties hereto agree to execute
or cause to be executed at any time, any and all other documents or instruments
necessary to carry out the terms of this Amendment No. 1.
SECTION 5. Counterparts. This Amendment No. 1 may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument, and all
signatures need not appear on any one counterpart.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Amendment No. 1
to be executed as of the date first written above.
AMERIKING, INC.
By:______________________________
Name:
Title:
The undersigned hereby consent 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:
-4-
AMENDMENT NO. 1
TO
STOCK OPTION AGREEMENT
THIS AMENDMENT NO. 1 TO STOCK OPTION AGREEMENT (this
"Amendment No. 1") is dated as of ______, 1996, by and among AmeriKing, Inc.,
a Delaware corporation (the "Company"), Donald Stahurski ("Stahurski") and
Scott Vasatka ("Vasatka").
W I T N E S 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, 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
agreement as follows:
A G R E E M E N T:
- - - - - - - - -
SECTION 1. Amendment. Effective as of the date hereof, Section B.3.
of each of the Stahurski Option Agreement and the Vasatka Option Agreement
shall be deleted in their entirety and replaced with the following:
3. Vesting. Subject to the terms of this Agreement, 50% of
this Option and the shares of Common Stock issuable upon
exercise of this Option shall vest on September 1, 1995 and
the remaining 50% shall vest on September 1, 1996; provided,
however, that this Option and the shares of Common Stock
issuable upon exercise of this Option shall vest immediately
upon the closing
<PAGE>
of an initial public offering of equity securities of the
Company. This Option may only be exercised as to the vested
portion of this Option.
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:
Title:
----------------------------------
Name: Donald Stahurski
----------------------------------
Name: Scott Vasatka
-3-
July __, 1995
AmeriKing, Inc.
2215 Enterprise Drive
Suite 1502
Westchester, Illinois 60154
Re: 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 initial public
offering (the "Offering") of up to an aggregate of [10,000,000] shares of the
Company's Common Stock, $.01 par value per share (the "Common Stock"). 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
Offering, the Common Stock will have been duly authorized for issuance, and
when the Common Stock is delivered in accordance with the Underwriting
Agreement in substantially the form filed as Exhibit 1 to the Registration
Statement, will be validly issued, fully paid and non-assessable.
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."
Very truly yours,
MAYER, BROWN & PLATT
RATIFICATION OF STOCK PLEDGE AGREEMENT
This RATIFICATION OF STOCK PLEDGE AGREEMENT, dated as of May 21, 1996
(the "Agreement"), is made by NATIONAL RESTAURANT ENTERPRISES, INC. d/b/a
AmeriKing, a Delaware corporation ("NRE"), in favor of BURGER KING
CORPORATION, a Florida corporation ("BKC").
R E C I T A L S
A. AmeriKing Tennessee Corporation I, a Delaware corporation and a
wholly-owned subsidiary of NRE (the "Company"), has executed a note dated
November 21, 1995 in favor of BKC in the original principal amount of
$6,920,700, which amount has been reduced to $6,093,067.16 by an optional
prepayment of $827,632.84 (the "Secured Promissory Note").
B. The Secured Promissory Note is secured by a pledge of all of the
outstanding capital stock of the Company pursuant to a Stock Pledge Agreement
dated November 21, 1995 between BKC and NRE (the "Stock Pledge Agreement").
C. The Company has requested BKC to extend the term of the Secured
Promissory Note until July 19, 1996, and BKC has required, as a condition
precedent to entering into an extension agreement of even date herewith (the
"Extension Agreement") with the Company, that NRE execute and deliver this
Agreement.
NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00)
and other good and valuable consideration) the receipt and sufficiency of
which is hereby acknowledged, NRE, intending to be legally bound, does hereby
covenant and agree as follows:
1. Recitations. The foregoing recitals are true, complete and
correct in all respects and are incorporated herein by reference and made a
part hereof.
2. Ratification of Stock Pledge Agreement. NRE hereby consents to the
execution by the Company of the Extension Agreement and all documents,
instruments and certificates executed in connection therewith. NRE hereby
ratifies all of the provisions of the Stock Pledge Agreement and agrees that
the Stock Pledge Agreement shall remain in full force and effect in accordance
with its terms.
3. Representations and Warranties. NRE represents and warrants as
follows:
(a) There are no actions, suits or proceedings pending or threatened
against or affecting NRE which, if adversely
<PAGE>
determined, would have a material adverse effect on the financial condition or
operations of NRE or would otherwise impair its ability to perform its
obligations under the Stock Pledge Agreement, or involving the validity or
enforceability of the Stock Pledge Agreement before any court of law or equity
or any administrative board or before or by any governmental authority, and
NRE is not in default under the terms of any order, writ, injunction, decree
or demand of any court or any governmental authority.
(b) NRE agrees with, and for the benefit of BKC, that NRE has no
claims, offsets or defenses against BKC or against the enforcement of the
terms of the Stock Pledge Agreement through the date of NRE's execution of
this Agreement.
(c) NRE releases and relieves BKC of and from any claims of, or
liabilities or obligations whatsoever to, NRE in any way arising from or
growing out of any actions of BKC relating to the Stock Pledge Agreement or
any of the documents executed in connection therewith through the date of
NRE's execution of this Agreement.
4. Counterparts. This Agreement may be executed in any
number of counterparts, with each executed counterpart constituting an
original, but all together one and the same instrument.
NRE AND BKC HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE
RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF UNDER OR IN CONNECTION WITH THIS AGREEMENT,
THE STOCK PLEDGE AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY.
WITNESS the due execution hereof as of date set forth above.
NATIONAL RESTAURANT ENTERPRISES, INC.
By:
-----------------------------------
Title:
--------------------------------
-2-
<PAGE>
MBP DRAFT 6/30/96
AMENDMENT NO. 1
TO
NOTE PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO NOTE PURCHASE AGREEMENT (this
"Amendment No. 1"), dated as of June __, 1996, 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 prepayment of the Subordinated Notes upon the termination of the
Warrants pursuant to the terms and conditions of Amendment No. 1 to Common
Stock Purchase Warrants, dated as of the date hereof, and as set forth herein.
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:
A G R E E M E N T:
SECTION 1. Amendment. Effective as of the date hereof, Section 3.3 of the
Note Purchase Agreement shall be amended by the addition of a subsection (c) as
set forth below:
<PAGE>
3.3 (c) In the case of a Termination Event (as defined in
Amendment No. 1 to the Common Stock Purchase Warrants,
"Amendment No. 1") and the election by the Company to
terminate the Warrants by exercising its Right of
Termination (as defined in, and in accordance with the terms
of, Amendment No. 1), the Company shall prepay the
Subordinated Notes in full together with all fees and
expenses payable hereunder, the Applicable Prepayment
Premium, and the Termination Prepayment Premium (as defined
in Amendment No. 1). To exercise its Right of Termination,
the Company shall provide the holders of the Subordinated
Notes with a notice of termination no sooner than thirty
(30) days prior to nor no later than thirty (30) days after
the occurrence of a Termination Event ("Termination
Notice"), which Termination Notice shall specify the
principal amount of Indebtedness of the Subordinated Notes
to be repaid, plus accrued interest on such principal amount
up to the date of prepayment, plus the Applicable Prepayment
Premium, plus the Termination Prepayment Premium (as defined
in Amendment No. 1 to the Warrant). Any prepayment shall be
made by cashiers check or by wire transfer of immediately
available funds, in currency of the United States of
America, at such address or to such account, as applicable,
as shall be designated to the Company by the holders. If,
for any reason, the proposed Termination Event does not
close, then the Subordinated Notes shall not be due on the
proposed date of termination, but, instead, shall continue
to be due and payable in accordance with the terms of this
Agreement as if the Company had never given notice to the
holders of a proposed Termination Event.
SECTION 2. 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 3. 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 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:
Title:
NATIONAL RESTAURANT ENTERPRISES, INC.
By:______________________________
Name:
Title:
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-
AMENDED AND RESTATED MANAGEMENT CONSULTING AGREEMENT
THIS AMENDED AND RESTATED MANAGEMENT CONSULTING AGREEMENT (this
"Agreement"), is executed as of ______, 1996, by and among TJC MANAGEMENT
CORPORATION, a Delaware corporation (the "Consultant"), AMERIKING, INC., a
Delaware corporation (the "Parent") and National Restaurant Enterprises, Inc.,
a Delaware corporation and a wholly owned subsidiary of Parent (the
"Subsidiary").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Consultant, Parent and the Subsidiary are parties to a
management consulting agreement, dated September 1, 1994 (as amended by
amendment no. 1 thereto on February 7, 1996, the "Prior Consulting
Agreement");
WHEREAS, the Consultant, Parent and the Subsidiary desire to
terminate the Prior Consulting Agreement in its entirety simultaneously with
execution of this Agreement;
WHEREAS, the Consultant continues to have and/or have access to
personnel who are highly skilled in the field of rendering advice to
businesses and financial advice;
WHEREAS, the Board of Directors of each of Parent and the Subsidiary
have been made fully aware of the relationships of certain of their members to
the Consultant;
WHEREAS, the disinterested members of the Board of Directors of each
of Parent and the Subsidiary have reviewed in detail and discussed the terms
and provisions of this Agreement, its fairness and whether a more favorable
agreement could be obtained from unaffiliated third parties; and
WHEREAS, on the basis of their review of this Agreement, the
disinterested members of the Board of Directors of each of Parent and the
Subsidiary have deemed this Agreement advisable and in the best interests of
Parent, the Subsidiary, and all of their respective present and future direct
or indirect subsidiaries (together with Parent and the Subsidiary, the
"AmeriKing Entities") and necessary to the conduct, promotion and attainment
of the business objectives of the AmeriKing Entities.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto agree as
follows:
<PAGE>
1. Parent hereby retains the Consultant, through the Consultant's own
personnel or through personnel available to the Consultant, to render
consulting services from time to time to the AmeriKing Entities in connection
with their financial and business affairs, their relationships with their
lenders, stockholders and other third-party associates or affiliates, and the
expansion of their businesses. The term of this Agreement shall commence the
date hereof and continue until December 31, 2006, unless extended or sooner
terminated as provided in paragraph 3 below. The Consultant's personnel shall
be reasonably available to Parent's managers, auditors and other personnel for
consultation and advice, subject to Consultant's reasonable convenience and
scheduling. Services may be rendered at the Consultant's offices or at such
other locations selected by the Consultant as Parent and the Consultant shall
from time to time agree.
2. (a) Parent shall pay the Consultant a management fee equal to
three hundred thousand dollars ($300,000) on a per annum basis. Parent shall
pay the Consultant such management fee in quarterly installments on each of
March 31, June 30, September 30 and December 31 of each year, commencing on
September 30, 1996; provided, that such fee payable on September 30, 1996
shall be pro rated to reflect the actual number of days that this Agreement
was in effect during such quarterly period.
(b) In addition to the above quarterly payments, Parent shall pay to
the Consultant:
(i) an investment banking and sponsorship fee of up to one
percent (1.0%) of the aggregate consideration paid (including non-competition,
earnout, contingent purchase price, incentive arrangements and similar
payments) (such amounts being collectively referred to herein as the
"Transaction Value") by an AmeriKing Entity in connection with the acquisition
by an AmeriKing Entity or to an AmeriKing Entity in connection with the sale
by an AmeriKing Entity of all or substantially all of the outstanding capital
stock, warrants, options or other rights to acquire or sell capital stock, or
all or substantially all of the business or assets of another individual,
corporation, partnership or other business entity (a "Transaction"),
including, but not limited to, any Transaction negotiated for an AmeriKing
Entity involving any affiliate of an AmeriKing Entity or the Consultant,
including, but not limited to, any Transaction involving The Jordan Company,
MCIT PLC, Jordan/Zalaznick Capital Company, Jordan Industries, Inc. or any
direct or indirect affiliates of any of the foregoing (collectively, the
"Jordan Affiliates"); provided, that, the Transaction Value is greater than
five million dollars ($5,000,000); and
(ii) a financial consulting fee not to exceed one-half of
one percent (.05%) of the amount obtained or made available pursuant to any
debt, equity or other financing (including without limitation, any
refinancing) by an AmeriKing Entity with the assistance of Consultant,
including, but not limited to, any financing obtained for an AmeriKing Entity
from one or more of the Jordan Affiliates. Notwithstanding the foregoing, if
the Consultant renders services to an AmeriKing Entity outside the ordinary
course of business, Parent shall pay an additional amount equal to the value
of such extraordinary services rendered by the Consultant.
-2-
<PAGE>
3. As recognition of the services rendered by the Consultant in
connection with the evaluation, negotiation and closing of the Offerings, the
Michigan Acquisition, and the New Credit Facility (as each term is defined in
the Parent's Registration Statement on Form S-1 (File No. 333-04261)), the
Company shall pay the Consultant a total fee of $1,000,000 in lieu of the fees
set forth in Section 1(b) hereof.
4. Parent shall reimburse Consultant for out-of-pocket expenses
(including, without limitation, an allocable amount of the Consultant's
overhead expenses, as determined by the Consultant in its sole discretion)
incurred by the Consultant and its personnel in performing services hereunder
to an AmeriKing Entity upon the Consultant's rendering of a statement
therefor, together with supporting data as Parent shall reasonably require.
5. Notwithstanding the foregoing, Parent shall not be required to pay
the fees under Section 2, (a) if and to the extent expressly prohibited by the
provisions of any credit, stock, financing or other agreements or instruments
binding upon Parent, its subsidiaries or properties, (b) if Parent has not
paid interest on any interest payment date or has postponed or not made any
principal payments with respect to any of their indebtedness on any scheduled
payment dates, or (c) if Parent has not paid dividends on any dividend payment
date as set forth in its certificate of incorporation or as declared by its
Board of Directors, or has postponed or not made any redemptions on any
redemption date as set forth in its certificate of incorporation or any
certificate of designation with respect to its preferred stock, if any. Any
payments otherwise owed hereunder, which are not made for any of the
above-mentioned reasons, shall not be cancelled but rather shall accrue, and
shall be payable by Parent promptly when, and to the extent, that Parent is no
longer prohibited from making such payments and when Parent has become current
with respect to such principal or interest payments, has become current with
respect to such dividends and has made such redemptions with respect to such
preferred stock, if any. Any payments required hereunder which are not paid
when due shall bear interest at the rate of ten percent (10%) per annum. This
Section 4 will not, in any event, restrict or limit Parent's or an AmeriKing
Entity's obligations, as the case may be, under Section 3, 8 and 9, which will
be absolute and not subject to set-off.
6. This Agreement shall be automatically renewed for successive
one-year terms starting December 31, 2006 unless either party hereto, within
sixty (60) days prior to the scheduled renewal date, notifies the other party
as to its election to terminate this Agreement. Notwithstanding the foregoing,
this Agreement may be terminated by not less than ninety (90) days' prior
written notice from Parent to the Consultant at any time after (i)
substantially all of the assets of Parent are sold to any entity unaffiliated
with the Consultant and/or a majority of Parent's stockholders immediately
prior to such sale or (ii) Parent is merged or consolidated into another
entity unaffiliated with the Consultant and/or a majority of Parent's
stockholders immediately prior to such merger and Parent is not the survivor
of such transaction.
7. The Consultant shall have no liability to an AmeriKing Entity on
account of (i) any advice which it renders to such AmeriKing Entity, provided
the Consultant believed in
-3-
<PAGE>
good faith that such advice was useful or beneficial to the AmeriKing Entity
at the time it was rendered, (ii) the Consultant's inability to obtain
financing or achieve other results desired by an AmeriKing Entity or
Consultant's failure to render services to an AmeriKing Entity at any
particular time or from time to time or (iii) the failure of any transaction
to meet the financial, operating or other expectations of an AmeriKing Entity.
The sole remedy for any claim under this Agreement by an AmeriKing Entity
shall be termination of this Agreement.
8. Notwithstanding anything contained in this Agreement to the
contrary, the AmeriKing Entities agree and acknowledge that the Consultant,
the Jordan Affiliates and their shareholders, employees, directors and
affiliates intend to engage and participate in acquisitions and business
transactions outside of the scope of the relationship created by this
Agreement and neither the Consultant, any of the Jordan Affiliates nor any of
their shareholders, employees, directors or affiliates shall be under any
obligation whatsoever to make such acquisitions, business transactions or
other opportunities through an AmeriKing Entity or offer such acquisitions,
business transactions or other opportunities to an AmeriKing Entity.
9. The AmeriKing Entities will, to the fullest extent permitted by
applicable law, indemnify and hold harmless the Consultant, its affiliates and
associates, each of the Jordan Affiliates, and each of the respective owners,
partners, officers, directors, employees and agents of each of the foregoing,
from and against any loss, liability, damage, claim or expenses (including the
fees and expenses of counsel) arising as a result or in connection with this
Agreement, the Consultant's services hereunder or other activities on behalf
of an AmeriKing Entity.
10. Any payments paid by Parent under this Agreement shall not be
subject to set-off and shall be increased by the amount, if any, of any taxes
(other than income taxes) or other governmental charges levied in respect of
such payments, so that the Consultant is made whole for such taxes or charges.
11. a. This Agreement sets forth the entire understanding of the
parties with respect to the Consultant's rendering of services to the
AmeriKing Entities and supersedes all prior agreements, arrangements and
communications, whether oral or written, with respect to the subject matter
hereof, including without limitation, the Prior Consulting Agreement (except
for Section 9 thereof). This Agreement may not be modified, waived, terminated
or amended except expressly by an instrument in writing signed by the
Consultant and Parent.
b. This Agreement may be assigned by either party hereto
without the consent of the other party, provided, however, such assignment
shall not relieve such party from its obligations hereunder. Any assignment of
this Agreement shall be binding upon and inure to the benefit of the parties
and their respective successors and assigns.
-4-
<PAGE>
c. In the event that any provision of this Agreement shall
be held to be void or unenforceable in whole or in part, the remaining
provisions of this Agreement and the remaining portion of any provision held
void or unenforceable in part shall continue in full force and effect.
d. Except as otherwise specifically provided herein, notice
given hereunder shall be deemed sufficient if delivered personally or sent by
registered or certified mail to the address of the party for whom intended at
the principal executive offices of such party, or at such other address as
such party may hereinafter specify by written notice to the other party.
e. Subsidiary will be jointly and severally liable and
obligated hereunder with respect to each obligation, responsibility and
liability of Parent, as if a direct obligation of the Subsidiary.
f. No waiver by either party of any breach of any provision
of this Agreement shall be deemed a continuing waiver or a waiver of any
preceding or succeeding breach of such provision or of any other provision
herein contained.
g. The Consultant and its personnel shall, for purposes of
this Agreement, be independent contractors with respect to each AmeriKing
Entity.
h. This Agreement shall be governed by the internal laws
(and not the law of conflicts) of the State of New York.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
TJC MANAGEMENT CORPORATION
By:
-----------------------------------
Name:
Title:
AMERIKING, INC.
By:
-----------------------------------
Name: Lawrence E. Jaro
Title: Chairman of the Board and
Chief Executive Officer
NATIONAL RESTAURANT
ENTERPRISES, INC.
By:
-----------------------------------
Name: Lawrence E. Jaro
Title: Chairman of the Board and
Chief Executive Officer
-6-
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT, dated as of ______, 1996 ("this
Agreement"), is by and among AmeriKing, Inc., a Delaware corporation
("AmeriKing") National Restaurant Enterprises, Inc., a Delaware Corporation
(collectively the "Company"), and _________ ("Indemnitee").
WITNESSETH
WHEREAS, highly competent persons are becoming more reluctant to
serve publicly-held corporations as directors, executive officers, or in other
capacities unless they are provided with adequate protection through insurance
and indemnification against inordinate risks of claims and actions against
them arising out of their service to and activities on behalf of the
corporation; and
WHEREAS, the current difficulties or virtual impossibility of
obtaining adequate insurance and uncertainties relating to indemnification
have increased the difficulty of attracting and retaining such persons; and
WHEREAS, the Board of Directors of AmeriKing has determined that the
inability to attract and retain such persons is detrimental to the best
interests of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection
in the future; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest
extent permitted by applicable law so that they will serve or continue to
serve the Company free from undue concern that they will not be so
indemnified; and
WHEREAS, the shareholders of the Company have adopted the Amended and
Restated Certificate of Incorporation of the Company (the "Certificate") and
the Amended and Restated Bylaws of the Company (the "Bylaws") providing for
the indemnification of the directors, officers, agents and employees of the
Company to the full extent permitted by the General Corporation Law of the
State of Delaware (the "Act"). The Charter, the Bylaws and the Act
specifically provide that they are not exclusive, and thereby contemplate that
contracts may be entered into between the Company and the members of its Board
of Directors and its
<PAGE>
executive officers with respect to indemnification of such directors and
executive officers; and
WHEREAS, this Agreement is being entered into as part of Indemnitee's
total compensation for serving as a director and/or an executive officer, as
the case may be; and
NOW THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
SECTION 1. Service by Indemnitee.
Indemnitee agrees to serve as director of the Company and/or
executive officer of the Company if so designated by the Company and appointed
by the Board of Directors, and agrees to the indemnification provisions
provided for herein. Indemnitee may at any time and for any reason resign from
such position (subject to any other contractual obligation or other obligation
imposed by operation of law), in which event the Company shall have no
obligation under this Agreement to continue Indemnitee in any such position.
SECTION 2. Indemnification.
The Company shall indemnify Indemnitee to the fullest extent
permitted by applicable law in effect on the date hereof, notwithstanding that
such indemnification is not specifically authorized by this Agreement, the
Charter, the Bylaws, the Act or otherwise. In the event of any change, after
the date of this Agreement, in any applicable law, statute or rule regarding
the right of a Delaware corporation to indemnify a member of its board of
directors or an officer, such changes, to the extent that they would expand
Indemnitee's rights hereunder, shall be within the scope of Indemnitee's
rights and the Company's obligations hereunder, and, to the extent that they
would narrow Indemnitee's rights hereunder, shall be excluded from this
Agreement; provided, however, that any change that is required by applicable
laws, statutes or rules to be applied to this Agreement shall be so applied
regardless of whether the effect of such change is to narrow Indemnitee's
rights hereunder. Without diminishing the scope of the indemnification
provided by this Section 2, the rights of indemnification of Indemnitee
provided hereunder shall include indemnification in respect of the Company's
proposed initial public offering of Common Stock pursuant to its Registration
Statement on Form S-1 (File No. 333-04261) and shall further include any other
public offerings of securities by the Company, and shall not be limited to
those rights set forth hereinafter, except to the extent expressly prohibited
by applicable law.
<PAGE>
SECTION 3. Action or Proceeding Other Than an Action by or in the
Right of the Company.
Indemnitee shall be entitled to the indemnification rights provided
in this Section 3 if he is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative in nature, other than an
action by or in the right of the Company, by reason of the fact that he is or
was a director, officer, employee, agent or fiduciary of the Company or is or
was serving at the request of the Company as a director, officer, employee,
agent, partner, trustee or fiduciary of any other entity (a "Related Company")
or by reason of anything done or not done by him in any such capacity.
Pursuant to this Section 3, Indemnitee shall be indemnified against reasonable
costs and expenses (including, but not limited to, counsel fees, costs,
judgments, penalties, fines, ERISA excise taxes, and amounts paid in
settlement) (collectively, "Damages") actually and reasonably incurred by him
in connection with such action, suit or proceeding (including, but not limited
to, the investigation, defense or appeal thereof), if, in the case of conduct
in his official capacity with the corporation, he acted in good faith and in
the Company's best interests, and in all other cases, he acted in good faith
and was at least not 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
of 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 Company 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, Indemnitee is fairly and
reasonably entitled to indemnity for such expenses as such court shall deem
proper or (ii) the indemnification does not relate to any liability arising
under Section 16(b) of the Securities Exchange Act of 1934, as amended, or any
of the rules or regulations promulgated thereunder. Notwithstanding the
foregoing, the Company 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 or a committee
thereof. No indemnity pursuant to this Agreement shall be provided by the
Company for Damages that have been paid directly to Indemnitee by an insurance
carrier under a policy of directors' and officers' liability insurance
maintained by the Company.
SECTION 4. Actions by or in the Right of the Company.
<PAGE>
Indemnitee shall be entitled to the indemnification rights provided
in this Section 4 if he is or was made a party or is threatened to be made a
party to any threatened, pending or completed action, suit, or proceeding,
whether civil, criminal, administrative or investigative brought by or in the
right of the Company to procure a judgment in its favor by reason of the fact
that he is or was a director, officer, employee, agent or fiduciary of the
Company or is or was serving at the request of the Company as a director,
officer, employee, agent, partner, trustee or fiduciary of any other entity by
reason of anything done or not done by him in any such capacity. Pursuant to
this Section 4, Indemnitee shall be indemnified against Damages (as defined in
Section 3 of Agreement) actually and reasonably incurred by him in connection
with such action or suit (including, but not limited to the investigation,
defense, settlement or appeal thereof) if, in the case of conduct in his
official capacity with the corporation, he acted in good faith and in the
Company's best interests, and in all other cases, he acted in good faith and
was at least not opposed to the Company's best interests, except that no
indemnification shall be made in respect of 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 Company 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, Indemnitee is fairly and reasonably entitled to
indemnity for such expenses as such court shall deem proper or (ii) the
indemnification does not relate to any liability arising under Section 16(b)
of the Securities Exchange Act of 1934, as amended, or any of the rules or
regulations promulgated thereunder. Notwithstanding the foregoing, the Company
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 or a committee thereof. No indemnity
pursuant to this Agreement shall be provided by the Company for Damages that
have been paid directly to Indemnitee by an insurance carrier under a policy
of directors' and officers' liability insurance maintained by the Company.
SECTION 5. Indemnification for Costs, Charges and Expenses of
Successful Party.
Notwithstanding the other provisions of this Agreement, to the extent
that Indemnitee has served as a witness on behalf of the Company or has been
successful, on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit or
proceeding referred to in Section 3 and Section 4 hereof, or in defense of any
claim,
<PAGE>
issue or matter therein, shall be indemnified against all reasonable
costs, charges, and expenses (including counsel fees) actually and reasonably
incurred by him or on his behalf in connection therewith.
SECTION 6. Partial Indemnification
If Indemnitee is only partially successful in the defense,
investigation, settlement or appeal of any action, suit, investigation or
proceeding described in Section 3 or Section 4 hereof, and as a result is not
entitled under Section 5 hereof to indemnification by the Company for the
total amount of reasonable Damages actually and reasonably incurred by him,
the Company shall nevertheless indemnify Indemnitee, as a matter of right
pursuant to Section 5 hereof, to the extent Indemnitee has been partially
successful.
SECTION 7. Determination of Entitlement to Indemnification.
Upon written request by Indemnitee for indemnification pursuant to
Section 3 or Section 4 hereof, the entitlement of Indemnitee to
indemnification pursuant to the terms of this Agreement shall be determined by
the following person or persons who shall be empowered to make such
determination: (a) the Board of Directors of the Company by a majority vote of
a quorum consisting of Disinterested Directors (as hereinafter defined); or
(b) if such a quorum is not obtainable or, even if obtainable, if the Board of
Directors by the majority vote of Disinterested Directors so directs, by
Independent Counsel (as hereinafter defined) in a written opinion to the Board
of Directors, a copy of which shall be delivered to Indemnitee; or (c) by the
stockholders, but shares owned by or voted under the control of directors,
including the Indemnitee, who are at the time parties to the proceeding may
not be voted on the determination. Such Independent Counsel shall be selected
by the Board of Directors and approved by Indemnitee. Upon failure of the
Board of Directors to so select such Independent Counsel or upon failure of
Indemnitee to so approve, such Independent Counsel shall be selected by the
Chancellor of the State of Delaware or such other person as the Chancellor
shall designate to make such selection. Such determination of entitlement to
indemnification shall be made no later than sixty (60) days after receipt by
the Company of a written request for indemnification. Such request shall
include documentation or information which is necessary for such determination
and which is reasonably available to Indemnitee. Any Damages incurred by
Indemnitee in connection with his request for indemnification hereunder shall
be borne by the Company. The Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom irrespective of the outcome of the determination
of Indemnitee's entitlement to indemnification. If the person making such
determination shall determine that Indemnitee is
<PAGE>
entitled to indemnification as to part (but not all) of the application for
indemnification, such person shall reasonably prorate such partial
indemnification among such claims, issues or matters.
SECTION 8. Presumptions and Effect of Certain Proceedings.
The Secretary of the Company shall, promptly upon receipt of
Indemnitee's request for indemnification, advise in writing the Board of
Directors or such other person or persons empowered to make the determination
as provided in Section 7 that Indemnitee has made such request for
indemnification. Indemnitee shall be presumed to be entitled to
indemnification hereunder and the Company shall have the burden of proof in
the making of any determination contrary to such presumption. If the person or
persons so empowered to make such determination shall have failed to make the
requested indemnification within 60 days after receipt by the Company of such
request, the requisite determination of entitlement to indemnification shall
be deemed to have been made and Indemnitee shall be absolutely entitled to
such indemnification, absent actual and material fraud in the request for
indemnification. The termination of any action, suit, investigation or
proceeding described in Section 3 or Section 4 hereof by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself (a) create a presumption that Indemnitee did not act in
good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, that Indemnitee had reasonable cause to believe
that his conduct was unlawful or (b) otherwise adversely affect the rights of
Indemnitee to indemnification except as may be provided herein.
SECTION 9. Advancement of Expenses and Costs.
All reasonable expenses and costs incurred by Indemnitee who is party
to a proceeding (including counsel fees, retainers and advances of
disbursements required of Indemnitee) (collectively, the "Expense Advance")
shall be paid by the Company in advance of the final disposition of such
action, suit or proceeding at the request of Indemnitee within twenty (20)
days after the receipt by the Company of a statement or statements from
Indemnitee requesting such advance or advances from time to time. Such
statement or statements shall reasonably evidence the expenses and costs
incurred by him in connection therewith. The Company's obligation to provide
an Expense Advance is subject to the following conditions: (i) If the
proceeding arose in connection with Indemnitee's service as a director and/or
executive officer of the Company (and not in any other capacity in which
Indemnitee rendered service, including service to any related company), then
the Indemnitee or his representative shall have executed and
<PAGE>
delivered to the Company an undertaking, which need not be secured and shall
be accepted without reference to Indemnitee's financial ability to make
repayment, by or on behalf of Indemnitee to repay all Expense Advance if and
to the extent that it shall ultimately be determined by a final, unappealable
decision rendered by a court having jurisdiction over the parties and the
question that Indemnitee is not entitled to be indemnified for such Expense
Advance under this Agreement or otherwise; (ii) Indemnitee shall give the
Company such information and cooperation as it may reasonably request and as
shall be within Indemnitee's power; and (iii) Indemnitee shall furnish, upon
request by the Company and if required under applicable law, a written
affirmation of Indemnitee's good faith belief that any applicable standards of
conduct have been met by Indemnitee. Indemnitee's entitlement to such Expense
Advance shall include those incurred in connection with any proceeding by
Indemnitee seeking an adjudication pursuant to this Agreement. In the event
that a claim for an Expense Advance is made hereunder and is not paid in full
within twenty (20) days after written notice of such claim is delivered to the
Company, Indemnitee may, but need not, at any time thereafter bring suit
against the Company to recover the unpaid amount of the claim.
SECTION 10. Remedies of Indemnitee in Cases of Determination not to
Indemnify or to Advance Expenses.
In the event that a determination is made that Indemnitee is not
entitled to indemnification hereunder or if payment has not been timely made
following a determination of entitlement to indemnification pursuant to
Section 7 and 8, or if expenses are not advanced pursuant to Section 9,
Indemnitee shall be entitled to a final adjudication in an appropriate court
of the State of Delaware or any other court of competent jurisdiction of his
entitlement to such indemnification or advance. The Company shall not oppose
Indemnitee's right to seek any such adjudication or any other claim. Such
judicial proceeding shall be made de novo and Indemnitee shall not be
prejudiced by reason of a determination (if so made) that he is not entitled
to indemnification. If a determination is made or deemed to have been made
pursuant to the terms of Section 7 or Section 8 hereof that Indemnitee is
entitled to indemnification, the Company shall be bound by such determination
and is precluded from asserting that such determination has not been made or
that the procedure by which such determination was made is not valid, binding
and enforceable. The Company further agrees to stipulate in any such court
that the Company is bound by all the provisions of this Agreement and is
precluded from making any assertion to the contrary. If the court shall
determine that Indemnitee is entitled to any indemnification hereunder, the
Company shall pay
<PAGE>
all reasonable Damages actually incurred by Indemnitee in connection with such
adjudication (including, but not limited to, any appellate proceedings).
SECTION 11. Other Rights to Indemnification.
The indemnification and advancement of expenses (including counsel
fees) and costs provided by this Agreement shall not be deemed exclusive of
any other rights to which Indemnitee may now or in the future be entitled
under any provision of the By-laws, provisions of the Charter, vote of
stockholders or Disinterested Directors, provision of law or otherwise.
SECTION 12. Counsel Fees and Other Expenses to Enforce Agreement.
In the event that Indemnitee is subject to or intervenes in any
proceeding in which the validity or enforceability of this Agreement is at
issue or seeks an adjudication or award in arbitration to enforce his rights
under, or to recover damages for breach of, this Agreement, Indemnitee, if he
prevails in whole or in part in such action, shall be entitled to recover from
the Company, and shall be indemnified by the Company against, any reasonable
expenses for counsel fees and disbursements actually and reasonably incurred
by him.
SECTION 13. Duration of Agreement.
This Agreement shall continue until and terminate upon the later of
(a) 10 years after Indemnitee has ceased to occupy any of the positions or
have any of the relationships described in Section 3 or Section 4 of this
Agreement or (b) the final termination of all pending or threatened actions,
suits, proceedings or investigations with respect to Indemnitee. This
Agreement shall be binding upon the Company and its successors and assigns and
shall inure to the benefit of Indemnitee and his spouse, assigns, heirs,
devisees, executors, administrators or other legal representatives.
SECTION 14. Severability.
If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever (a) the validity,
legality and enforceability of the remaining provisions of this Agreement
(including without limitation, all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby and (b) to the fullest
extent possible, the provisions of this Agreement (including, without
limitation, all portions of
<PAGE>
any paragraph of this Agreement containing any such provision held to be
invalid, illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
SECTION 15. Identical Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall for all purposes be deemed to be an original, but all of which
together shall constitute one and the same Agreement. Only one such
counterpart signed by the party against whom enforceability is sought needs to
be produced to evidence the existence of this Agreement.
SECTION 16. Headings.
The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement
or to affect the construction thereof.
SECTION 17. Definitions.
For purposes of this Agreement:
(a) "Disinterested Director" shall mean a director of the Company who
is not or was not a party to the action, suit, investigation or proceeding in
respect of which indemnification is being sought by Indemnitee.
(b) "Independent Counsel" shall mean a law firm or a member of a law
firm that neither is presently nor in the past five years has been retained to
represent (i) the Company or Indemnitee in any matter material to either such
party or (ii) any other party to the action, suit, investigation or proceeding
giving rise to a claim for indemnification hereunder. Notwithstanding the
foregoing, the term "Independent Counsel" shall not include any person who,
under the applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or Indemnitee
in an action to determine Indemnitee's right to indemnification under this
Agreement.
SECTION 18. Modification and Waiver.
No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any
<PAGE>
other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
SECTION 19. Mutual Acknowledgment
The Company and Indemnitee acknowledge that, in certain instances,
federal law or public policy may override applicable state law and prohibit
the Company from indemnifying Indemnitee under this Agreement or otherwise.
For example, the Company and Indemnitee acknowledge that the U.S. Securities
and Exchange Commission (the "SEC") has taken the position that
indemnification is not permissible for liabilities arising under certain
federal securities laws, and federal legislation prohibits indemnification for
certain ERISA violations. Furthermore, Indemnitee understands and acknowledges
that the Company has undertaken or may be required in the future to undertake
with the SEC to submit the question of indemnification to a court in certain
circumstances for a determination of the Company's right under public policy
to indemnify Indemnitee.
SECTION 20. Notice by Indemnitee.
Indemnitee agrees promptly to notify the Company in writing upon
being served with any summons, citation, subpoena, complaint, indictment,
information or other document relating to any matter which may be subject to
indemnification covered hereunder, either civil, criminal or investigative.
SECTION 21. Notices.
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed or if (ii) mailed by certified or
registered mail with postage prepaid on the third business day after the date
on which it is so mailed, to the following addresses:
(a) to Indemnitee:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
(b) to the Company:
AmeriKing, Inc.
2215 Enterprise Drive, Suite 1502
Westchester, Illinois 60154
<PAGE>
Attention: Chief Executive Officer
or to such other address as may have been furnished to Indemnitee by the
Company or to the Company by Indemnitee, as the case may be.
SECTION 22. Other Agreements.
This Agreement restates and supersedes, but does not limit or negate,
any indemnification, rights or interests of Indemnitee under any prior
agreements between the Company and Indemnitee.
SECTION 23. Governing Law.
The parties agree that this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
AMERIKING, INC.
By:
-----------------------------------
Name:
Title:
NATIONAL RESTAURANT
ENTERPRISES, INC.
By:
-----------------------------------
Name:
Title:
INDEMNITEE:
--------------------------------------
Name:
AMERIKING, INC.
1996 OUTSIDE DIRECTORS PLAN
---------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION 1................................................................. 1
GENERAL.......................................................... 1
1.1. Purpose.................................................... 1
1.2. Operation and Administration............................... 1
SECTION 2................................................................. 1
OPTION GRANTS.................................................... 1
2.1. Election................................................... 1
2.2. Option Terms............................................... 2
SECTION 3................................................................. 3
OPERATION AND ADMINISTRATION..................................... 3
3.1. Effective Date............................................. 3
3.2. Shares Subject to Plan..................................... 3
3.3. Adjustments to Shares...................................... 3
3.4. Limit on Distribution...................................... 4
3.5. Taxes...................................................... 4
3.6. Distributions to Disabled Persons.......................... 4
3.7. Transferability............................................ 5
3.8. Form and Time of Elections................................. 5
3.9. Limitation of Implied Rights............................... 5
3.10. Evidence.................................................. 5
3.11. Action by Company......................................... 5
3.12. Gender and Number......................................... 5
SECTION 4................................................................. 6
COMMITTEE........................................................ 6
4.1. Administration............................................. 6
4.2. Selection of Committee..................................... 6
4.3. Powers of Committee........................................ 6
4.4. Information to be Furnished to Committee................... 6
4.5. Liability and Indemnification of Committee................. 6
SECTION 5................................................................. 7
AMENDMENT AND TERMINATION........................................ 7
SECTION 6................................................................. 7
DEFINED TERMS.................................................... 7
Board................................................... 7
Code.................................................... 7
Date of Termination..................................... 7
Director................................................ 7
Effective Date.......................................... 7
Eligible Director....................................... 8
Fair Market Value....................................... 8
Participant............................................. 8
Plan Year............................................... 8
<PAGE>
Related Companies....................................... 8
SEC..................................................... 8
Stock................................................... 8
<PAGE>
AMERIKING, INC.
1996 OUTSIDE DIRECTORS PLAN
---------------------------
SECTION 1
---------
GENERAL
-------
1.1. Purpose. The AmeriKing, Inc. 1996 Outside Directors Plan (the
"Plan") has been established by AmeriKing, Inc. (the "Company") to promote the
interests of the Company and its stockholders by enhancing the Company's
ability to attract and retain the services of experienced and knowledgeable
directors and by encouraging such directors to acquire a proprietary interest
in the Company.
1.2. Operation and Administration. The operation and administration
of the Plan shall be subject to the provisions of Section 3. Capitalized terms
in the Plan shall be defined as set forth in Section 6 or elsewhere in the
Plan.
SECTION 2
---------
OPTION GRANTS
-------------
2.1. Election. For each Plan Year, each Eligible Director shall be
entitle to the grant of an "Option", subject to the following:
(a) As of the first day of the first Plan Year, each individual who is
then an Eligible Director shall be granted an Option to purchase
5,000 shares of Stock.
(b) For each Plan Year after the first Plan Year, as of the first
business day after each annual meeting of the Company's stockholders,
each Director who is then an Eligible Director shall be granted an
Option to purchase 5,000 shares of Stock.
(c) If an individual becomes an Eligible Director during the Plan Year,
on a date other than the first day of the Plan Year, he shall be
granted an Option to purchase the number of shares of Stock
applicable as of the date on which he first becomes an Eligible
Director (determined in accordance with the following sentence). The
number of shares subject to the Option shall be the number which
would have been subject to the Option if he had become an Eligible
Director on the first day of the year, except that such number of
shares shall be subject to a pro-rata reduction to reflect the
portion of the Plan Year prior to the date on which he becomes an
Eligible Director. In no event shall an Option
<PAGE>
be granted with respect to a fractional share, and the amount of any
pro-rata reduction shall be rounded to the nearest whole share.
2.2. Option Terms. Each Option granted pursuant to this
Section 2 shall be subject to the following:
(a) Each Option shall provide for a per-share exercise price equal to the
greater of (i) 100% of the Fair Market Value of a share of Stock on
the date as of which the Option is granted; or (ii) the par value of
a share of Stock.
(b) The full purchase price of each share of Stock purchased upon the
exercise of any Option shall be paid at the time of such exercise
and, as soon as practicable thereafter, a certificate representing
the shares so purchased shall be delivered to the person entitled
thereto.
(c) The Option purchase price shall be payable in cash or in shares of
Stock (valued at Fair Market Value as of the day of exercise), or in
any combination thereof. A Director may elect to pay the purchase
price upon the exercise of an Option granted pursuant to this Section
2 through a cashless exercise procedure established by the Company.
(d) The Option granted to a Director shall become exercisable on the last
day of the Plan Year for which it is granted, if the Director's Date
of Termination has not occurred prior to that date. If a Director's
Date of Termination occurs during a Plan Year because of the
Director's death or Disability, the Option granted to the Director
for the Plan Year shall become exercisable on such Date of
Termination. If a Director's Date of Termination occurs during a Plan
Year for reasons other than death or Disability, the Option granted
to the Director for the Plan Year shall be forfeited as of the Date
of Termination.
(e) An Option shall expire on the earlier of: (i) the ten-year
anniversary of the date it is granted; or (ii) the one-year
anniversary of the Director's Date of Termination. However, no Option
shall be exercisable following a Director's Date of Termination
except to the extent that the Option is exercisable prior to, or
becomes exercisable as of, such Date of Termination.
(f) Each Option granted under this Section 2 shall be evidenced by an
Agreement duly executed on behalf of the Company and by the Director
to whom such Option is granted and dated as of the applicable date of
grant. Each Agreement shall comply with and be subject to the terms
of the Plan.
2
<PAGE>
(g) The Option are not intended to be "incentive stock options" as that
term is described in section 422(b) of the Code.
SECTION 3
---------
OPERATION AND ADMINISTRATION
----------------------------
3.1. Effective Date. The Plan (subject to the approval of the Plan by
the shareholders of the Company which was given on _______________) was
approved and adopted by the Board of Directors of the Company on June __,
1996, effective as of such date (the "Effective Date"). The Plan shall be
unlimited in duration and, in the event of Plan termination, shall remain in
effect as long as any Options granted under it are outstanding and not
exercised; provided, however, that no new Options shall be made under the Plan
on or after the tenth anniversary of the Effective Date.
3.2. Shares Subject to Plan. The shares of Stock with respect to
which Options may be made under the Plan shall be currently authorized but
unissued shares or currently held or subsequently acquired by the Company as
treasury shares, including shares purchased in the open market or in private
transactions. The maximum number of shares of Stock available for Options
under the Plan shall not exceed [insert number] shares.
3.3. Adjustments to Shares.
(a) If the Company shall effect any subdivision or consolidation of
shares of Stock or other capital readjustment, payment of stock
dividend, stock split, combination of shares or recapitalization or
other increase or reduction of the number of shares of Stock
outstanding without receiving compensation therefor in money,
services or property, then the Committee shall adjust: (i) the number
of shares of Stock available under the Plan; (ii) the number of
shares available under any Plan limits; (iii) the number of shares of
Stock subject to any outstanding Options; (iv) the number of shares
of Stock subject to future grant; and (v) the per- share price under
any outstanding Option.
(b) If the Company is reorganized, merged or consolidated or is party to
a plan of exchange with another corporation, pursuant to which
reorganization, merger, consolidation or plan of exchange the
stockholders of the Company receive any shares of stock or other
securities or property, or the Company shall distribute securities of
another corporation to its stockholders, there shall be substituted
for the shares subject to outstanding Options an appropriate number
of shares of each class of stock or amount of other
3
<PAGE>
securities or property which were distributed to the stockholders of
the Company in respect of such shares; provided that, upon the
occurrence of a reorganization of the Company or any other event
described in this paragraph (b), any successor to the Company shall
be substituted for the Company.
(c) The existence of this Plan and the Options granted hereunder
shall not affect in any way the right or power of the Company or its
stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's
capital structure or its business, any merger or consolidation of the
Company, any issue of bonds, debentures, preferred or prior
preference stocks ahead of or affecting the Company's Stock or the
rights thereof, the dissolution or liquidation of the Company, any
sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or
otherwise.
(d) Except as expressly provided by the terms of this Plan, the
issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property
or for labor or services, either upon direct sale, upon the exercise
of rights or warrants to subscribe therefor or upon conversion of
shares or obligations of the Company convertible into such shares or
other securities, shall not affect Options under the Plan.
3.4. Limit on Distribution. Distribution of shares of
Stock or other amounts under the Plan shall be subject to the
following:
(a) Notwithstanding any other provision of the Plan, the Company shall
have no liability to issue any shares of Stock under the Plan or make
any other distribution of benefits under the Plan unless such
delivery or distribution would comply with all applicable laws and
the applicable requirements of any securities exchange or similar
entity.
(b) The Committee shall add such conditions and limitations to any
Options to any Participant as is necessary to comply with Section
16(a) and 16(b) of the Securities Exchange Act of 1934, and the rules
and regulations thereunder or to obtain any exemption therefrom.
(c) To the extent that the Plan provides for issuance of certificates to
reflect the transfer of shares of Stock, the transfer of such shares
may, at the direction of the Committee, be effected on a
non-certificated basis, to the
4
<PAGE>
extent not prohibited by applicable law or the rules of any stock
exchange.
3.5. Taxes. All Options and other payments under the Plan
are subject to all applicable taxes.
3.6. Distributions to Disabled Persons. Notwithstanding any other
provision of the Plan, if, in the Committee's opinion, a Participant or other
person entitled to benefits under the Plan is under a legal disability or is
in any way incapacitated so as to be unable to manage his financial affairs,
the Committee may direct that payment be made to a relative or friend of such
person for his benefit until claim is made by a conservator or other person
legally charged with the care of his person or his estate, and such payment or
distribution shall be in lieu of any such payment to such Participant or other
person. Thereafter, any benefits under the Plan to which such Participant or
other person is entitled shall be paid to such conservator or other person
legally charged with the care of his person or his estate.
3.7. Transferability. Options are not transferable prior
to exercise, except as designated by the Participant by will or by the laws of
descent and distribution.
3.8. Form and Time of Elections. Any election required or
permitted under the Plan shall be in writing, and shall be deemed to be filed
when delivered to the Secretary of the Company.
3.9. Limitation of Implied Rights. Neither the Participant nor any
other person shall, by reason of participation in the Plan, acquire any right
in or title to any assets, funds or property of the Company whatsoever prior
to the date such shares are distributed. A Participant shall have only a
contractual right to the shares, if any, distributable under the Plan,
unsecured by any assets of the Company. Nothing contained in the Plan shall
constitute a guarantee by the Company that the assets of the Company shall be
sufficient to provide any benefits to any person.
3.10. Evidence. Evidence required of anyone under the Plan
may be by certificate, affidavit, document or other information which the
person acting on it considers pertinent and reliable, and signed, made or
presented by the proper party or parties.
3.11. Action by Company. Any action required or permitted to be taken
by the Company shall be by resolution of the Board, or by action of one or
more members of the Board (including a committee of the Board) who are duly
authorized to act for the board, by a duly authorized officer of the Board, or
(except to the extent prohibited by applicable law or the rules of any stock
exchange) by a duly authorized officer of the Company.
5
<PAGE>
3.12. Gender and Number. Where the context admits, words
in any gender shall include any other gender, words in the singular shall
include the plural and the plural shall include the singular.
SECTION 4
---------
COMMITTEE
---------
4.1. Administration. The authority to control and manage
the operation and administration of the Plan shall be vested in a committee
(the "Committee") in accordance with this Section 4.
4.2. Selection of Committee. The Committee shall be selected by
the Board, and shall consist of not less than two members of the Board.
4.3. Powers of Committee. The Committee will have the authority to
establish, amend, and rescind any rules and regulations relating to the Plan,
to determine the terms and provisions of any agreements made pursuant to the
Plan, and to make all other determinations that may be necessary or advisable
for the administration of the Plan.
4.4. Information to be Furnished to Committee. The Company shall
furnish the Committee with such data and information as may be required for it
to discharge its duties. The records of the Company as to the period of a
Director's service shall be conclusive on all persons unless determined to be
incorrect. Participants and other persons entitled to benefits under the Plan
must furnish the Committee such evidence, data or information as the Committee
considers desirable to carry out the terms of the Plan.
4.5. Liability and Indemnification of Committee. No member or
authorized delegate of the Committee shall be liable to any person for any
action taken or omitted in connection with the administration of the Plan
unless attributable to his own fraud or willful misconduct; nor shall the
Company be liable to any person for any such action unless attributable to
fraud or willful misconduct on the part of a director or employee of the
Company. The Committee, the individual members thereof, and persons acting as
the authorized delegates of the Committee under the Plan, shall be indemnified
by the Company, to the fullest extent permitted by law, against any and all
liabilities, losses, costs and expenses (including legal fees and expenses) of
whatsoever kind and nature which may be imposed on, incurred by or asserted
against the Committee or its members or authorized delegates by reason of the
performance of a Committee function if the Committee or its members or
authorized delegates did not act dishonestly or in willful violation of the
law or regulation
6
<PAGE>
under which such liability, loss, cost or expense arises. This indemnification
shall not duplicate but may supplement any coverage available under any
applicable insurance.
SECTION 5
---------
AMENDMENT AND TERMINATION
-------------------------
The Board may, at any time, amend or terminate the Plan, provided
that, subject to subsection 3.3 (relating to certain adjustments to shares),
no amendment or termination may materially adversely affect the rights of any
Participant or beneficiary under any Option made under the Plan prior to the
date such amendment is adopted by the Board. Notwithstanding the provisions of
this Section 5, in no event shall the provisions of the Plan relating to
Options under the Plan be amended more than once every six months, other than
to comport with changes in the Code, the Employee Retirement Income Security
Act, or the rules thereunder; provided, however, that the limitation set forth
in this sentence shall be applied only to the extent required under SEC Rule
16b-3(c)(2)(ii)(B) or any successor provision thereof.
SECTION 6
---------
DEFINED TERMS
-------------
For purposes of the Plan, the terms listed below shall be defined as
follows:
(a) Board. The term "Board" shall mean the Board of Directors of the
Company.
(b) Code. The term "Code" means the Internal Revenue Code of 1986, as
amended. A reference to any provision of the Code shall include
reference to any successor provision of the Code.
(c) Date of Termination. A Participant's "Date of Termination" shall be
the day following the last day on which he serves as a Director.
(d) Director. The term "Director" means a member of the Board.
(e) Disability. A Director shall be considered to have a "Disability"
during the period in which he is unable, by reason of a medically
determinable physical or mental impairment, to engage in any
substantial gainful activity, which condition, in the opinion of a
physician selected by the Committee, is expected to have a duration
of not less than 120 days.
7
<PAGE>
(f) Effective Date. The "Effective Date" means the date described at
Section 3.1.
(g) Eligible Director. Each Director who is not an employee of the
Company or any Related Company shall be an "Eligible Director".
(h) Fair Market Value. The "Fair Market Value" of a share of Stock of
the Company on a specified date means (i) the closing price at which
a Share is quoted on such date if quoted as a national market
security on NASDAQ or on a national securities exchange on which
shares are primarily traded; or (ii) if the Shares are not so quoted
on such date, then the average of the bid and asked closing prices,
at which one Share is traded on the over-the-counter market on
NASDAQ; but if no shares were traded on such date, then on the last
previous date on which a Share was so traded, or (iii) if none of the
above is applicable, the value of a share as established by the
Committee in its sole and absolute discretion.
(i) Participant. A "Participant" is any person who has received an
Option under the Plan.
(j) Plan Year. The first "Plan Year" of the Plan shall be the period
beginning on the effective date of the initial public offering of the
Company's Stock and ending on the day immediately before the
Company's next annual stockholders meeting. Thereafter, the "Plan
Year" shall be the period (i) beginning on the date on which members
of the Board begin their yearly term as Board members following the
election of Directors at the Company's annual stockholders meeting
and (ii) ending on the day immediately prior the first day of the
following Plan Year.
(k) Related Companies. The term "Related Company" means any company
during any period in which it is a "parent company" (as that term is
defined in Code section 424(e)) or a "subsidiary corporation" (as
that term is defined in Code section 424(f)) with respect to the
Company.
(l) SEC. "SEC" shall mean the Securities and Exchange Commission.
(m) Stock. The term "Stock" shall mean shares of common stock of the
Company.
8
1996 LONG-TERM INCENTIVE PLAN
OF
AMERIKING, INC.
<PAGE>
(AMERIKING, INC.)
CERTIFICATE
I,____________ ,_____________ of AmeriKing, Inc., having in my
custody and possession the corporate records of said corporation, do hereby
certify that attached hereto is a true and correct copy of the 1996 Long-Term
Incentive Plan of AmeriKing, Inc. as in effect as of June __, 1996.
WITNESS my hand this day of , 1996.
---------------------------
As Aforesaid
<PAGE>
TABLE OF CONTENTS
Pagination to be corrected
SECTION 1................................................................. 1
GENERAL.......................................................... 1
1.1. Purpose................................................ 1
1.2. Participation.......................................... 1
1.3. Operation and Administration........................... 2
SECTION 2................................................................. 2
OPTIONS.......................................................... 2
2.1. Definitions............................................ 2
2.2. Eligibility............................................ 3
2.3. Price.................................................. 3
2.4. Exercise............................................... 4
2.5. Post-Exercise Limitations.............................. 5
2.6. Expiration Date........................................ 5
2.7. Reload Provision....................................... 6
SECTION 3................................................................. 6
STOCK APPRECIATION RIGHTS........................................ 6
3.1. Definition............................................. 6
3.2. Eligibility............................................ 6
3.3. Exercise............................................... 7
3.4. Settlement of Award.................................... 7
3.5. Post-Exercise Limitations.............................. 7
3.6. Expiration Date........................................ 8
3.7. Limited Stock Appreciation Rights...................... 8
SECTION 4................................................................. 10
STOCK AWARDS..................................................... 10
4.1. Definition............................................. 10
4.2. Eligibility............................................ 10
4.3. Terms and Conditions of Awards......................... 10
SECTION 5................................................................. 14
OPERATION AND ADMINISTRATION..................................... 14
5.1. Effective Date......................................... 14
5.2. Shares Subject to Plan................................. 14
5.3. Individual Limits on Awards............................ 14
5.4. Adjustments to Shares.................................. 15
5.5. Limit on Distribution.................................. 18
5.6. Liability for Cash Payments............................ 19
i
<PAGE>
5.7. Performance-Based Compensation......................... 19
5.8. Withholding............................................ 20
5.9. Transferability........................................ 20
5.10. Notices................................................ 21
5.11. Form and Time of Elections............................. 21
5.12. Agreement With Company................................. 21
5.13. Limitation of Implied Rights........................... 21
5.14. Benefits Under Qualified Retirement Plans.............. 22
5.15. Evidence............................................... 22
5.16. Action by Company or Related Company................... 22
5.17. Gender and Number...................................... 22
SECTION 6................................................................. 22
CHANGE IN CONTROL................................................ 22
6.1. Acceleration........................................... 22
SECTION 7................................................................. 23
COMMITTEE........................................................ 23
7.1. Administration......................................... 23
7.2. Selection of Committee................................. 23
7.3. Powers of Committee.................................... 24
7.4. Delegation by Committee................................ 25
7.5. Information to be Furnished to Committee............... 25
7.6. Liability and Indemnification of Committee............. 25
SECTION 8................................................................. 26
AMENDMENT AND TERMINATION........................................ 26
SECTION 9................................................................. 26
DEFINED TERMS.................................................... 26
ii
<PAGE>
1996 LONG-TERM INCENTIVE PLAN
OF
AMERIKING, INC.
SECTION 1
---------
GENERAL
-------
1.1. Purpose. The 1996 Long-Term Incentive Plan of AmeriKing, Inc.
(the "Plan") has been established by AmeriKing, Inc. (the "Company") to:
(a) attract and retain key executive and managerial
employees;
(b) motivate participating employees, by means of
appropriate incentives, to achieve long-range goals;
(c) provide incentive compensation opportunities that are
competitive with those of other major corporations;
and
(d) further identify Participants' interests with those of
the Company's other shareholders through compensation
that is based on the Company's common stock;
and thereby promote the long-term financial interest of the Company
and the Related Companies, including the growth in value of the
Company's equity and enhancement of long-term shareholder return.
1.2. Participation. Subject to the terms and conditions of the Plan,
the Committee shall determine and designate, from time to time, from among the
employees and officers of the Company and the Related Companies who are key
executives or managerial employees, those persons who will be granted one or
more Awards under the Plan, and thereby become "Participants" in the Plan. In
the discretion of the Committee, and subject to the terms of the Plan, a
Participant may be granted any Award permitted under the provisions of the
Plan, and more than one Award may be granted to a Participant. Except as
otherwise agreed by the Committee and the Participant, or except as otherwise
provided in the Plan, an Award under the Plan shall not affect any previous
Award under the Plan or an award under any other plan maintained by the
Company or the Related Companies.
<PAGE>
1.3. Operation and Administration. The operation and administration
of the Plan, including the Awards made under the Plan, shall be subject to the
provisions of Section 7 (relating to operation and administration).
Capitalized terms in the Plan shall be defined as set forth in the Plan
(including the definition provisions of Section 11 of the Plan).
SECTION 2
---------
OPTIONS
-------
2.1. Definitions. The grant of an "Option" under this Section 2
entitles the Participant to purchase shares of Stock at a price fixed at the
time the Option is granted, or at a price determined under a method
established at the time the Option is granted, subject to the terms of this
Section 2. Options granted under this Section 2 may be either Incentive Stock
Options or Non-Qualified Stock Options, as determined in the discretion of the
Committee. An "Incentive Stock Option" is an Option that is intended to
satisfy the requirements applicable to an "incentive stock option" described
in section 422(b) of the Code. A "Non-Qualified Option" is an Option that is
not intended to be an "incentive stock option" as that term is described in
section 422(b) of the Code.
2.2. Eligibility. The Committee shall designate the Participants to
whom Options are to be granted under this Section 2 and shall determine the
number of shares of Stock to be subject to each such Option. To the extent
that the aggregate fair market value of Stock with respect to which Incentive
Stock Options are exercisable for the first time by any individual during any
calendar year (under all plans of the Company and all Related Companies)
exceeds $100,000, such options shall be treated as Non-Qualified Stock
Options, to the extent required by section 422 of the Code.
2.3. Price. The determination and payment of the purchase price
of a share of Stock under each Option granted under this Section 2 shall be
subject to the following:
(a) The purchase price shall be established by the
Committee or shall be determined by a method
established by the Committee at the time the Option is
granted and may not be less than 100% of the Fair
Market Value of a share of Stock as of the date on
which the Option is granted; provided, however, that if
the Option is an incentive stock option in no event
shall the purchase price be less than 110% of the Fair
Market Value of a share on such date if the Optionee is
a greater than 10% stock holder within the meaning of
Section 422(b)(6) of the Internal Revenue Code.
(b) Subject to the following provisions of this subsection
2.3, the full purchase price of each share of Stock
purchased upon the exercise of any Option shall be paid
at the time of such exercise and, as soon as
practicable thereafter, a certificate representing the
shares so purchased shall be delivered to the person
entitled thereto.
2
<PAGE>
(c) The purchase price shall be payable in cash or in
shares of Stock (valued at Fair Market Value as of the
day of exercise), or in any combination thereof, as
determined by the Committee.
(d) A Participant may elect to pay the purchase price upon
the exercise of an Option through a cashless exercise
arrangement to the extent provided by the Committee.
2.4. Exercise. Except as otherwise expressly provided in the Plan,
an Option granted under this Section 2 shall be exercisable in accordance with
the following terms of this subsection 2.4:
(a) The terms and conditions relating to exercise of an
Option shall be established by the Committee, and may
include, without limitation, conditions relating to
completion of a specified period of service (subject to
paragraph 2.4(b)), achievement of performance standards
prior to exercise of the Option, or achievement of
Stock ownership objectives by the Participant.
(b) No Option may be exercised by a Participant: (i) prior
to the date on which the Participant completes one
continuous year of employment with the Company or any
Related Company after the date as of which the Option
is granted (provided, however, that the Committee may
permit earlier exercise following the Participant's
Date of Termination by reason of death or Disability);
or (ii) after the Expiration Date applicable to that
Option. The Committee, in its sole discretion, may
accelerate the vesting of any Option under
circumstances designated by it at the time the Option
is granted or thereafter.
(c) The exercise of an Option will result in the surrender
of the corresponding rights under a tandem Stock
Appreciation Right, if any.
2.5. Post-Exercise Limitations. The Committee, in its discretion, may
impose such restrictions on shares of Stock acquired pursuant to the exercise
of an Option (including stock acquired pursuant to the exercise of a tandem
Stock Appreciation Right) as it determines to be desirable, including, without
limitation, restrictions relating to disposition of the shares and forfeiture
restrictions based on service, performance, Stock ownership by the
Participant, and such other factors as the Committee determines to be
appropriate.
2.6. Expiration Date. The "Expiration Date" with respect to an Option
means the date established as the Expiration Date by the Committee at the time
of the grant; provided, however, that the Expiration Date with respect to any
Option shall not be later than the earliest to occur of:
3
<PAGE>
(a) the ten-year anniversary of the date on which the
Option is granted;
(b) if the Participant's Date of Termination occurs by
reason of death or Disability, the one-year anniversary
of such Date of Termination;
(c) if the Participant's Date of Termination occurs by
reason of Retirement, the three-year anniversary of
such Date of Termination; or
(d) if the Participant's Date of Termination occurs for
reasons other than Retirement, death or Disability, the
three-month anniversary of such Date of Termination.
2.7. Reload Provision. In the event the Participant exercises an
Option and pays all or a portion of the purchase price in Stock, in the manner
permitted by subsection 2.3, such Participant (either pursuant to the terms of
the Option Award, or pursuant to the exercise of Committee discretion at the
time the Option is exercised) may be issued a new Option to purchase
additional shares of Stock equal to the number of shares of Stock surrendered
to the Company in such payment plus the number of shares surrendered to
satisfy the Participant's tax liability. Such new Option shall have an
exercise price equal to the Fair Market Value per share on the date such new
Option is granted, shall first be exercisable six months from the date of
grant of the new Option and shall have an Expiration Date on the same date as
the Expiration Date of the original Option so exercised by payment of the
purchase price in shares of Stock.
SECTION 3
---------
STOCK APPRECIATION RIGHTS
-------------------------
3.1. Definition. Subject to the terms of this Section 3, a Stock
Appreciation Right granted under the Plan entitles the Participant to receive,
in cash or Stock (as determined in accordance with subsection 3.4), value
equal to all or a portion of the excess of: (a) the Fair Market Value of a
specified number of shares of Stock at the time of exercise; over (b) a
specified price which shall not be less than 100% of the Fair Market Value of
the Stock at the time the Stock Appreciation Right is granted, or, if granted
in tandem with an Option, the exercise price with respect to shares under the
tandem Option.
3.2. Eligibility. Subject to the provisions of the Plan, the
Committee shall designate the Participants to whom Stock Appreciation Rights
are to be granted under the Plan, shall determine the exercise price or a
method by which the price shall be established with respect to each such Stock
Appreciation Right, and shall determine the number of shares of Stock on which
each Stock Appreciation Right is based. A Stock Appreciation Right may be
granted in connection with all or any portion of a previously or
contemporaneously granted Option or not in connection with an Option. If a
Stock Appreciation Right is granted in connection
4
<PAGE>
with an Option then, in the discretion of the Committee, the Stock
Appreciation Right may, but need not, be granted in tandem with the Option.
3.3. Exercise. The exercise of Stock Appreciation Rights shall be
subject to the following:
(a) If a Stock Appreciation Right is not in tandem with an
Option, then the Stock Appreciation Right shall be
exercisable in accordance with the terms established by
the Committee in connection with such rights, and may
include, without limitation, conditions relating to
completion of a specified period of service,
achievement of performance standards prior to exercise
of the Stock Appreciation Rights, or achievement of
objectives relating to Stock ownership by the
Participant. However, except as otherwise expressly
provided in the Plan, no Stock Appreciation Right
subject to this paragraph (a) may be exercised by a
Participant (i) prior to the date on which the
Participant completes one continuous year of employment
with the Company and the Related Companies after the
date as of which the Stock Appreciation Right is
granted (provided, however, that the Committee may
permit earlier exercise following the Participant's
Date of Termination by reason of death or Disability);
or (ii) after the Expiration Date applicable to that
Stock Appreciation Right.
(b) If a Stock Appreciation Right is in tandem with an
Option, then the Stock Appreciation Right shall be
exercisable at the time the tandem Option is
exercisable. The exercise of a Stock Appreciation Right
will result in the surrender of the corresponding
rights under the tandem Option.
3.4. Settlement of Award. Upon the exercise of a Stock Appreciation
Right, the value to be distributed to the Participant, in accordance with
subsection 3.1, shall be distributed in shares of Stock (valued at their Fair
Market Value at the time of exercise), in cash, or in a combination thereof,
in the discretion of the Committee.
3.5. Post-Exercise Limitations. The Committee, in its discretion, may
impose such restrictions on shares of Stock acquired pursuant to the exercise
of a Stock Appreciation Right as it determines to be desirable, including,
without limitation, restrictions relating to disposition of the shares and
forfeiture restrictions based on service, performance, ownership of Stock by
the Participant, and such other factors as the Committee determines to be
appropriate.
3.6. Expiration Date. If a Stock Appreciation Right is in tandem with
an Option, then the "Expiration Date" for the Stock Appreciation Right shall
be the Expiration Date for the related Option. If a Stock Appreciation Right
is not in tandem with an Option, then the "Expiration Date" for the Stock
Appreciation Right shall be the date established as the Expiration Date by the
Committee; provided, however, that subject to the following
5
<PAGE>
provisions of this subsection 3.6, the Expiration Date with respect to any
Stock Appreciation Right shall not be later than the earliest to occur of:
(a) the ten-year anniversary of the date on which the
Stock Appreciation Right is granted;
(b) if the Participant's Date of Termination occurs by
reason of death or Disability, the one-year anniversary
of such Date of Termination;
(c) if the Participant's Date of Termination occurs by
reason of Retirement, the three-year anniversary of
such Date of Termination; or
(d) if the Participant's Date of Termination occurs by
reason other than Retirement, death or Disability, the
three-month anniversary of such Date of Termination.
3.7. Limited Stock Appreciation Rights. The Committee may grant
Limited Stock Appreciation Rights. Notwithstanding the foregoing provisions of
this Section 3, Limited Stock Appreciation Rights shall be subject to the
following:
(a) A Limited Stock Appreciation Right may (but need not)
be granted in connection with all or any portion of a
previously or contemporaneously granted Option. A
Limited Stock Appreciation Right may be granted in
tandem with an Option regardless of whether the Option
is in tandem with a Stock Appreciation Right.
(b) A Limited Stock Appreciation Right entitles the
Participant to receive a cash payment in connection
with a Change in Control, determined as follows:
(i) In the case of a Limited Stock Appreciation
Right that is in tandem with an Option, the
payment amount shall be equal to the
difference between the exercise price per
share of the Stock covered by the tandem
Option and the Market Price of a share of
Stock.
(ii) In the case of a Limited Stock Appreciation
Right that is not in tandem with an Option,
the payment amount shall be equal to the
difference between (A) the Fair Market Value
of the Stock at the time of grant of the
Limited Stock Appreciation Right, or the
average Stock value over a period of up to six
months prior to the date of the Change in
Control; and (B) the Market Price of a share
of Stock.
6
<PAGE>
(c) To the extent provided by the Committee, a Limited
Stock Appreciation Right may be automatically
exercisable at a time determined by the Committee, or
it may be exercised by the Participant during the
period beginning not earlier than the date of a Change
in Control, and ending not later than the seven-month
anniversary of the date of the Change in Control, and
may be exercisable regardless of whether the
Participant is then employed by the Company or a
Related Company.
(d) If the Limited Stock Appreciation Right is in tandem
with an Option, the exercise of the Limited Stock
Appreciation Right shall result in the cancellation of
the tandem Option (and any Stock Appreciation Right in
tandem with such Option).
(e) For purposes of this subsection 3.7, the term "Market
Price" shall mean the greater of (i) the highest price
per share of Stock paid in connection with the Change
in Control; and (ii) the highest price per share of
Stock as quoted on NASDAQ during a period beginning not
earlier than 90 days prior to the Change in Control and
ending not later than the date of exercise of the
Limited Stock Appreciation Right, as determined by the
Committee.
SECTION 4
---------
STOCK AWARDS
------------
4.1. Definition. Subject to the terms of this Section 4, a Stock
Award under the Plan is a grant of shares of Stock to a Participant, the
earning, vesting or distribution of which is subject to one or more conditions
established by the Committee. Such conditions may relate to events (such as
performance or continued employment) occurring before or after the date the
Stock Award is granted, or the date the Stock is earned by, vested in or
delivered to the Participant. If the vesting of Stock Awards is subject to
conditions occurring after the date of grant, the period beginning on the date
of grant of a Stock Award and ending on the vesting or forfeiture of such
Stock (as applicable) is referred to as the "Restricted Period". Stock Awards
may provide for delivery of the shares of Stock at the time of grant, or may
provide for a deferred delivery date. A Stock Award may, but need not, be made
in conjunction with a cash-based incentive compensation program maintained by
the Company, and may, but need not, be in lieu of cash otherwise awardable
under such program.
4.2. Eligibility. The Committee shall designate the Participants
to whom Stock Awards are to be granted, and the number of shares of Stock that
are subject to each such Award.
4.3. Terms and Conditions of Awards. Stock Awards granted to
Participants under the Plan shall be subject to the following terms and
conditions:
7
<PAGE>
(a) Beginning on the date of grant (or, if later, the date
of distribution) of shares of Stock comprising a Stock
Award, and including any applicable Restricted Period,
the Participant as owner of such shares shall have the
right to vote such shares.
(b) Payment of dividends with respect to Stock Awards
shall be subject to the following:
(i) On and after the date that a Participant has a
fully earned and vested right to the shares
comprising a Stock Award, and the shares have
been distributed to the Participant, the
Participant shall have all dividend rights
(and other rights) of a stockholder with
respect to such shares.
(ii) Prior to the date that a Participant has a
fully earned and vested right to the shares
comprising a Stock Award, the Committee, in
its sole discretion, may award Dividend Rights
with respect to such shares.
(iii) On and after the date that a Participant has a
fully earned and vested right to the shares
comprising a Stock Award, but before the
shares have been distributed to the
Participant, the Participant shall be entitled
to Dividend Rights with respect to such
shares, at the time and in the form determined
by the Committee.
(iv) A "Dividend Right" with respect to shares
comprising a Stock Award shall entitle the
Participant, as of each dividend payment date,
to an amount equal to the dividends payable
with respect to a share of Stock multiplied by
the number of such shares. Dividend Rights
shall be settled in cash or in shares of
Stock, as determined by the Committee, shall
be payable at the time and in the form
determined by the Committee, and shall be
subject to such other terms and conditions as
the Committee may determine.
SECTION 5
---------
OPERATION AND ADMINISTRATION
----------------------------
5.1. Effective Date. [The Plan was approved and adopted by the Board
of Directors of the Company on June __, 1996, effective as of such date (the
"Effective Date"), and was approved by the shareholders of the Company on June
___, 1996.] The Plan shall be unlimited in duration and, in the event of Plan
termination, shall remain in effect as long as any Awards under it are
outstanding; provided, however, that no Incentive
8
<PAGE>
Stock Options may be granted under the Plan on a date that is more than ten
years from the date the Plan is adopted or, if earlier, the date the Plan is
approved by shareholders.
5.2. Shares Subject to Plan. The shares of Stock with respect to
which Awards may be made under the Plan shall be shares currently authorized
but unissued or currently held or subsequently acquired by the Company as
treasury shares, including shares purchased in the open market or in private
transactions. Subject to the provisions of subsection 5.4, the number of
shares of Stock which may be issued with respect to Awards under the Plan
shall not exceed [5% of post-IPO - need to insert number] shares in the
aggregate. Except as otherwise provided herein, any shares subject to an Award
which for any reason expires or is terminated without issuance of shares
(whether or not cash or other consideration is paid to a Participant in
respect of such shares) shall again be available under the Plan.
5.3. Individual Limits on Awards. Notwithstanding any other
provision of the Plan to the contrary, no Participant shall receive any Award
of an Option or a Stock Appreciation Right under the Plan to the extent that
the sum of:
(a) the number of shares of Stock subject to such Award;
(b) the number of shares of Stock subject to all other
prior Awards of Options and Stock Appreciation Rights
under the Plan during the one-year period ending on the
date of the Award; and
(c) the number of shares of Stock subject to all other
prior stock options and stock appreciation rights
granted to the Participant under other plans or
arrangements of the Company and Related Companies
during the one-year period ending on the date of the
Award;
would exceed the Participant's Individual Limit under the Plan. The
determination made under the foregoing provisions of this subsection
5.3 shall be based on the shares subject to the awards at the time of
grant, regardless of when the awards become exercisable. Subject to
the provisions of paragraph 5.4, a Participant's "Individual Limit"
shall be 200,000.
5.4. Adjustments to Shares.
(a) If the Company shall effect any subdivision or
consolidation of shares of Stock or other capital
readjustment, payment of stock dividend, stock split,
combination of shares or recapitalization or other
increase or reduction of the number of shares of Stock
outstanding without receiving compensation therefor in
money, services or property, then the Committee shall
adjust (i) the number of shares of Stock available
under the Plan; (ii) the number of shares available
under any individual or other limits; (iii) the number
of shares of Stock subject to outstanding Awards and
(iv) the
9
<PAGE>
per-share price under any outstanding Award to the
extent that the Participant is required to pay a
purchase price per share with respect to the Award.
(b) If the Company is reorganized, merged or consolidated
or is party to a plan of exchange with another
corporation, pursuant to which reorganization, merger,
consolidation or plan of exchange, the shareholders of
the Company receive any shares of stock or other
securities or property, or the Company shall distribute
securities of another corporation to its shareholders,
there shall be substituted for the shares subject to
outstanding Awards an appropriate number of shares of
each class of stock or amount of other securities or
property which were distributed to the shareholders of
the Company in respect of such shares, subject to the
following:
(i) If the Committee determines that the
substitution described in accordance with the
foregoing provisions of this paragraph (b)
would not be fully consistent with the
purposes of the Plan or the purposes of the
outstanding Awards under the Plan, the
Committee may make such other adjustments to
the Awards to the extent that the Committee
determines such adjustments are consistent
with the purposes of the Plan and of the
affected Awards.
(ii) All or any of the Awards may be cancelled by
the Committee on or immediately prior to the
effective date of the applicable transaction,
but only if the Committee gives reasonable
advance notice of the cancellation to each
affected Participant, and only if either: (A)
the Participant is permitted to exercise the
Award for a reasonable period prior to the
effective date of the cancellation; or (B) the
Participant receives payment or other benefits
that the Committee determines to be reasonable
compensation for the value of the cancelled
Awards.
(iii) Upon the occurrence of a reorganization of the
Company or any other event described in this
paragraph (b), any successor to the Company
shall be substituted for the Company to the
extent that the Company and the successor
agree to such substitution.
(c) Upon (or, in the discretion of the Committee,
immediately prior to) the sale to (or exchange with) a
third party unrelated to the Company of all or
substantially all of the assets of the Company, all
Awards shall be cancelled. If Awards are cancelled
under this paragraph (c), then, with respect to any
affected Participant, either:
10
<PAGE>
(i) the Participant shall be provided with
reasonable advance notice of the cancellation,
and the Participant shall be permitted to
exercise the Award for a reasonable period
prior to the effective date of the
cancellation; or
(ii) the Participant shall receive payment or other
benefits that the Committee determines to be
reasonable compensation for the value of the
cancelled Awards.
The foregoing provisions of this paragraph (c) shall also apply
to the sale of all or substantially all of the assets of the
Company to a related party, if the Committee determines such
application is appropriate.
(d) In determining what action, if any, is necessary or
appropriate under the foregoing provisions of this
subsection 5.4, the Committee shall act in a manner
that it determines to be consistent with the purposes
of the Plan and of the affected Awards and, where
applicable or otherwise appropriate, in a manner that
it determines to be necessary to preserve the benefits
and potential benefits of the affected Awards for the
Participants and the Company.
(e) The existence of this Plan and the Awards granted
hereunder shall not affect in any way the right or
power of the Company or its shareholders to make or
authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's
capital structure or its business, any merger or
consolidation of the Company, any issue of bonds,
debentures, preferred or prior preference stocks ahead
of or affecting the Company's Stock or the rights
thereof, the dissolution or liquidation of the Company,
any sale or transfer of all or any part of its assets
or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
(f) Except as expressly provided by the terms of this
Plan, the issue by the Company of shares of stock of
any class, or securities convertible into shares of
stock of any class, for cash or property or for labor
or services, either upon direct sale, upon the exercise
of rights or warrants to subscribe therefor or upon
conversion of shares or obligations of the Company
convertible into such shares or other securities, shall
not affect, and no adjustment by reason thereof shall
be made with respect to Awards then outstanding
hereunder.
(g) Awards under the Plan are subject to adjustment under
this subsection 5.4 only during the period in which
they are considered to be outstanding under the Plan.
For purposes of this subsection 5.4, an Award is
11
<PAGE>
considered "outstanding" on any date if the
Participant's ability to obtain all benefits with
respect to the Award is subject to limits imposed by
the Plan (including any limits imposed by the Agreement
reflecting the Award). The determination of whether an
Award is outstanding shall be made by the Committee.
5.5. Limit on Distribution. Distribution of shares of Stock or
other amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the
Company shall have no liability to deliver any shares
of Stock under the Plan or make any other distribution
of benefits under the Plan unless such delivery or
distribution would comply with all applicable laws and
the applicable requirements of any securities exchange
or similar entity.
(b) In the case of a Participant who is subject to Section
16(a) and 16(b) of the Securities Exchange Act of 1934,
the Committee may, at any time, add such conditions and
limitations to any Award to such Participant, or any
feature of any such Award, as the Committee, in its
sole discretion, deems necessary or desirable to comply
with Section 16(a) or 16(b) and the rules and
regulations thereunder or to obtain any exemption
therefrom.
(c) To the extent that the Plan provides for issuance of
certificates to reflect the transfer of shares of
Stock, the transfer of such shares may be effected on a
non-certificated basis, to the extent not prohibited by
applicable law or the rules of any stock exchange.
5.6. Liability for Cash Payments. Subject to the provisions of this
Section 5, each Related Company shall be liable for payment of cash due under
the Plan with respect to any Participant to the extent that such benefits are
attributable to the services rendered for that Related Company by the
Participant. Any disputes relating to liability of a Related Company for cash
payments shall be resolved by the Committee.
5.7. Performance-Based Compensation. To the extent that the Committee
determines that it is necessary or desirable to conform any Awards under the
Plan with the requirements applicable to "Performance-Based Compensation", as
that term is used in Code section 162(m)(4)(C), it may, at or prior to the
time an Award is granted, take such steps and impose such restrictions with
respect to such Award as it determines to be necessary to satisfy such
requirements, including, without limitation:
(a) The establishment of performance goals that must be
satisfied prior to the payment or distribution of
benefits under such Awards.
12
<PAGE>
(b) The submission of such Awards and performance goals to
the Company's shareholders for approval and making the
receipt of benefits under such Awards contingent on
receipt of such approval.
(c) Providing that no payment or distribution be made under
such Awards unless the Committee certifies that the
goals and the applicable terms of the Plan and
Agreement reflecting the Awards have been satisfied.
To the extent that the Committee determines that the foregoing
requirements relating to Performance-Based Compensation do not apply
to Awards under the Plan because the Awards constitute Options or
Stock Appreciation Rights, the Committee may, at the time the Award
is granted, conform the Awards to alternative methods of satisfying
the requirements applicable to Performance-Based Compensation.
5.8. Withholding. All Awards and other payments under the Plan are
subject to withholding of all applicable taxes. The Company shall have the
right to require the recipient to remit to the Company an amount sufficient to
satisfy any federal, state and/or local tax withholding requirements prior to
the delivery of any certificate for shares or, in the discretion of the
Committee, the Company may withhold from any shares to be delivered shares
sufficient to satisfy all or a portion of such tax withholding requirements.
Whenever under the Plan payments are to be made in cash, such payments shall
be net of an amount sufficient to satisfy any federal, state and/or local tax
withholding requirements.
5.9. Transferability. Awards under the Plan are not transferable
except as designated by the Participant by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Code, Title I of the Employee Retirement Income Security Act, or the rules
thereunder (a "QDRO"). To the extent that the Participant who receives an
Award under the Plan has the right to exercise such Award, the Award may be
exercised during the lifetime of the Participant only by the Participant.
5.10. Notices. Any notice or document required to be filed with the
Committee under the Plan will be properly filed if delivered or mailed by
registered mail, postage prepaid, to the Committee, in care of the Company, at
its principal executive offices. The Committee may, by advance written notice
to affected persons, revise such notice procedure from time to time. Any
notice required under the Plan (other than a notice of election) may be waived
by the person entitled to notice.
5.11. Form and Time of Elections. Unless otherwise specified herein,
each election required or permitted to be made by any Participant or other
person entitled to benefits under the Plan, and any permitted modification or
revocation thereof, shall be in writing filed with the Committee at such
times, in such form, and subject to such restrictions and limitations, not
inconsistent with the terms of the Plan, as the Committee shall require.
13
<PAGE>
5.12. Agreement With Company. At the time of an Award to a
Participant under the Plan, the Committee may require a Participant to enter
into an agreement with the Company (the "Agreement") in a form specified by
the Committee, agreeing to the terms and conditions of the Plan and to such
additional terms and conditions, not inconsistent with the Plan, as the
Committee may, in its sole discretion, prescribe.
5.13. Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by
reason of the Plan, acquire any right in or title to
any assets, funds or property of the Company or any
Related Company whatsoever, including, without
limitation, any specific funds, assets, or other
property which the Company or any Related Company, in
their sole discretion, may set aside in anticipation of
a liability under the Plan. A Participant shall have
only a contractual right to the amounts, if any,
payable under the Plan, unsecured by any assets of the
Company or any Related Company. Nothing contained in
the Plan shall constitute a guarantee by any of the
Company or any Related Company that the assets of such
companies shall be sufficient to pay any benefits to
any person.
(b) The Plan does not constitute a contract of employment,
and selection as a Participant will not give any
employee the right to be retained in the employ of the
Company or any Related Company, nor any right or claim
to any benefit under the Plan, unless such right or
claim has specifically accrued under the terms of the
Plan. Except as otherwise provided in the Plan, no
Award under the Plan shall confer upon the holder
thereof any right as a shareholder of the Company prior
to the date on which he fulfills all service
requirements and other conditions for receipt of such
rights.
5.14. Benefits Under Qualified Retirement Plans. Awards to a
Participant (including the grant and the receipt of benefits) under the Plan
shall be disregarded for purposes of determining the Participant's benefits
under any Qualified Retirement Plan.
5.15. Evidence. Evidence required of anyone under the Plan may be
by certificate, affidavit, document or other information which the person
acting on it considers pertinent and reliable, and signed, made or presented
by the proper party or parties.
5.16. Action by Company or Related Company. Any action required or
permitted to be taken by the Company or any Related Company shall be by
resolution of its board of directors, or by action of one or more members of
the board (including a committee of the board) who are duly authorized to act
for the board, or (except to the extent prohibited by applicable law or the
rules of any stock exchange) by a duly authorized officer of the company.
14
<PAGE>
5.17. Gender and Number. Where the context admits, words in any
gender shall include any other gender, words in the singular shall include the
plural and the plural shall include the singular.
SECTION 6
---------
CHANGE IN CONTROL
-----------------
6.1. Acceleration. Subject to the provisions of subsection 5.4
(relating to the adjustment of shares), and except as otherwise provided in
the Plan or the Agreement reflecting the applicable Award, upon the occurrence
of a Change in Control:
(a) All outstanding Options (regardless of whether in
tandem with Stock Appreciation Rights) shall become
fully exercisable, except to the extent that the right
to exercise the Option is subject to any restrictions
established in connection with a Limited Stock
Appreciation Right that is in tandem with the Option.
(b) All outstanding Stock Appreciation Rights (regardless
of whether in tandem with Options) shall become fully
exercisable, except that if Stock Appreciation Rights
are in tandem with an Option, and the Option is in
tandem with a Limited Stock Appreciation Right, the
right to exercise the Stock Appreciation Right shall be
subject to any restrictions established in connection
with the Limited Stock Appreciation Right.
(c) All Stock Awards shall become fully vested.
SECTION 7
---------
COMMITTEE
---------
7.1. Administration. The authority to control and manage the
operation and administration of the Plan shall be vested in a committee (the
"Committee") in accordance with this Section 7.
7.2. Selection of Committee. The Committee shall be selected by the
Board, and shall consist of not less than two members of the Board. Insofar as
it is necessary for compliance with the requirements of Section 16 of the
Securities Exchange Act of 1934, each member of the Committee must be either a
"disinterested person" or a "non-employee director" (whichever is then
applicable with respect to the Company) within the meaning of the rules
promulgated pursuant to the Securities Exchange Act of 1934. Insofar as the
Company deems it desirable and necessary in order for compensation recognized
by Participants pursuant to the Plan to be fully deducted by the corporation
for federal income
15
<PAGE>
tax purposes, each member of the Committee shall also be an "outside director"
(as defined in Treasury Regulations under Section 162(m) of the Code.)
7.3. Powers of Committee. The authority to manage and control the
operation and administration of the Plan shall be vested in the Committee,
subject to the following:
(a) Subject to the provisions of the Plan, the Committee
will have the full and absolute authority and
discretion to select employees to receive Awards, to
determine the time or times of receipt, to determine
the types of Awards and the number of shares covered by
the Awards, to establish the terms, conditions,
performance criteria, restrictions, and other
provisions of such Awards, and (subject to the
restrictions imposed by Section 8) to cancel or suspend
Awards. In making such Award determinations, the
Committee may take into account the nature of services
rendered by the respective employee, his present and
potential contribution to the Company's success and
such other factors as the Committee deems relevant.
(b) Subject to the provisions of the Plan, the Committee
will have the full and absolute authority and
discretion to determine the extent to which Awards
under the Plan will be structured to conform to the
requirements applicable to Performance-Based
Compensation as described in Code section 162(m), and
to take such action, establish such procedures, and
impose such restrictions at the time such Awards are
granted as the Committee determines to be necessary or
appropriate to conform to such requirements.
(c) The Committee will have the full and absolute authority
and discretion to interpret the Plan, to establish,
amend, and rescind any rules and regulations relating
to the Plan, to determine the terms and provisions of
any agreements made pursuant to the Plan, to correct
defects and omissions in the Plan or any Award
hereunder, and to make all other determinations that
may be necessary or advisable for the administration of
the Plan and any Awards thereunder.
(d) Any interpretation of the Plan by the Committee and any
decision made by it under the Plan is final and binding
on the Company and all other persons, and no member of
the Committee shall be liable for any action or
determination made with respect to the Plan.
(e) Except as otherwise expressly provided in the Plan,
where the Committee is authorized to make a
determination with respect to any Award, such
determination shall be made at the time the Award is
made, except that the Committee may reserve the
authority to have such determination made by the
Committee in the future (but only if such reservation
is made at the
16
<PAGE>
time the Award is granted and is expressly stated in
the Agreement reflecting the Award).
(f) In controlling and managing the operation and
administration of the Plan, the Committee shall act by
a majority of its then members, by meeting or by
writing filed without a meeting. The Committee shall
maintain and keep adequate records concerning the Plan
and concerning its proceedings and acts in such form
and detail as the Committee may decide.
7.4. Delegation by Committee. Except to the extent prohibited by
applicable law or the rules of any stock exchange, the Committee may allocate
all or any portion of its responsibilities and powers to any one or more of
its members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.
7.5. Information to be Furnished to Committee. The Company and
Related Companies shall furnish the Committee with such data and information
as may be required for it to discharge its duties. The records of the Company
and Related Companies as to an employee's or Participant's employment,
termination of employment, leave of absence, reemployment and compensation
shall be conclusive on all persons unless determined to be incorrect.
Participants and other persons entitled to benefits under the Plan must
furnish the Committee such evidence, data or information as the Committee
considers desirable to carry out the terms of the Plan.
7.6. Liability and Indemnification of Committee. No member or
authorized delegate of the Committee shall be liable to any person for any
action taken or omitted in connection with the administration of the Plan
unless attributable to his own fraud or willful misconduct; nor shall the
Company or any Related Company be liable to any person for any such action
unless attributable to fraud or willful misconduct on the part of a director
or employee of the Company or Related Company. The Committee, the individual
members thereof, and persons acting as the authorized delegates of the
Committee under the Plan, shall be indemnified by the Company against any and
all liabilities, losses, costs and expenses (including legal fees and
expenses) of whatsoever kind and nature which may be imposed on, incurred by
or asserted against the Committee or its members or authorized delegates by
reason of the performance of a Committee function if the Committee or its
members or authorized delegates did not act dishonestly or in willful
violation of the law or regulation under which such liability, loss, cost or
expense arises. This indemnification shall not duplicate but may supplement
any coverage available under any applicable insurance.
SECTION 8
---------
AMENDMENT AND TERMINATION
-------------------------
17
<PAGE>
The Board may, at any time, amend or terminate the Plan, provided
that, subject to subsection 5.4 (relating to certain adjustments to shares),
no amendment or termination may materially adversely affect the rights of any
Participant or beneficiary under any Award made under the Plan prior to the
date such amendment or termination is adopted by the Board.
SECTION 9
---------
DEFINED TERMS
-------------
For purposes of the Plan, the terms listed below shall be defined as
follows:
(a) Award. The term "Award" shall mean any award or benefit
granted to any Participant under the Plan, including,
without limitation, the grant of Options, Stock
Appreciation Rights and Stock Awards.
(b) Board. The term "Board" shall mean the Board of
Directors of the Company.
(c) Cause. The term "Cause", with respect to any
Participant, shall mean:
(i) the willful and continued failure by the
Participant to substantially perform his
duties with the Company and Related Companies
(other than any such failure resulting from
the Participant's Disability), within a
reasonable period of time after a written
demand for substantial performance is
delivered to the Participant by the board of
directors of the Participant's employer, or a
delegate of such board, which demand
specifically identifies the manner in which
such board or its delegate believes that the
Participant has not substantially performed
his duties;
(ii) the willful engaging by the Participant in
conduct which is demonstrably and materially
injurious to the Company and Related
Companies, monetarily or otherwise; or
(iii) the engaging by the Participant in egregious
misconduct involving serious moral turpitude
to the extent that, in the reasonable judgment
of the board of directors of the Participant's
employer, or a delegate of such board, the
Participant's credibility and reputation no
longer conform to the standard for the
employer's management employees.
For purposes of the Plan, no act, or failure to act, on an
individual's part shall be deemed "willful" unless done, or omitted
to be done, by the individual not in good
18
<PAGE>
faith and without reasonable belief that the individual's action or
omission was in the best interest of the Company or the Related
Company, as applicable.
(d) Change in Control. The term "Change in
Control" means [an event which results in a
change in the ownership or control of the
Company, provided that the Committee in its
sole discretion determines such event shall be
treated as a Change in Control for purposes of
the plan.]1.
(e) Code. The term "Code" means the Internal Revenue Code
of 1986, as amended. A reference to any provision of
the Code shall include reference to any successor
provision of the Code.
(f) Date of Termination. A Participant's "Date of
Termination" shall be the date on which his employment
with the Company and all Related Companies terminates
for any reason; provided that a Date of Termination
shall not be deemed to occur by reason of a transfer of
the Participant between the Company and a Related
Company or between two Related Companies; and further
provided that a Participant's employment shall not be
considered terminated while the Participant is on a
leave of absence from the Company or a Related Company
approved by the Participant's employer. If, as a result
of a sale or other transaction, a Participant's
employer ceases to be a Related Company (and the
Participant's employer is or becomes an entity that is
separate from the Company), the occurrence of such
transaction shall be treated as the Participant's Date
of Termination.
(g) Disability. Except as otherwise provided by the
Committee, a Participant shall be considered to have a
"Disability" during the period in which he is unable,
by reason of a medically determinable physical or
mental impairment, to engage in any substantial gainful
activity, which condition, in the opinion of a
physician selected by the Committee, is expected to
have a duration of not less than 120 days.
- ---------------
1 This definition is a "placeholder". Note that the Financing Agreement
prohibits all but certain mergers, consolidations and acquisitions.
Presumably the company will not want the transactions permitted under the
Financing Agreement to constitute a change in control of the company.
Accordingly, we were not sure how change in control should be defined for
this plan. The company may wish to consider giving the committee
discretionary authority to accelerate vesting of awards for any reason,
and have the committee add the change in control provision at a later
date.
19
<PAGE>
(h) Fair Market Value. "Fair Market Value" on a specified
date means (i) the closing price at which a Share is
quoted on such date if quoted as a national market
security on NASDAQ or on a national securities exchange
on which Shares are primarily traded; or (ii) if the
Shares are not so quoted on such date, then the average
of the bid and asked closing prices at which one Share
is traded on the over-the-counter market on NASDAQ; but
if no shares were traded on such date, then on the last
previous date on which a Share was so traded, or (iii)
if none of the above is applicable, the value of a
Share as established by the Committee in its sole and
absolute discretion.
(i) Option. The term "Option" shall mean any Incentive
Stock Option or Non-Qualified Stock Option granted
under the Plan.
(j) Performance-Based Compensation. The term
"Performance-Based Compensation" shall have the meaning
ascribed to it in section 162(m)(4)(C) of the Code.
(k) Qualified Retirement Plan. The term "Qualified
Retirement Plan" means any plan of the Company or a
Related Company that is intended to be qualified under
section 401(a) of the Code.
(l) Related Companies. The term "Related Company" means any
company during any period in which it is a "subsidiary
corporation" (as that term is defined in Code section
424(f)) with respect to the Company.
(m) Retirement. "Retirement" of a Participant shall mean
the occurrence of a Participant's Date of Termination
under circumstances that constitutes a retirement under
the terms of the Qualified Retirement Plan of the
Company or Related Company that is extended to the
Participant immediately prior to the Participant's Date
of Termination or, if no such plan is extended to the
Participant on his Date of Termination, under the terms
of any applicable retirement policy of the
Participant's employer.
(n) SEC. "SEC" shall mean the Securities and Exchange
Commission.
(o) Stock. The term "Stock" shall mean shares of common
stock of the Company.
*** *** ***
20
=============================================================================
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 ____________, 1996
--------------------------
=============================================================================
<PAGE>
RECAPITALIZATION AGREEMENT
RECAPITALIZATION AGREEMENT (this "Agreement"), dated as of _________,
1996, by and among National Restaurant Enterprises, Inc. ("Enterprises"),
AmeriKing, Inc. (the "Company"), MCIT PLC ("MCIT"), BancBoston Investments
Inc. ("BBI"), PMI Mezzanine Fund, L.P., 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, John M. Camp, A. Richard
Caputo, Jr., James E. Jordan, Jr., Paul Rodzevik, Lawrence Jaro ("Jaro"),
William Osborn ("Osborn"), Gary Hubert, Joel Aaseby, Scott Vasatka, Donald
Stahurski, Tabor Restaurants Associates, Inc., Jaro Enterprises, Inc., Jaro
Restaurants Associates, Inc., JB Restaurants, Inc., Osburger, Inc.,
Castleking, Inc. and White-Osborn Restaurants, Inc. (collectively referred to
as the "Stockholders)". The Stockholders, together with the Company and TJC
Management Corporation ("TJC"), are referred to 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 a proposed initial public offering of the Company's
Common Stock (the "Offering");
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 equivalent number of shares of Non-Voting
Common Stock and (ii) the retirement of each of the Class A Common Stock,
Class B Common Stock, Class C Common Stock and Class D Common Stock as classes
of capital stock of the Company (collectively, the "Reclassification"); (b)
the ____-to-1 stock split (the "Stock Split") of all outstanding shares of
Common Stock; (c) the Offering; (d) the prepayment in full of the Company's
$15.0 million aggregate principal amount of 12.5% Senior Subordinated Notes
due 2005 (the "Senior Subordinated Notes") 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 prepayment in full
of the Company's $600,000 aggregate principal amount of 6.0% promissory notes
due 2005 (the "BBI Notes") held by BancBoston Investments, Inc. as of June 30,
1996; (h) the redemption of all accrued and outstanding shares of Class A1
Preferred Stock, Class A2 Preferred Stock and Class B Preferred Stock as
<PAGE>
of June 30, 1996; (i) the repurchase of all of the warrants issued by the
Company to PMI; (j) the payment of $_____ to TJC in payment of accrued fees
under the TJC Consulting Agreement prior to ________________, 1996; (k) the
execution of the Amended and Restated Consulting Agreement; (l) the amendment
of the Stockholders Agreement; (m) the execution of an amended and restated
credit agreement (the "New Credit Facility"); and (n) all other related
transactions, agreements and instruments contemplated by this Agreement and/or
described, and based upon the assumptions described, in the Registration
Statement.
[WHEREAS, the Company is required to notify BKC and obtain its
consent prior to amending any of the Company's corporate governance documents,
including without limitation, those instruments specified in Section 5.3 of
this Agreement;]
WHEREAS, pursuant to the rules and regulations of the Securities and
Exchange Commission, the Company is required to file the Amended Company
Charter prior to the effective date of the Registration Statement; and
WHEREAS, in order to implement the Recapitalization, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
meanings specified below:
"Amended and Restated Company By-Laws" means the Company's Amended
and Restated By-Laws substantially in the form of Exhibit A hereto.
"Amended and Restated Company Charter" means the Company's Amended
and Restated Certificate of Incorporation substantially in the form of Exhibit
B hereto.
"Amended and Restated Consulting Agreement" means the Amended and
Restated Management Consulting Agreement to be entered into between the
Company and TJC simultaneously with the consummation of the Offering,
substantially in the form of Exhibit D hereto.
"Amended and Restated Stockholders Agreement" means the Amended and
Restated Stockholders Agreement substantially in the form of Exhibit G hereto.
"AmeriKing Investors" means Lawrence Jaro, William Osborn, Gary
Hubert, Joel Aaseby, Scott Vasatka, Tabor Restaurants Associates, Inc., Jaro
Enterprises, Inc., Jaro
-2-
<PAGE>
Restaurants Associates, Inc., JB Restaurants, Inc., Osburger, Inc.,
Castleking, Inc. and White-Osborn Restaurants, Inc.
"BBI Notes" has the meaning specified in the recitals to this
Agreement.
"BKC" means the Burger King Corporation.
"Class A Common Stock" means the Company's Class A Common Stock, par
value $.01 per share.
"Class B Common Stock" means the Company's Class B Common Stock, par
value $.01 per share.
"Class C Common Stock" means the Company's Class C Common Stock, par
value $.01 per share.
"Class D Common Stock" means the Company's Class D Common Stock, par
value $.01 per share.
"Class A1 Preferred Stock" means the Company's Class A Preferred
Stock, par value $.01 per share.
"Class A2 Preferred Stock" means the Company's Class A2 Preferred
Stock, par value $.01 per share.
"Class B Preferred Stock" means the Company's Class B Preferred
Stock, par value $.01 per share.
"Closing" has the meaning specified in Section 4.1 of this Agreement.
"Closing Time" has the meaning specified in Section 4.1 of this
Agreement.
"Common Stock" means the Company's Common Stock, par value $.01 per
share.
"Company" shall have the meaning as set forth in the preamble to
this Agreement.
"Directors Indemnification Agreements" means the Indemnification
Agreements substantially in the form of Exhibit C hereto.
"Enterprises" means National Restaurant Enterprises, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Company.
-3-
<PAGE>
"Equity Securities" of the Company means the Class A1 Preferred
Stock, Class A2 Preferred Stock, Class B Preferred Stock, Class A Common
Stock, Class B Common Stock, Class C Common Stock and Class D Common Stock.
"Jaro" has the meaning specified in the preamble.
"Jordan Investors" means Jordan/Zalaznick Capital Company, Leucadia
Investors, Inc., TJC Management Corporation, John W. Jordan II Revocable
Trust, David W. Zalaznick, Thomas H. Quinn, Jonathan F. Boucher, John R.
Lowden, Adam E. Max, John M. Camp Profit Sharing Plan, John M. Camp, A.
Richard Caputo, Jr., James E. Jordan, Jr. Profit Sharing Plan and Trust and
Paul Rodzevick Profit Sharing Plan and Trust.
"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' Representative" has the meaning specified in
Section 8.2 of this Agreement.
"Material Adverse Effect" means any circumstances or event that (i)
has, or may be reasonably expected to have, any materially adverse effect upon
the validity or enforceability of this Agreement or any of the other
Recapitalization Documents or (ii) is, or may be reasonably expected to be,
materially adverse to the business or operations of the Company and its
subsidiaries, taken as a whole.
"MCIT" has the meaning specified in the preamble to this Agreement.
"1996 Stock Option Plans" shall mean the 1996 Stock Option Plans
substantially in the form of Exhibit E hereto.
"Non-Voting Common Stock" means the Company's non-voting common
stock, par value $.01 per share.
"Offering" shall mean the initial public offering of ___________
shares of Common Stock (and ___________ additional shares pursuant to
over-allotment options) (as adjusted for the Stock Split) by the Underwriters,
in concurrent offerings in the United States and outside the United States,
pursuant to the Registration Statement.
"Old Consulting Agreement" means the Management and Consulting
Agreement between the Company and TJC, dated as of September 1, 1994, as
amended on February 7, 1996.
-4-
<PAGE>
"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.
"Pricing Committee" means the Pricing Committee of the Company's
Board of Directors, established in connection with the Offering, and composed
of Messrs. Caputo and Jaro.
"Recapitalization" has the meaning specified in the recitals to this
Agreement.
"Recapitalization Documents" means this Agreement (including all
Schedules and Exhibits hereto) and each of the agreements, instruments,
consents and documents referred to in Sections 5.2 through 5.13, 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 Subordinated Notes" has the meaning specified in the recitals
to this Agreement.
"Stock Split" has the meaning specified in the recitals to this
Agreement.
"Stockholder Chart" means the stockholder chart described in Section
2.3 and set forth as Exhibit F hereto.
"Stockholders" has the meaning specified in the preamble to this
Agreement.
"Stockholders Agreement" means the Stockholders Agreement, dated as
of September 1, 1994, as amended by Consent and Amendment No. 1 to the
Stockholders Agreement, dated as of November 30, 1994, as further amended by
Waiver and Amendment No. 2 to the Stockholders Agreement, dated as of February
7, 1996, and as further amended and restated by the Amended and Restated
Stockholders Agreement.
"Subordinated Notes" has the meaning specified in the recitals to
this Agreement.
-5-
<PAGE>
"Termination Date" means _____, 1996.
"TJC" has the meaning specified in the preamble to this Agreement.
"Underwriting Agreements" means the Underwriting Agreements, Custody
Agreement, Power of Attorney and related documentation relating to the
Offering.
"Underwriters" means Smith Barney, Inc., PaineWebber Incorporated and
EVEREN Securities, Inc., as managing underwriters, on behalf of themselves and
the other underwriters, under the Underwriting Agreements.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the other Parties to
this Agreement, as of the Closing Time, as follows:
Section 2.1. Due Authorization. The Company is a duly organized,
validly existing corporation under the laws of the State of Delaware. Each of
this Agreement and the other Recapitalization Documents have been duly
authorized, executed and delivered by the Company and each of this Agreement
and such other Recapitalization Documents is a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with
its terms, except as enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforceability of creditors' rights generally and by general
principles of equity (whether arising under a proceeding at law or in equity).
The Amended and Restated Company Charter has been duly filed with the
Secretary of State of the State of Delaware.
Section 2.2. Authority; No Conflicts. The Company has the corporate
power and authority and the legal right to make, deliver and perform, and has
taken all necessary corporate action to authorize the transactions
contemplated by this Agreement and the other Recapitalization Documents, and
to conduct its business as described in the Registration Statement. Neither
the execution and delivery of this Agreement or the other Recapitalization
Documents nor the consummation of any of the transactions contemplated herein
or therein nor compliance with the terms and provisions hereof or thereof (a)
violates or will violate any law or regulation or any order or decree of any
court or government instrumentality applicable to the Company or any of its
subsidiaries or properties, except such violations as would not, in the
aggregate, have a Material Adverse Effect, or (b) conflicts with or would
result in the breach of, or constitutes a default under, any contract, lease,
indenture, loan agreement, mortgage, deed of trust or other agreement or
instrument to which the Company or any of its subsidiaries, is a party or by
which any of
-6-
<PAGE>
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.
Section 2.3. Capital Stock.
-------------
(a) At the Closing Time, the Company's authorized capital stock shall
consist of _____ shares of Common Stock, _____ shares of Non-Voting Common
Stock and 1,000,000 shares of Preferred Stock. At the Closing Time, the
Company shall have ______ shares of Common Stock outstanding, ______ shares of
Non-Voting Common Stock outstanding, 0 shares of Preferred Stock outstanding
and ______ shares of Common Stock reserved for issuance for options granted
pursuant to the 1996 Stock Option Plans.
(b) Set forth on the Stockholder Chart is a true, complete and
correct chart showing, among other things, the record ownership of the
Company's Equity Securities prior to the Recapitalization.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE OTHER PARTIES
Each of the Parties to this Agreement (other than the Company and
Enterprises) represent and warrant, severally as to themselves and not
jointly, to each of the other Parties to this Agreement, as of the Closing
Time, as follows:
Section 3.1. Due Authorization. Each of this Agreement and the other
Recapitalization Documents to which such Party is a party have been duly
authorized, executed and delivered by such Party, as required, and each of
this Agreement and such other Recapitalization Documents is a legal, valid and
binding obligation of such Party, enforceable against such Party, in
accordance with its terms, except as enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting the enforceability of creditors' rights generally and
by general principles of equity (whether arising under a proceeding at law or
in equity).
Section 3.2. Authority; No Conflicts. Such Party has the power and
authority and the legal right to make, deliver and perform, and has taken all
necessary corporate action to authorize the transactions contemplated by, this
Agreement and the other Recapitalization
-7-
<PAGE>
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 would not, in the
aggregate, have a Material Adverse Effect, or (b) conflicts with or would
result in the breach of, or constitutes a default under, any contract, lease,
indenture, loan agreement, mortgage, deed of trust or other agreement or
instrument to which such Party is a party or by which they or any of their
respective assets may be bound, except such conflicts, breaches or defaults as
have been waived or consents therefor have been obtained or such conflicts,
breaches or defaults as would not, in the aggregate, have a Material Adverse
Effect. No consent, approval, authorization or order of any governmental
authority is presently required in connection with the execution and delivery
of this Agreement or the Recapitalization Documents by such Party or the
consummation of the transactions contemplated hereby or thereby that has not
been obtained.
Section 3.3. Capital Stock. Such Party, if a Stockholder, is the
record and beneficial owner of the Company's Equity Securities ascribed to
such Party in the Stockholder Chart and beneficially owns such Equity
Securities free and clear of any Liens, other than such as may be created
under the Stockholders Agreement.
ARTICLE IV
THE CLOSING
Section 4.1. Closing. Upon satisfaction of the conditions set forth
herein, the transactions contemplated by this Agreement, other than those
contemplated by Sections 5.3(a), 5.3(c), 5.4, 5.8, 5.10 and 5.11 which will be
deemed consummated at the times set forth therein, shall be consummated at the
closing (the "Closing") thereof, which shall occur on the closing date of the
Offering (the "Closing Time") at the offices of Mayer, Brown & Platt, New
York, New York, or at such other place as shall be agreed upon by the
Stockholders and the Company. All of the transactions contemplated by this
Agreement shall be deemed to have been consummated simultaneously and none of
such transactions shall be deemed consummated unless all of such transactions
are consummated. Notwithstanding the foregoing, if the Closing does not occur
by the Termination Date, none of the Parties hereto shall have any obligations
under Article V or otherwise under this Agreement.
-8-
<PAGE>
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 Parties that
are directors of the Company, the foregoing will be subject to their fiduciary
duties as directors.
Section 5.2. Preferred Stock. Upon the Closing, the Company shall use
a portion of the net proceeds of the Offering to redeem all of the issued and
outstanding shares of Class A1 Preferred Stock, Class A2 Preferred Stock and
Class B Preferred Stock, and will pay from the net proceeds of the Offering
dividends accruing after June 30, 1996 through the Closing Date. At the
Closing, the holder of the Class A1 Preferred Stock, Class A2 Preferred Stock
and Class B Preferred Stock will deliver to the Company certificates
representing their shares of stock for redemption and cancellation.
Section 5.3. Amended Charter Documents.
(a) Prior to the effective date of the Registration Statement, the
Amended and Restated Company Charter will be duly approved and adopted as the
Charter of the Company and filed by the Company with the Secretary of State of
the State of Delaware.
In the event the Closing does not occur by the Termination Date, then
the Stockholders hereby consent, and the Company hereby agrees, without any
further action by the Stockholders, to promptly effect an amendment to the
Amended and Restated Company Charter so that it is identical to the Company's
certificate of incorporation in effect as of the date hereof.
(b) At or prior to the Closing, the Amended and Restated Company
By-Laws will be duly approved and adopted as the By-Laws of the Company.
(c) Prior to the effective date of the Registration Statement, BKC
will consent to the adoption by the Company of those documents referred to in
Sections 5.3(a) and 5.3(b) of this Agreement.
Section 5.4. Reclassification and Stock Split.
(a) Effective simultaneously upon the filing of the Amended and
Restated Company Charter, the Reclassification shall be effected and (i) each
share of Class A Common Stock,
-9-
<PAGE>
Class C Common Stock and Class D Common Stock currently issued and outstanding
shall be converted into a like number of shares of Common Stock and (ii) each
share of Class B Common Stock currently issued and outstanding shall be
converted into a like number of shares of Non-Voting Common Stock. Upon
written notice, holders of the Class A Common Stock, Class C Common Stock or
Class D Common Stock shall deliver their stock certificates to the Company for
cancellation and such certificates which are not so delivered will thereafter
represent the right to receive a new certificate or certificates representing
an equivalent number of shares of Common Stock or Non-Voting Common Stock, as
the case may be, subject to the effect of the Stock Split.
(b) Effective upon the filing of the Amended and Restated Company
Charter, the Stock Split shall be consummated and each holder of shares of
capital stock of the Company shall be entitled to receive a new certificate or
certificates representing the appropriate number of shares of Common Stock or
Non-Voting Common Stock, as the case may be.
(c) As a result of the Reclassification and the Stock Split, if any
fractional interest in a share of Common Stock or Non-Voting Common Stock, as
the case may be, would be deliverable, the Company, in lieu of delivering the
fractional share, shall pay an amount to the holder thereof equal to (x) the
initial public offering price of the Common Stock set forth on the cover page
of the final prospectus forming a part of the Registration Statement,
multiplied by (y) such stockholder's fractional interest in a share of Common
Stock or NonVoting Common Stock, as the case may be.
Section 5.5. Subordinated Note Repurchase.
(a) At the Closing, the Company will use a portion of the net
proceeds from the Offering to repurchase at ___% of the principal amount the
entire outstanding aggregate principal amount of the Senior 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 Senior Subordinated Notes will deliver to the Company the
note(s) evidencing the principal amount of Senior Subordinated Notes held by
such holder to be repurchased, together with written instructions to complete
such repurchase.
(b) At the Closing, the Company will use a portion of the net
proceeds from the Offering to repurchase at ___% of the principal amount the
entire outstanding aggregate principal amount of the Subordinated Notes and
will pay accrued interest thereon through the Closing Time. Upon repurchase by
the Company, such notes shall cease to accrue interest and the Company's
obligations thereunder shall be cancelled. At the Closing, the holders of the
Subordinated Notes will deliver to the Company the note(s) evidencing the
principal amount of Subordinated Notes held by such holder to be repurchased,
together with written instructions to complete such repurchase.
-10-
<PAGE>
(c) At the Closing, the Company will use a portion of the net
proceeds from the Offering to repurchase at ___% 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.
(d) At the Closing, the Company will use a portion of the net
proceeds from the Offering to repurchase at ___% of the principal amount the
entire outstanding aggregate principal amount of the BBI 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 BBI Notes will deliver to the Company the notes evidencing the
principal amount of BBI Notes held by such holder to be repurchased, together
with written instructions to complete such repurchase.
Section 5.6. Repurchase of Warrants. Upon the Closing, the Company
will enter into Amendment No. 1 to the PMI Note Purchase Agreement in
substantially the form of Exhibit H hereto.
Section 5.7. Employment Agreements. At or prior to the Closing, each
of Messrs. Jaro, Osborn, Hubert, Aaseby and Vasatka will enter into new
Employment and NonInterference Agreements in substantially the form of Exhibit
I hereto.
Section 5.8. Amended and Restated Consulting Agreement. At the
Closing: (i) the Company, Enterprises, and TJC will execute and deliver the
Amended and Restated Consulting Agreement and (ii) the Company will pay to TJC
$_____ as payment for accrued consulting fees and expenses incurred under the
Old Consulting Agreement.
Section 5.9. 1996 Stock Option Plans. Prior to the filing of the
Amended and Restated Company Charter with the Secretary of State of the State
of Delaware, the Company and the Stockholders will duly approve and adopt the
1996 Stock Option Plans.
Section 5.10. Directors Indemnification Agreements and D&O Insurance.
At the Closing, the Company will enter into the Directors Indemnification
Agreements with each of the signatories to the Registration Statement.
Section 5.11. Lock-Ups and Waivers. Prior to the effective date of
the Registration Statement, each of the Stockholders hereby agree to execute
and deliver to the Company and the Underwriters a "lock-up" agreement
substantially in the form of Exhibit J hereto.
-11-
<PAGE>
Section 5.12. 1996 Annual Meeting of Stockholders. The Parties hereby
agree to execute and deliver stockholder consents, substantially in the form
of Exhibit K hereto, with regard to (a) the Amended and Restated Company
Charter, (b) the Amended and Restated Company By-Laws, (c) the
Reclassification, (d) the 1996 Stock Option Plans, (e) the Stock Split, (f)
the Recapitalization Agreement and Recapitalization Documents, (g) the
election of directors of the Company as reasonably requested by the Company,
(h) the ratification of the appointment of accountants and (i) 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 5.13. Amended and Restated Stockholders Agreement. At the
Closing, the Company and the Stockholders will execute, deliver and consummate
the Amended and
Restated Stockholders Agreement.
ARTICLE VI
CONDITIONS OF THE PARTIES'
(OTHER THAN THE COMPANY AND ENTERPRISES) OBLIGATIONS
Section 6.1. Conditions of the Stockholders' Obligations. The
obligation of each of the Parties (other than the Company and Enterprises) on
the Closing Time to consummate the transactions contemplated by Article V of
this Agreement will be subject to the prior or concurrent satisfaction on the
Closing Time of the following conditions:
(a) Representations and Warranties; Agreements; No Default.
The representations and warranties of the Company set forth in this
Agreement will be true in all material respects at and as if repeated
on and as of the Closing Time after giving effect to the transactions
contemplated hereby; and the Company will have executed, delivered
and consummated all Recapitalization Documents on its part to be
performed pursuant to this Agreement on or prior to the Closing Time.
(b) Certificate as to Representations, Etc. The Parties
(other than the Company and Enterprises) will each have received an
Officers' Certificate signed by the Chief Executive Officer and the
Chief Financial Officer of the Company, addressed to the Parties
(other than the Company and Enterprises) and dated as of the date of
the Closing, certifying the accuracy of the statements set forth in
clause (a) above.
(c) Recapitalization and Recapitalization Documents.
Subject to the proviso at the end of Section 4.1, (a) each of the
other Parties to the Recapitalization Documents will have executed,
delivered and consummated the Recapitalization Documents to
-12-
<PAGE>
which they are parties, (b) the Offering and the Amended and Restated
Bank Credit Agreement will close concurrently with the Closing
hereunder and (c) the Recapitalization will have been consummated.
(d) Closing Papers. The Parties will have received copies
of the following:
(i) copies of the resolutions adopted by the Board
of Directors and stockholders of the Company authorizing the
execution, delivery and performance of this Agreement and
each of the Recapitalization Documents and the other
transactions contemplated hereby;
(ii) copies of each of the Recapitalization
Documents; and
(iii) an incumbency certificate in respect of
officers of the Company executing the Recapitalization
Documents, a standard good standing certificate from the
Secretary of the State of Delaware in respect of the
Company, and such other customary and standard documents
reasonably requested by any of the Parties.
ARTICLE VII
CONDITIONS OF THE COMPANY'S OBLIGATIONS
Section 7.1. Conditions of the Company's Obligations. The obligation
of the Company on the Closing Time to consummate the transactions contemplated
by this Agreement will be subject to the prior or concurrent satisfaction on
the Closing Time of the following conditions:
(a) Representations and Warranties; Agreements. The
representations and warranties of the other Parties set forth in this
Agreement shall be true in all material respects at and as if
repeated on and as of the Closing Time after giving effect to the
transactions contemplated hereby and the other Parties will have
performed all agreements on their part to be performed pursuant to
this Agreement on or prior to the Closing Time.
(b) Recapitalization and Recapitalization Documents. Subject
to the proviso at the end of Section 4.1, (a) each of the other
Parties to the Recapitalization Documents will have executed,
delivered and consummated the Recapitalization Documents to which
they are parties, (b) the Offering and the Amended and Restated Bank
Credit Agreement will be consummated, (c) the Recapitalization will
have been consummated and (d) BKC shall have delivered a written
consent to the Company with respect to the matters set forth in
Section 5(c) of this Agreement.
-13-
<PAGE>
(c) Consummation of the Company's Initial Public Offering.
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 Common Stock in the Offering,
including, but not limited to, any prior notice or response periods any Party
may be entitled to, (ii) waives any right it may have to anti-dilution
adjustment of its Equity Securities arising from the issuance and sale of the
Common Stock in the Offering and (iii) agrees not to exercise any "demand
registration right" it may have prior to the consummation of the Offering and
for the period of time covered by the lock-up agreement and waives any
"piggyback registration rights" it may have and related notice requirements as
a result of the Offering.
Section 8.2. Power of Attorney.
(a) Each of the Jordan Investors hereby appoint A. Richard
Caputo, Jr. 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 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
-14-
<PAGE>
subject to termination by any of the Management Investors, or by operation of
law, whether by the death or incapacity of any of the Management Investors, or
the occurrence of any other event. Any notice given to the Management
Investors' Representative shall constitute effective notice to each of the
Management Investors, and any other party to this Agreement or any other
Person may rely on any notice, consent, election or other communication
received from the Management Investors' Representative as if such notice,
consent, election or other communication had been received from each of the
Management Investors.
(c) The Jordan Investors' Representative and the Management
Investors' Representative shall have no duties or responsibilities except
those expressly set forth herein. The Jordan Investors' Representative and the
Management Investors' Representative shall be held harmless by the Jordan
Investors and the Management Investors, as the case may be, from any
liability, loss, claim, demand or expense (including attorney's fees and
expenses) arising out of or in connection with the performance of their
obligations in accordance with this Agreement, except for any of the foregoing
arising out of the gross negligence or willful misconduct of the Jordan
Investors' Representative and the Management Investors' Representative, as the
case may be. The foregoing provision shall survive the resignation or
substitution of the Jordan Investors' Representative or the Management
Investors' Representative, as the case may be, or the termination of this
Agreement.
Section 8.3. Notices. Subject to Section 8.2 hereof, all notices and
other communications pertaining to this Agreement shall be in writing and
shall be delivered in person with receipt acknowledged, or telecopied and
confirmed immediately in writing by a copy mailed by registered or certified
mail, return receipt requested, postage prepaid, addressed as hereafter set
forth, or mailed by registered or certified mail, return receipt requested,
postage prepaid, to the address set forth under the respective party's name on
the signature pages to this Agreement, or to such other person or address as
shall be furnished to the other party in compliance with this Section.
Section 8.4. Consent to Amendments and Waivers. The provisions of
this Agreement may be amended only if the Company has obtained the written
consent of a majority of the Parties, provided that (a) any adjustments to the
Recapitalization Documents and the Recapitalization generally resulting from
the determination of the price at which the Common Stock will be sold to the
public in the Offering 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
-15-
<PAGE>
obligations hereunder (by operation of law or otherwise) without the prior
written consent of each of the Parties.
Section 8.7. Survival. All representations, warranties, covenants
and agreements herein will survive the Closing.
-16-
<PAGE>
IN WITNESS WHEREOF, the parties hereto 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:
-17-
<PAGE>
PMI MEZZANINE FUND, L.P.
By:
-----------------------------------
Name:
Title:
Address:
JORDAN INVESTORS:
JORDAN/ZALAZNICK CAPITAL COMPANY
By:
-----------------------------------
Name:
Title:
LEUCADIA INVESTORS, INC.
By:
-----------------------------------
Name:
Title:
-18-
<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
-19-
<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
PAUL RODZEVIK PROFIT SHARING PLAN AND
TRUST
By:
------------------------------
Name: Paul Rodzevik
Title: Trustee
-20-
<PAGE>
MANAGEMENT STOCKHOLDERS:
---------------------------------
Lawrence Jaro
Address: c/o AmeriKing, Inc., 2215 Enterprise
Drive, Suite 1502, Westchester, Illinois 60154
---------------------------------
William Osborn
---------------------------------
Gary Hubert
---------------------------------
Joel Aaseby
---------------------------------
Scott Vasatka
---------------------------------
Donald Stahurski
-21-
<PAGE>
JARO INVESTORS:
TABOR RESTAURANTS ASSOCIATES, INC.
By:
-----------------------------------
Name: Lawrence Jaro
Title: President
JARO ENTERPRISES, INC.
By:
-----------------------------------
Name: Lawrence Jaro
Title: President
JARO RESTAURANTS ASSOCIATES, INC.
By:
-----------------------------------
Name: Lawrence Jaro
Title: President
JB RESTAURANTS, INC.
By:
-----------------------------------
Name: Lawrence Jaro
Title: President
-22-
<PAGE>
OSBORN INVESTORS:
OSBURGER, INC.
By:
-----------------------------------
Name: William Osborn
Title: President
CASTLEKING, INC.
By:
-----------------------------------
Name: William Osborn
Title: President
WHITE-OSBORN RESTAURANTS, INC.
By:
-----------------------------------
Name: William Osborn
Title: President
----------------------------
Thomas H. Quinn
TJC MANAGEMENT CORPORATION
By:
-----------------------------------
Name:
Title:
-23-
<PAGE>
EXHIBIT A
AMENDED AND RESTATED COMPANY BY-LAWS
<PAGE>
EXHIBIT B
AMENDED AND RESTATED COMPANY CHARTER
<PAGE>
EXHIBIT C
INDEMNIFICATION AGREEMENT
<PAGE>
EXHIBIT D
AMENDED AND RESTATED CONSULTING AGREEMENT
<PAGE>
EXHIBIT E
1996 STOCK OPTION PLANS
<PAGE>
EXHIBIT F
STOCKHOLDER CHART
[Previously Distributed]
<PAGE>
EXHIBIT G
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
<PAGE>
EXHIBIT H
AMENDMENT NO. 1 TO PMI NOTE PUCHASE AGREEMENT
[To Follow]
<PAGE>
EXHIBIT I
EMPLOYMENT AND NON-DISCLOSURE AGREEMENTS
<PAGE>
EXHIBIT J
LOCK-UP AGREEMENT
[To Come From Underwriters' Counsel]
<PAGE>
EXHIBIT K
STOCKHOLDER WRITTEN CONSENT IN LIEU OF 1996 ANNUAL MEETING
[To Follow]
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 2.1. Due Authorization......................................... 6
Section 2.2. Authority; No Conflicts................................... 6
Section 2.3. Capital Stock............................................. 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE OTHER PARTIES
Section 3.1. Due Authorization......................................... 7
Section 3.2. Authority; No Conflicts................................... 7
Section 3.3. Capital Stock............................................. 8
ARTICLE IV
THE CLOSING
Section 4.1. Closing ................................................ 8
ARTICLE V
THE RECAPITALIZATION
Section 5.1. General ................................................ 9
Section 5.2. Preferred Stock........................................... 9
Section 5.3. Amended Charter Documents................................. 9
Section 5.4. Reclassification and Stock Split.......................... 9
Section 5.5. Subordinated Note Repurchase.............................. 10
Section 5.6. Repurchase of Warrants.................................... 11
Section 5.7. Employment Agreements..................................... 11
Section 5.8. Amended and Restated Consulting Agreement................. 11
Section 5.9. 1996 Stock Option Plans................................... 11
Section 5.10. Directors Indemnification Agreements and D&O Insurance... 11
<PAGE>
Section 5.11. Lock-Ups and Waivers..................................... 12
Section 5.12. 1996 Annual Meeting of Stockholders...................... 12
Section 5.13. Amended and Restated Stockholders Agreement.............. 12
ARTICLE VI
CONDITIONS OF THE PARTIES'
(OTHER THAN THE COMPANY AND ENTERPRISES) OBLIGATIONS
Section 6.1. Conditions of the Stockholders' Obligations............... 12
ARTICLE VII
CONDITIONS OF THE COMPANY'S OBLIGATIONS
Section 7.1. Conditions of the Company's Obligations................... 13
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Waiver of First Refusal, Anti-Dilution Rights and
Registration Rights....................................... 14
Section 8.2. Power of Attorney......................................... 14
Section 8.3. Notices ................................................ 15
Section 8.4. Consent to Amendments and Waivers......................... 15
Section 8.5. Governing Law............................................. 15
Section 8.6. Successors and Assigns.................................... 16
Section 8.7. Survival ................................................ 16
<PAGE>
EXHIBITS
A Amended and Restated Company By-Laws
B Amended and Restated Company Charter
C Indemnification Agreement
D New Consulting Agreement
E 1996 Stock Option Plans
F Stockholder Chart
G Amended and Restated Stockholders Agreement
H Amendment No. 1 to PMI Note Purchase Agreement
I Employment and Non-Disclosure Agreements
J Lock-up Letter
K Stockholder Written Consent in Lieu of a 1996 Annual Meeting
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
dated as of July __, 1996
among
NATIONAL RESTAURANT ENTERPRISES, INC.,
AMERIKING, INC.
and
THE FIRST NATIONAL BANK OF BOSTON and
those other lending institutions listed on Schedule 1 hereto
and
THE FIRST NATIONAL BANK OF BOSTON, as Agent
<PAGE>
-ii-
TABLE OF CONTENTS
-----------------
<PAGE>
-2-
---
EXHIBITS
--------
----------------
Exhibit A Form of Revolving Credit Note
Exhibit B Form of Revolving Credit Loan Request
Exhibit C Form of Term Note
Exhibit D Form of Acquisition Note
Exhibit E Form of Advance Request
Exhibit F Form of Compliance Certificate
Exhibit G Form of Guaranty
Exhibit H-1 Form of Security Agreement (Borrower)
Exhibit H-2 Form of Security Agreement (Subsidiaries)
Exhibit I Form of Stock Pledge Agreement
Exhibit J Form of Assignment and Acceptance
Exhibit K Form of Mortgage
Exhibit L Form of Tax Statement
SCHEDULES
---------
-------
Schedule 1 Commitments
Schedule 1A Mortgaged Properties
Schedule 9.3 Title to Properties; Leases
Schedule 9.7 Litigation
Schedule 9.15 Transactions with Affiliates
Schedule 9.18 Environmental Matters
Schedule 9.19 Subsidiaries
Schedule 9.20 Chief Executive Offices of Subsidiaries
Schedule 9.21 Fiscal Years
Schedule 9.25 Insurance
Schedule 11.1 Permitted Indebtedness
Schedule 11.2 Permitted Liens
Schedule 11.3 Permitted Investments
<PAGE>
-2-
THIRD AMENDED AND RESTATED
--------------------------
REVOLVING CREDIT AND TERM LOAN AGREEMENT
----------------------------------------
This THIRD AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN
AGREEMENT is made as of July __, 1996, by and among AMERIKING, INC.
("Holdings"), a Delaware corporation, NATIONAL RESTAURANT ENTERPRISES, INC.
(the "Borrower"), a Delaware corporation having its principal place of
business at 2215 Enterprise Drive, Suite 1502, Westchester, Illinois 60154 and
THE FIRST NATIONAL BANK OF BOSTON, a national banking association and the
other lending institutions listed on Schedule 1 and THE FIRST NATIONAL BANK OF
BOSTON as agent for itself and such other lending institutions.
WHEREAS, pursuant to a Second Amended and Restated Revolving Credit
and Term Loan Agreement dated as of February 7, 1996 (as amended from time to
time, the "Original Credit Agreement"), by and among Holdings, the Borrower,
certain of the Banks (as hereinafter defined) and the Agent (as hereinafter
defined), the Banks party thereto made term loans to the Borrower for the
purpose of financing certain acquisitions and made available revolving credit
loans to finance certain acquisitions and for general corporate and working
capital purposes; and
WHEREAS, the Borrower has requested, among other things, additional
financing to effect the AmeriKing Michigan Acquisition (as hereinafter
defined), to refinance certain Indebtedness (as hereinafter defined), to
finance acquisitions and development of BKC Restaurants (as hereinafter
defined) in the future, and for working capital and general corporate
purposes, and the Banks are willing to provide such additional financing on
the terms and conditions set forth herein;
NOW, THEREFORE, Holdings, the Borrower, the Banks and the Agent agree
that on the Closing Date the Original Credit Agreement is hereby amended and
restated in its entirety as set forth herein.
DEFINITIONS AND RULES OF INTERPRETATION.
Definitions.
-----------
The following terms shall have the meanings set forth in this
[section]1 or elsewhere in the provisions of this Credit Agreement referred to
below:
Aaseby Sale Agreement. Those provisions of the Employment Agreement
dated as of September 1, 1994 between the Borrower and Joel Aaseby pertaining
to the sale by the Borrower to Joel Aaseby of the restaurant identified as the
BKC Restaurant #209.
Acquisition Commitment. With respect to each Bank, the amount set
forth on Schedule 1 hereto as the amount of such Bank's commitment to make
Advances to the Borrower during the Disbursement
<PAGE>
-3-
Period, as the same may be reduced from time to time; or, after the
Disbursement Period or if such commitment is terminated pursuant to the
provisions hereof, zero.
Acquisition Loan. Advances made or to be made by the Banks to the
Borrower during the Disbursement Period pursuant to [section]5.
Acquisition Loan Maturity Date. January __, 2003.
Acquisition Note. See [section]5.4 hereof.
Acquisition Note Record. A Record with respect to an Acquisition
Note.
Acquisitions. The AmeriKing Cincinnati Acquisition and the
AmeriKing Virginia Acquisition.
Adjustment Date. The first day of the month immediately following
the month in which a Compliance Certificate is to be delivered by the Borrower
pursuant to [section]10.4(d).
Advance Request. See [section]5.1.2 hereof.
Advances. See [section]5.1.2 hereof.
Affected Bank. See [section]7.12 hereof.
Affiliate. Any Person that would be considered to be an affiliate of
the Borrower under Rule 144(a) of the Rules and Regulations of the Securities
and Exchange Commission, as in effect on the date hereof, if the Borrower was
issuing securities.
Agent's Head Office. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent
may designate from time to time.
Agent. The First National Bank of Boston acting as agent for the
Banks.
Agent's Fee. See [section]7.2 hereof.
Agent's Special Counsel. Bingham, Dana & Gould LLP or such other
counsel as may be approved by the Agent.
AmeriKing Cincinnati. AmeriKing Cincinnati Corporation I, a Delaware
corporation and wholly-owned Subsidiary of the Borrower.
<PAGE>
-4-
AmeriKing Cincinnati Acquisition. The transaction in which AmeriKing
Cincinnati purchased certain of the assets and business of (a) Houston, Inc.
consisting of two (2) restaurants pursuant to the AmeriKing/Houston Asset
Purchase Agreement on February 7, 1996; (b) Fifth & Race, Inc. consisting of
one (1) restaurant pursuant to the AmeriKing/FRI Asset Purchase Agreement on
February 7, 1996; and (c) Thirty- Forty, Inc. consisting of nine (9)
restaurants pursuant to the AmeriKing/TFI Asset Purchase Agreement on February
7, 1996.
AmeriKing Colorado. AmeriKing Colorado Corporation I, a Delaware
corporation and wholly-owned Subsidiary of the Borrower.
AmeriKing Colorado Acquisition. The transaction in which AmeriKing
Colorado purchased certain of the assets and business of (a) DMW, Inc.
consisting of three (3) restaurants pursuant to the AmeriKing/DMW Asset
Purchase Agreement on July 5, 1995 and (b) WSG, Inc. consisting of one (1)
restaurant pursuant to the AmeriKing/WSG Asset Purchase Agreement on July 5,
1995.
AmeriKing/DMW Asset Purchase Agreement. The Asset Purchase Agreement
dated as of July 5, 1995 by and among DMW, Inc., Daniel L. White and AmeriKing
Colorado.
AmeriKing/FRI Asset Purchase Agreement. The Asset Purchase Agreement
dated as of November 6, 1995 by and among Fifth & Race, Inc., James P. Borke,
W. Curtis Smith, William T. Keller and AmeriKing Cincinnati as amended by
Amendment No. 1 dated as of February 7, 1996.
AmeriKing/Houston Asset Purchase Agreement. The Asset Purchase
Agreement dated as of November 6, 1995 by and among Houston, Inc., James P.
Borke, W. Curtis Smith, William T. Keller, the Borrower and AmeriKing
Cincinnati as amended by Amendment No. 1 dated as of February 7, 1996.
AmeriKing Michigan. AmeriKing Michigan Corporation I, a Delaware
corporation and wholly-owned Subsidiary of the Borrower.
AmeriKing Michigan Acquisition. The transaction in which AmeriKing
Michigan shall have purchased (a) certain of the assets and business of
Greenville Bee-Kay, Inc. consisting of one (1) restaurant pursuant to the
Bee-Kay Asset Purchase Agreement on the AmeriKing Michigan Acquisition Closing
Date; (b) 100% of the capital stock of Holland Bee-Kay, Inc., whose assets
consist of, among other items, twenty-two (22) restaurants pursuant to the
Holland Stock Purchase Agreement on the AmeriKing Michigan Acquisition Closing
Date; (c) certain of the assets and business of Northland Bee-Kay, Inc.
consisting of five (5) restaurants pursuant to the Northland Asset Purchase
Agreement on the AmeriKing Michigan Acquisition Closing Date; and (d) certain
of the assets and business of Greenville West Bee-Kay, Inc., consisting of
twelve (12) restaurants pursuant to the Greenville Asset Purchase Agreement on
the AmeriKing Michigan Acquisition Date.
<PAGE>
-5-
AmeriKing Michigan Acquisition Closing Date. The first date on which
the conditions set forth in the Bee-Kay Asset Purchase Agreement, the Holland
Stock Purchase Agreement, the Northland Asset Purchase Agreement and the
Greenville Asset Purchase Agreement have been satisfied and the AmeriKing
Michigan Acquisition has occurred.
AmeriKing Michigan Acquisition Documents. The Bee-Kay Asset Purchase
Agreement, the Holland Stock Purchase Agreement, the Northland Asset Purchase
Agreement, the Greenville Asset Purchase Agreement and related bills of sale,
instruments of assignment, leases, Franchise Agreements and other documents,
instruments and certificates delivered in connection with any of the
foregoing.
AmeriKing Tennessee. AmeriKing Tennessee Corporation I, a Delaware
corporation and wholly-owned Subsidiary of the Borrower.
AmeriKing Tennessee Acquisition. The transaction in which AmeriKing
Tennessee purchased the outstanding capital stock of (a) QSC, Inc., whose
assets consist of, among other items, eight (8) restaurants pursuant to the
BKC/QSC Stock Purchase Agreement on November 21, 1995 and (b) Ro-Lank, Inc.,
whose assets consist of, among other items, three (3) restaurants pursuant to
the BKC/Ro-Lank Stock Purchase Agreement on November 21, 1995.
AmeriKing Tennessee Sellers. Collectively, Ronny D. Lankford,
Robert W. Lankford, Michael A. Reed, QSC, Inc. and Ro-Lank, Inc.
AmerKing/TFI Asset Purchase Agreement. The Asset Purchase Agreement
dated as of November 6, 1995 by and among Thirty-Forty, Inc., James P. Borke,
W. Curtis Smith and AmeriKing Cincinnati as amended by Amendment No. 1 dated
as of February 7, 1996.
AmeriKing Virginia. AmeriKing Virginia Corporation I, a Delaware
Corporation and wholly-owned Subsidiary of the Borrower.
AmeriKing Virginia Acquisition. The transaction in which AmeriKing
Virginia purchased certain of the assets and business of the Virginia Sellers,
consisting of twenty-four (24) restaurants pursuant to the AmeriKing Virginia
Asset Purchase Agreement on February 7, 1996.
AmeriKing/Virginia Asset Purchase Agreement. The Asset Purchase
Agreement dated as of November 30, 1994 by and among the Virginia Sellers and
AmeriKing Virginia, as amended by Amendment No. 1 dated as of February 7,
1996.
AmeriKing/WSG Asset Purchase Agreement. The Asset Purchase
Agreement dated as of July 5, 1995 by and among WSG, Inc., Daniel L. White,
Susan J. Wakeman, George Alaniz, Jr. and AmeriKing Colorado.
<PAGE>
-6-
Applicable Margin. For each period commencing on an Adjustment Date
through the date immediately preceding the next Adjustment Date (each a "Rate
Adjustment Period"), the Applicable Margin shall be the applicable margin set
forth below with respect to the Borrower's Leverage Ratio, as determined for
the fiscal period of the Borrower and its Subsidiaries ending immediately
prior to the applicable Rate Adjustment Period.
@@
<TABLE>
<CAPTION>
==============================================================================================================================
Letter
Base Rate Eurodollar Commitment of Credit
Level Leverage Ratio Loans Rate Loans Fee Fees
----- -------------- ----- ---------- --- ----
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1
Greater than or equal to 3.75:1.00 1.00% 2.25% 0.50% 2.25%
- ------------------------------------------------------------------------------------------------------------------------------
2 Less than 3.75:1.00 but greater than or equal to
3.25:100 0.50-% 1.75% 0.375% 1.75%
- ------------------------------------------------------------------------------------------------------------------------------
3
Less than 3.25:1.00 but greater than or equal to 0.375% 1.625% 0.375% 1.625%
2.75:1.00
- ------------------------------------------------------------------------------------------------------------------------------
4 Less than 2.75:1.00
0.250% 1.50% 0.250% 1.50%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
@@Notwithstanding the foregoing, (a) for Loans outstanding, and the Letter of
Credit Fees and Commitment Fees payable during the period commencing on the
Closing Date through the date immediately preceding the first Adjustment Date
to occur after the fiscal quarter ending March 31, 1997, the Applicable Margin
shall be at a minimum, the Applicable Margin set forth in Level 3 above, and
(b) if the Borrower fails to deliver any Compliance Certificate pursuant to
[section]10.4(d) hereof then, for the period commencing on the next Adjustment
Date to occur subsequent to such failure through the date immediately
following the date on which such Compliance Certificate is delivered, the
Applicable Margin shall be the highest Applicable Margin set forth above.
Asset Purchase
Agreement. The Asset Purchase Agreement dated as of September 30, 1994 by and
among BNB, Sheldon Friedman and the Borrower.
Assignment and
Acceptance. See [section]21.1 hereof.
Balance Sheet Date.
- ----------------.
Banks. FNBB and
the other lending institutions listed on Schedule 1 hereto and any other
Person who becomes an assignee of any rights and obligations of a Bank
pursuant to [section]21.
Base Rate. The annual
rate of interest announced from time to time by FNBB at its head office in
Boston, Massachusetts, as its "base rate".
Base Rate Loans.
Revolving Credit Loans and all or any portion of the Term Loan or the
Acquisition Loan bearing interest calculated by reference to the Base Rate.
<PAGE>
-7-
Bee-Kay Asset
Purchase Agreement. The Asset Purchase Agreement dated as of May __, 1996 by
and among Greenville Bee-Kay, Inc., Stuart P. Ray, David E. Bustraan and
AmeriKing Michigan.
BKC. Burger King
Corporation, a Florida corporation.
BKC Assignment.
The Assignment and Assumption Agreement dated as of November 21, 1995 among
BKC, the AmeriKing Tennessee Sellers and AmeriKing Tennessee, pursuant to
which BKC assigned all of its rights and obligations under the BKC/QSC Stock
Purchase Agreement and the BKC/Ro-Lank Stock Purchase Agreement to AmeriKing
Tennessee.
BKC Note. The
Secured Promissory Note dated as of November 21, 1995 from AmeriKing Tennessee
to BKC in the original principal amount of $6,920,700.
BKC/QSC Stock
Purchase Agreement. The Purchase Agreement dated as of November 21, 1995 by
and among Ronny D. Lankford, Robert W. Lankford, Michael A. Reed and QSC,
Inc., which Purchase Agreement was subject to the BKC Assignment.
BKC/Ro-Lank Stock
Purchase Agreement. The Purchase Agreement dated as of November 21, 1995 by
and among Ronny D. Lankford, Robert W. Lankford and Ro-Lank, Inc., which
Purchase Agreement was subject to the BKC Assignment.
BKC Restaurant.
A quick service restaurant franchised by BKC that is located in the United
States, its territories, or Canada.
BNB. BNB Land
Venture, Inc., an Illinois corporation.
Borrower. As defined
in the preamble hereto.
Borrower Stock Pledge
Agreements. Collectively, (a) the Stock Pledge Agreement, dated as of November
21, 1995, between the Borrower and the Agent, as amended by the Second
Security Documents Amendment, the Third Security Documents Amendment, and as
the same may be further amended, restated, supplemented or modified from time
to time; and (b) the Stock Pledge Agreement, dated as of February 7, 1996,
between the Borrower and the Agent, as amended by the Third Security Documents
Amendment, and as the same may be amended, restated, supplemented or modified
from time to time.
Business Day. Any
day (other than Saturdays or Sundays) on which banking institutions in Boston,
Massachusetts, Los Angeles[, California and Chicago, Illinois] are open for
the transaction of banking business and, in the case of Eurodollar Rate Loans,
also a day which is a Eurodollar Business Day.
Capital Assets. Fixed
assets, both tangible (such as land, buildings, fixtures, machinery and
equipment) and intangible (such as patents, copyrights, trademarks, franchises
and good will); provided that Capital Assets shall not include any item
customarily charged directly to expense or depreciated over a useful life of
twelve (12) months or less in accordance with generally accepted accounting
principles.
Capital Expenditures.
Amounts paid or indebtedness incurred by Holdings, the Borrower or any of
their Subsidiaries in connection with the purchase or lease by Holdings, the
Borrower or any of their Subsidiaries of Capital Assets that would be required
to be capitalized and shown on the balance sheet of such Person in accordance
with generally accepted accounting principles, provided, however amounts paid
or indebtedness incurred by the Borrower in connection with Permitted
Acquisitions other than in connection with the development of restaurants
shall not be included as Capital Expenditures.
<PAGE>
-8-
Capitalized Leases.
Leases under which Holdings, the Borrower or any of their Subsidiaries is the
lessee or obligor, the discounted future rental payment obligations under
which are required to be capitalized on the balance sheet of the lessee or
obligor in accordance with generally accepted accounting principles, provided,
however, for purposes of this Credit Agreement all real estate leases
(including the FFCA Leases) of BKC restaurants shall be considered operating
leases.
Capitalization
Documents. The Management Subscription Agreement, the Investor Subscription
Agreement, the Executive Subscription Agreement, the Stockholders Agreement
and the certificates of incorporation of Holdings, the Borrower and their
Subsidiaries.
Cash Equivalents.
Collectively, (a) marketable direct obligations issued or unconditionally
guaranteed by the United States Government or issued by any agency thereof and
backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof, (b) marketable
direct obligations issued by any state of the United States of America or any
political subdivision of any such state or any public instrumentality thereof
maturing within one year from the date of acquisition thereof and, at the time
of acquisition, having the highest rating obtainable from either Standard &
Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's"),
(or, if at any time neither such rating service shall be rating such
obligations, then from such other nationally recognized rating services
acceptable to the Majority Banks), (c) commercial paper maturing in no more
than one year from the date of creation thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or Moody's
(or, if at any time neither such rating service shall be rating such
obligations, then from such other nationally recognized rating service
acceptable to the Majority Banks), (d) certificates of deposit (domestic or
eurodollar), bankers' acceptances, or time deposits maturing within one year
from the date of acquisition thereof issued by commercial banks organized
under the laws of the United States of America or any state thereof or the
District of Columbia, each having combined capital and surplus of not less
than $500,000,000 ("Qualifying Banks"), (e) repurchase agreements and reverse
repurchase agreements with Qualifying Banks, provided that the terms of such
agreements comply with the guidelines set forth in the Federal Financial
Institutions Examination Council Supervisory Policy -- Repurchase Agreements
of Depository Institutions with Securities Dealers and Others as adopted by
the Comptroller of the Currency on October 31, 1985 (the "Supervisory
Policy"), and provided further that possession or control of the underlying
securities is established as provided in the Supervisory Policy, (f)
investments in money market funds or money market deposit accounts that invest
solely in Cash Equivalents described in clauses (a) through (e) above and (g)
any other Investment permitted under Section 11.3(a), (b), (c) or (d) of the
Credit Agreement (as in effect on the date hereof).
CERCLA. See [section]9.18
hereof.
Closing Date. The
first date on which the conditions set forth in [section]13 have been
satisfied, the Original Credit Agreement shall be amended and restated as set
forth herein, the existing Loans and Letters of Credit under the Original
Credit Agreement are converted to Loans or Letters of Credit hereunder, as the
case may be, and any Revolving Credit Loans, the Term Loan and any Advances
are to be made or any Letter of Credit is to be issued hereunder.
Code. The Internal
Revenue Code of 1986.
Collateral. All of
the property, rights and interests of Holdings, the Borrower and their
Subsidiaries that are or are intended to be subject to the security interests
created by the Security Documents.
Commitment. With
respect to each Bank, the amount set forth on Schedule 1 hereto as the amount
of such Bank's commitment to make Revolving Credit Loans to, and to
participate in the issuance, extension and renewal of Letters of Credit for
the account of, the Borrower, as the same may be reduced from time to time; or
if such commitment is terminated pursuant to the provisions hereof, zero.
Commitment Fee Rate.
The rate per annum set forth in the chart contained in the definition of
Applicable Margin under the heading "Commitment Fee".
<PAGE>
-9-
Commitment
Percentage. With respect to each Bank, the percentage set forth on Schedule 1
hereto as such Bank's percentage of the aggregate Commitments of all of the
Banks, and with respect to the Term Loan and the Acquisition Loan, the
percentage amount set forth on Schedule 1 of such Bank's commitment to make
the Term Loan and the Acquisition Loan.
Compliance Certificate.
See [section]10.4(d) hereof.
Consolidated or
consolidated. With reference to any term defined herein, shall mean that term
as applied to the accounts of Holdings and its Subsidiaries or the Borrower
and its Subsidiaries, as applicable, consolidated in accordance with generally
accepted accounting principles.
Consolidated Cash
Flow. With respect to any fiscal period, an amount equal to the sum of (a)
Consolidated Net Income for such fiscal period, plus (b) depreciation and
amortization for such period, plus (c) without duplication, other noncash
charges made in calculating Consolidated Net Income for such period, plus (d)
tax expense for such period, plus (e) Consolidated Total Interest Expense paid
or accrued during such period, plus (f) non-cash expenses relating to
Financial Accounting Standards Board Statements Nos. 106 and 109 deducted in
the calculation of Consolidated Net Income for such period, plus (g) the
aggregate amount of non-capitalized transaction costs incurred in connection
with financings and acquisitions, (including, but not limited to, financing
and refinancing fees), to the extent such costs were deducted in the
calculation of such Person's Consolidated Net Income, minus (h) Capital
Expenditures made in such period, minus (i) cash taxes paid in such period,
all as determined on a consolidated basis in accordance with generally
accepted accounting principles.
Consolidated Excess
Cash Flow. With respect to Holdings and its Subsidiaries on a consolidated
basis, and for any particular fiscal period, an amount equal to the sum of
Consolidated Cash Flow of Holdings and its Subsidiaries for such period plus,
to the extent deducted in the calculation of such Person's Consolidated Cash
Flow, the aggregate amount of the financed portion of all Capital Expenditures
made by such Person in such period, less the sum of (without duplication) (a)
all mandatory principal payments on any Indebtedness of Holdings or any of its
Subsidiaries paid or due and payable during such period (other than payments
made in respect of the prior fiscal year's Consolidated Excess Cash Flow) and
all voluntary permanent prepayments of the Term Loan and the Acquisition Loan
paid during such period, (b) cash interest payments of Holdings and its
Subsidiaries for such period, (c) to the extent not already deducted in the
calculation of Consolidated Cash Flow for such period, cash expenditures made
during such period for Permitted Acquisitions net of any proceeds received
from the financing of such cash expenditures in such period, including related
cash transaction costs, cash Investments permitted pursuant to
[section]11.3(g), (h) or (i) and cash Distributions permitted pursuant to
[section]11.4 other than [section]11.4(e), (d) any deposits required to be
made in cash during such period pursuant to the Franchise Agreements, and (e)
nonrecurring cash consolidation expenses of the Borrower and its Subsidiaries
which are excluded pursuant to clause (c) of Consolidated Net Income.
Consolidated Net
Income. For any period, the consolidated net income (or net deficit) of any
Person and its Subsidiaries, after deduction of all expenses, taxes, and other
proper charges, determined in accordance with generally accepted accounting
principles, after excluding therefrom (a) dividends paid or payable to the
extent deducted from Consolidated Net Income; (b) without duplication, all
nonrecurring nonoperating income or expenses, including but not limited to
gains or losses realized upon the termination of pension plans, upon the sale
of assets or the satisfaction of Indebtedness; and (c) nonrecurring cash
consolidation expenses of the Borrower and its Subsidiaries pertaining to the
Acquisitions and the AmeriKing Michigan Acquisition, to the extent such cash
expenses (i) which, in the aggregate are greater than $250,000 but less than
$500,000 in any fiscal year, are approved by the Agent and (ii) which in the
aggregate are greater than $500,000 in any fiscal year are approved by the
Majority Banks.
Consolidated Total
Interest Expense. With respect to any Person, for any fiscal period, the
aggregate amount of interest expense in respect of all Indebtedness (other
than Indebtedness relating to Franchise Agreements, licenses, leases or other
agreements with BKC other than the BKC Note) of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in
accordance with generally accepted accounting principles (including all
non-cash interest payments, the interest portion of any deferred payment
obligation and the interest component of Capitalized Leases, but excluding
amortization of deferred financing fees if such amortization would otherwise
be included in interest expense).
<PAGE>
-10-
Conversion Request.
A notice given by the Borrower to the Agent of the Borrower's election to
convert or continue a Loan in accordance with [section]2.7.
Credit Agreement.
This Third Amended and Restated Revolving Credit and Term Loan Agreement,
including the Schedules and Exhibits hereto.
Debt Service Coverage
Ratio. As at the date of determination and with respect to the Borrower and
its Subsidiaries, the ratio of (a) the Consolidated Cash Flow of the Borrower
and its Subsidiaries for the Reference Period to (b) the Total Debt Service of
the Borrower and its Subsidiaries for such Reference Period.
Default. See [section]15.1
hereof.
Delinquent Bank.
See [section]17.5.3 hereof.
Disbursement Period.
See [section]5.1.2 hereof.
Distribution. The
declaration or payment of any dividend on or in respect of any shares of any
class of capital stock of a Person, other than dividends payable solely in
shares of common stock or Preferred Stock of such Person; the purchase,
redemption, or other retirement of any shares of any class of capital stock of
a Person, directly or indirectly through a Subsidiary of such Person or
otherwise; the return of capital by a Person to its shareholders as such; or
any other distribution on or in respect of any shares of any class of capital
stock of a Person.
Dollars or $. Dollars
in lawful currency of the United States of America.
Domestic Lending
Office. Initially, the office of each Bank designated as such in Schedule 1
hereto; thereafter, such other office of such Bank, if any, located within the
United States that will be making or maintaining Base Rate Loans.
Drawdown Date.
The date on which any Revolving Credit Loan, the Term Loan or any Advance is
made or is to be made, and the date on which any Revolving Credit Loan is
converted or continued in accordance with [section]2.7 or all or any portion
of the Term Loan or the Acquisition Loan is converted or continued in
accordance with [section]4.5.2 or [section]5.7.2, as the case may be.
Dual-Use
Establishment. A single location at which more than one business activity
is conducted, but as to which the primary business is the conduct of a BKC
Restaurant.
EBITDA. With
respect to any fiscal period, an amount equal to the sum of (a) Consolidated
Net Income for such fiscal period, plus (b) depreciation and amortization for
such period, plus (c) without duplication, other noncash charges made in
calculating Consolidated Net Income for such period plus (d) tax expense for
such period, plus (e) Consolidated Total Interest Expense paid or accrued
during such period, plus (f) non-cash expenses relating to Financial
Accounting Standards Board Statements Nos. 106 and 109 deducted in the
calculation of Consolidated Net Income for such period, plus (g) the aggregate
amount of non-capitalized transaction costs incurred in connection with
financings and acquisitions, (including, but not limited to, financing and
refinancing fees), to the extent such costs were deducted in the calculation
of such Person's Consolidated Net Income, all as determined in accordance with
generally accepted accounting principles.
Eligible Assignee.
Any of (a) a commercial bank or finance company organized under the laws of
the United States, or any State thereof or the District of Columbia, and
having total assets in excess of $1,000,000,000; (b) a savings and loan
association or savings bank organized under the laws of
<PAGE>
-11-
the United States, or any State thereof or the District of Columbia, and
having a net worth of at least $100,000,000, calculated in accordance with
generally accepted accounting principles; (c) a commercial bank organized
under the laws of any other country which is a member of the Organization for
Economic Cooperation and Development (the "OECD"), or a political subdivision
of any such country, and having total assets in excess of $1,000,000,000,
provided that such bank is acting through a branch or agency located in the
country in which it is organized or another country which is also a member of
the OECD; (d) the central bank of any country which is a member of the OECD;
(e) any investment company, investment fund, financial institution or other
institutional lender (other than any financial institution which but for the
amount of its total assets or net worth would have been an Eligible Assignee
under clauses (a) through (d) above) having total assets in excess of
$100,000,000; and (f) if, but only if, any Event of Default has occurred and
is continuing, any other bank, insurance company, commercial finance company
or other financial institution or other Person approved by the Agent, such
approval not to be unreasonably withheld.
Employee Benefit
Plan. Any employee benefit plan within the meaning of [section]3(3) of ERISA
maintained or contributed to by the Borrower or any ERISA Affiliate, other
than a Multiemployer Plan.
Environmental Laws.
See [section]9.18(a) hereof.
ERISA. The
Employee Retirement Income Security Act of 1974.
ERISA Affiliate.
Any Person which is treated as a single employer with the Borrower under
[section]414 of the Code.
ERISA Reportable
Event. A reportable event with respect to a Guaranteed Pension Plan within the
meaning of [section]4043 of ERISA and the regulations promulgated thereunder
as to which the requirement of notice has not been waived.
Eurocurrency Reserve
Rate. For any day with respect to a Eurodollar Rate Loan, the maximum rate
(expressed as a decimal) at which any lender subject thereto would be required
to maintain reserves under Regulation D of the Board of Governors of the
Federal Reserve System (or any successor or similar regulations relating to
such reserve requirements) against "Eurocurrency Liabilities" (as that term is
used in Regulation D), if such liabilities were outstanding. The Eurocurrency
Reserve Rate shall be adjusted automatically on and as of the effective date
of any change in the Eurocurrency Reserve Rate.
Eurodollar Business
Day. Any day on which commercial banks are open for international business
(including dealings in Dollar deposits) in London or such other eurodollar
interbank market as may be selected by the Agent in its sole discretion acting
in good faith.
Eurodollar Lending
Office. Initially, the office of each Bank designated as such in Schedule 1
hereto; thereafter, such other office of such Bank, if any, that shall be
making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For
any Interest Period with respect to a Eurodollar Rate Loan, the rate of
interest equal to (a) the rate per annum (rounded upwards to the nearest 1/16
of one percent) at which the Reference Bank's Eurodollar Lending Office is
offered Dollar deposits two (2) Eurodollar Business Days prior to the
beginning of such Interest Period in the interbank eurodollar market where the
eurodollar and foreign currency and exchange operations of such Eurodollar
Lending Office are customarily conducted, for delivery on the first day of
such Interest Period for the number of days comprised therein and in an amount
comparable to the amount of the Eurodollar Rate Loan of such Reference Bank to
which such Interest Period applies, divided by (b) a number equal to 1.00
minus the Eurocurrency Reserve Rate, if applicable.
Eurodollar Rate Loans.
Revolving Credit Loans and all or any portion of the Term Loan and the
Acquisition Loan bearing interest calculated by reference to the Eurodollar
Rate.
<PAGE>
-12-
Event of Default.
See [section]15.1 hereof.
Executive Subscription
Agreement. The Executive and Advisor Subscription Agreement, dated as of
September 1, 1994, between Holdings and the parties listed on the signature
pages thereto.
Fee Letter. The fee
letter dated or to be dated on or prior to the Closing Date between the
Borrower and the Agent, in form and substance satisfactory to the Agent.
FFCA. FFCA
Acquisition Corporation, a Delaware corporation.
FFCA Agreement.
The Sale-Leaseback Agreement dated as of February 7, 1996 by and among FFCA,
AmeriKing Virginia and AmeriKing Tennessee, in substantially the form
delivered to the Agent.
FFCA Documents.
Collectively, the FFCA Agreement, the FFCA Franchisor Certificates, the FFCA
Guaranty and the FFCA Leases.
FFCA Franchisor
Certificates. Those certain BKC Franchisor Certificates executed by BKC with
respect to the franchise, license or area development agreements by and
between the Borrower, AmeriKing Virginia and AmeriKing Tennessee, as the case
may be, and BKC, and in form and substance satisfactory to the Agent.
FFCA Guaranty.
The Unconditional Guaranty of Payment and Performance by the Borrower in favor
of FFCA of the obligations of AmeriKing Virginia and AmeriKing Tennessee with
respect to the FFCA Agreement and the FFCA Leases, and in form and substance
satisfactory to the Agent.
FFCA Leases. Those
certain lease agreements by and between FFCA, as lessor, and AmeriKing
Virginia, as lessee, for each of the premises for which the "Lessee" on
Exhibit A thereto is AmeriKing Virginia, and by and between FFCA, as lessor,
and AmeriKing Tennessee, as lessee, for each of the premises for which the
"Lessee" on Exhibit A thereto is AmeriKing Tennessee, each in form and
substance satisfactory to the Agent.
FFCA Transaction.
The transaction in which AmeriKing Virginia and AmeriKing Tennessee caused the
Virginia Sellers and AmeriKing Tennessee to transfer certain Real Estate as
more fully described in the FFCA Documents to FFCA on February 7, 1996, and
which Real Estate is subject to a sale/leaseback transaction among FFCA,
AmeriKing Virginia and AmeriKing Tennessee pursuant to the FFCA Documents.
FNBB. The First
National Bank of Boston, a national banking association, in its individual
capacity.
Former Agent. See
[section]17.12 hereof.
Franchise Agreements.
The several Franchise Agreements (a) dated on or prior to the Closing Date
between the Borrower, AmeriKing Michigan or Holland, as the case may be, and
BKC, each in form and substance satisfactory to the Agent, (b) dated as of
February 7, 1996 between the Borrower, AmeriKing Colorado, AmeriKing
Tennessee, AmeriKing Cincinnati or AmeriKing Virginia, as the case may be, and
BKC, each in form and substance satisfactory to the Agent, (c) dated after the
Closing Date between the Borrower and BKC, each in form and substance
substantially similar to those Franchise Agreements entered into between such
parties on or prior to the Closing Date, (d) dated after the Closing Date
between any Restricted Subsidiary and BKC, each in form and substance
substantially similar to those Franchise Agreements entered into between any
other Restricted Subsidiary and BKC on or prior to the Closing Date, and (e)
dated after the Closing Date between any Unrestricted Subsidiary and
<PAGE>
-13-
BKC, each in form and substance substantially similar to those Franchise
Agreements entered into between any other Unrestricted Subsidiary and BKC on
or prior to the Closing Date.
Friedman Acquisition.
The transaction in which the Borrower purchased certain of the assets and
business of BNB and its affiliates consisting of thirty-nine (39) restaurants
pursuant to the Asset Purchase Agreement on November 30, 1994.
generally accepted
accounting principles. (a) When used in [section]12, whether directly or
indirectly through reference to a capitalized term used therein, means (i)
principles that are consistent with the principles promulgated or adopted by
the Financial Accounting Standards Board and its predecessors, in effect on
January 1, 1996, and (ii) to the extent consistent with such principles, the
accounting practice of the Borrower reflected in its financial statements for
the year ended on January 1, 1996, and (b) when used in general, other than as
provided above, means principles that are (i) consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, as in effect from time to time, and (ii) consistently applied
with past financial statements of the Borrower adopting the same principles,
provided that in each case referred to in this definition of "generally
accepted accounting principles" a certified public accountant would, insofar
as the use of such accounting principles is pertinent, be in a position to
deliver an unqualified opinion (other than a qualification regarding changes
in generally accepted accounting principles) as to financial statements in
which such principles have been properly applied.
Greenville Asset
Purchase Agreement. The Asset Purchase Agreement dated as of May ___, 1996
by and among Greenville West Bee-Kay, Inc., Stuart P. Ray and AmeriKing
Michigan, in the form delivered to the Agent on or prior to the Closing Date.
Guaranteed Pension
Plan. Any employee pension benefit plan within the meaning of [section]3(2) of
ERISA maintained or contributed to by the Borrower or any ERISA Affiliate the
benefits of which are guaranteed on termination in full or in part by the PBGC
pursuant to Title IV of ERISA, other than a Multiemployer Plan.
Guarantees.
Collectively, (a) the Limited Guaranty, dated as of September 1, 1994, made by
Holdings in favor of the Banks and the Agent pursuant to which Holdings
guaranties to the Banks and the Agent the payment and performance of certain
of the Obligations, as amended by the Security Documents Amendment, the Second
Security Documents Amendment and the Third Security Documents Amendment, and
as the same may be further amended, restated, supplemented or modified from
time to time; (b) the Guaranty, dated as of February 7, 1996, made by
AmeriKing Cincinnati and AmeriKing Virginia in favor of the Banks and the
Agent, pursuant to which AmeriKing Cincinnati and AmeriKing Virginia jointly
and severally guaranty to the Banks and the Agent the payment and performance
of the Obligations, as amended by the Third Security Documents Amendment, and
as the same may be amended, restated, supplemented or modified from time to
time; and (c) the Guaranty, dated on or prior to the Closing Date, made by
AmeriKing Michigan and Holland in favor of the Banks and the Agent,
substantially in the form of Exhibit G hereto, pursuant to which AmeriKing and
Holland jointly and severally guarantee to the Banks and the Agent the payment
and performance of the Obligations, as the same may be amended, restated,
supplemented or modified from time to time.
Hazardous Substances.
See [section]9.18(b) hereof.
Holdings. As defined
in the preamble hereto.
Holland. Holland
Bee-Kay, Inc., a Michigan corporation and, immediately upon giving effect to
the AmeriKing Michigan Acquisition, a wholly-owned Subsidiary of AmeriKing
Michigan.
Holland Stock
Purchase Agreement. The Stock Purchase Agreement dated as of May ___, 1996 by
and among Stuart P. Ray, Stuart P. Ray as trustee for Stuart P. Ray Lifelong
Charitable Remainder Unitrust, dated May 8, 1996, Stuart P. Ray Twenty Year
Charitable Remainder Unitrust, dated May 8, 1996, Stuart P. Ray Ten Year
Charitable Remainder Unitrust, dated May 8, 1996, Holland and AmeriKing
Michigan, in the form delivered to the Agent on or prior to the Closing Date.
<PAGE>
-14-
Indebtedness. All
obligations, contingent and otherwise, that in accordance with generally
accepted accounting principles should be classified upon the obligor's balance
sheet as liabilities, or to which reference should be made by footnotes
thereto, including in any event and whether or not so classified: (a) all debt
and similar monetary obligations, whether direct or indirect; (b) all
liabilities secured by any mortgage, pledge, security interest, lien, charge
or other encumbrance existing on property owned or acquired subject thereto,
whether or not the liability secured thereby shall have been assumed; and (c)
all guarantees, endorsements and other contingent obligations whether direct
or indirect in respect of indebtedness of others, including any obligation to
supply funds to or in any manner to invest in, directly or indirectly, the
debtor, to purchase indebtedness, or to assure the owner of indebtedness
against loss, through an agreement to purchase goods, supplies, or services
for the purpose of enabling the debtor to make payment of the indebtedness
held by such owner or otherwise, and the obligations to reimburse the issuer
in respect of any letters of credit.
Initial Acquisition.
The transaction in which the Borrower purchased (a) certain of the assets of
BKC consisting of sixty-eight (68) restaurants, (b) certain of the assets and
business of Lawrence Jaro and/or his affiliates consisting of eleven (11)
restaurants and (c) certain of the assets and business of William C. Osborn
and/or his affiliates consisting of three (3) restaurants pursuant to the
Initial Asset Purchase Agreements on September 1, 1994.
Initial Asset Purchase
Agreements. The several Asset Purchase Agreements dated as of September 1,
1994 by and between (a) BKC and the Borrower, (b) Lawrence Jaro and/or his
affiliates and the Borrower, and (c) William C. Osborn and/or his affiliates
and the Borrower.
Intercompany
Management Agreement. The Intercompany Management Consulting Agreement dated
as of September 1, 1994 by and between the Borrower and Holdings.
Intercreditor
Agreement. The Intercreditor Agreement, dated as of September 1, 1994 (as
amended pursuant to a First Amendment to Intercreditor Agreement dated as of
November 30, 1994, a Second Amendment to Intercreditor Agreement dated as of
February 7, 1996 and a Third Amendment to Intercreditor Agreement dated as of
the Closing Date), among BKC, the Borrower and the Agent, as the same may be
amended, restated, supplemented or modified from time to time.
Interest Coverage
Ratio. As at any date of determination and with respect to the Borrower, the
ratio of (a) the sum of the EBITDA of the Borrower and its Subsidiaries for
the Reference Period ending on such date to (b) Consolidated Total Interest
Expense of the Borrower and its Subsidiaries for such Reference Period.
Interest Payment Date.
(a) As to any Base Rate Loan, the last day of the calendar quarter which
includes the Drawdown Date thereof; and (b) as to any Eurodollar Rate Loan in
respect of which the Interest Period is (i) 3 months or less, the last day of
such Interest Period and (ii) more than 3 months, the date that is 3 months
from the first day of such Interest Period and, in addition, the last day of
such Interest Period.
Interest Period. With
respect to each Revolving Credit Loan or all or any relevant portion of the
Term Loan or Acquisition Loan (a) initially, the period commencing on the
Drawdown Date of such Loan and ending on the last day of one of the periods
set forth below, as selected by the Borrower in a Loan Request (i) for any
Base Rate Loan, the last day of the calendar quarter; and (ii) for any
Eurodollar Rate Loan, 1, 2, 3, or 6 months; and (b) thereafter, each period
commencing on the last day of the next preceding Interest Period applicable to
such Revolving Credit Loan or all or such portion of the Term Loan or
Acquisition Loan and ending on the last day of one of the periods set forth
above, as selected by the Borrower in a Conversion Request; provided that all
of the foregoing provisions relating to Interest Periods are subject to the
following:
(i) if any Interest Period with respect to a Eurodollar Rate
Loan would otherwise end on a day that is not a Eurodollar Business
Day, that Interest Period shall be extended to the next succeeding
Eurodollar Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the immediately preceding
Eurodollar Business Day;
<PAGE>
-15-
(ii) if any Interest Period with respect to a Base Rate Loan
would end on a day that is not a Business Day, that Interest Period
shall end on the next succeeding Business Day;
(iii) if the Borrower shall fail to give notice as provided
in [section]2.7, the Borrower shall be deemed to have requested a
conversion of the affected Eurodollar Rate Loan to a Base Rate Loan
and the continuance of all Base Rate Loans as Base Rate Loans on the
last day of the then current Interest Period with respect thereto;
(iv) any Interest Period relating to any Eurodollar Rate
Loan that begins on the last Eurodollar Business Day of a calendar
month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall
end on the last Eurodollar Business Day of a calendar month; and
(v) any Interest Period relating to any Eurodollar Rate Loan
that would otherwise extend beyond the Revolving Credit Loan Maturity
Date (if comprising a Revolving Credit Loan), the Term Loan Maturity
Date (if comprising a Term Loan or portion thereof) or the
Acquisition Loan Maturity Date (if comprising an Acquisition Loan or
portion thereof) shall end on the Revolving Credit Loan Maturity
Date, the Term Loan Maturity Date or the Acquisition Loan Maturity
Date, as the case may be.
Investments. All expenditures made (other than Capital Expenditures
not incurred or made in connection with the acquisition and/or development of
restaurants) and all liabilities incurred (contingently or otherwise) for the
acquisition of stock or Indebtedness of, or for loans, advances, capital
contributions or transfers of property to, or in respect of any guaranties (or
other commitments as described under Indebtedness), or obligations of, any
Person. In determining the aggregate amount of Investments outstanding at any
particular time: (a) the amount of any Investment represented by a guaranty
shall be taken at not less than the principal amount of the obligations
guaranteed and still outstanding; (b) there shall be included as an Investment
all interest accrued with respect to Indebtedness constituting an Investment
unless and until such interest is paid; (c) there shall be deducted in respect
of each such Investment any amount received as a return of capital in cash
(but only by repurchase, redemption, retirement, repayment, liquidating
dividend or liquidating distribution); (d) there shall not be deducted in
respect of any Investment any amounts received as earnings on such Investment,
whether as dividends, interest or otherwise, except that accrued interest
included as provided in the foregoing clause (b) may be deducted when paid;
and (e) there shall not be deducted from or added to, as the case may be, the
aggregate amount of Investments any decrease or increase, as the case may be,
in the value thereof.
Investors. MCIT PLC, the Jordan Investors (as defined in the
Stockholders Agreement), the Management Stockholders (as defined in the
Stockholders Agreement) and the Executive and Advisors Stockholders (as
defined in the Stockholders Agreement).
Investor Subscription Agreement. The Jordan Investor Subscription
Agreement, dated as of September 1, 1994, by and among Holdings and the
Stockholders (as defined therein).
Jaro Loan Agreement. The Revolving Credit Agreement, dated as of
September 1, 1994, by and between Jaro Enterprises, Inc. and/or its affiliates
and the Borrower providing the loans to Jaro Enterprises, Inc. and/or its
affiliates of up to $700,000.
Jordan Affiliates. Leucadia Investors, Inc., John W. Jordan II,
David W. Zalaznick, Jonathan F. Boucher, John R. Lowden, Adam E. Max, A.
Richard Caputo, Jr., John M. Camp, Jordan/Zalaznick Capital Company, John M.
Camp Profit Sharing Plan, James E. Jordan, Jr. Profit Sharing Plan and Trust,
John W. Jordan Revocable Trust and Paul Rodzevick Profit Sharing Plan and
Trust, Paul R. Rodzevick, James E. Jordan, Thomas H. Quinn and JII Partners,
Inc.
Jordan Principal. Collectively, (a) each partner, executive or
employee of TJC, (b) any wholly-owned Subsidiary of any one (or jointly of
more than one of any) Person specified in clause (a), and (c) the spouse or
any immediate family member of any Person specified in clause (a) or any trust
solely for the benefit of any such Person or the spouse or any immediate
family member of such Person.
Leases. The several leases (a) dated on or prior to the Closing Date
between (i) the Borrower, AmeriKing Colorado, AmeriKing Tennessee, AmeriKing
Cincinnati or AmeriKing Virginia, as the case may be, and BKC, (ii) the
Borrower and the current landlords of the restaurants acquired from Lawrence
Jaro and/or his affiliates in the Initial Acquisition, (iii) the Borrower and
the current landlords of the restaurants acquired from William C. Osborn in
the Initial Acquisition, (iv) the Borrower and the current landlords of the
restaurants acquired from BNB if such real property is not owned by BNB, (v)
the Borrower and BNB as to those restaurants acquired from BNB for which BNB
and/or an affiliate of BNB is the owner of the real property, or such
successor in interest to BNB, (vi) AmeriKing Colorado and the current
landlords of the restaurants acquired in the AmeriKing Colorado Acquisition,
(vii) AmeriKing Tennessee and the current landlords of the restaurants
acquired in the AmeriKing Tennessee Acquisition, (viii) AmeriKing Cincinnati
and the current landlords of the restaurants to be
<PAGE>
-16-
acquired in the AmeriKing Cincinnati Acquisition, (ix) AmeriKing Virginia and
the current landlords of the restaurants to be acquired in the AmeriKing
Virginia Acquisition, (x) AmeriKing Virginia and AmeriKing Tennessee and FFCA,
all in form and substance acceptable to the Agent and (xi) AmeriKing Virginia
and certain of the Virginia Sellers of the restaurants acquired in connection
with the AmeriKing Virginia Acquisition; (xii) AmeriKing Michigan and the
current landlords of the restaurants acquired in the AmeriKing Michigan
Acquisition; and (xiii) Holland and the current landlords of the restaurants
acquired in the AmeriKing Michigan Acquisition; (b) dated after the Closing
Date between the Borrower and the owner of the real property which is the
subject of such lease, so long as the terms and conditions of such leases are
in form and substance substantially similar to those leases entered into by
the Borrower on or prior to the Closing Date; (c) dated after the Closing Date
between any Restricted Subsidiary and the owner of the real property which is
the subject of such lease, so long as the terms and conditions of such leases
are in form and substance substantially similar to those leases entered into
by any other Restricted Subsidiary on or prior to the Closing Date; and (d)
dated after the Closing Date between any Unrestricted Subsidiary and the owner
of the real property which is the subject of such lease, so long as the terms
and conditions of such leases are in form and substance substantially similar
to those leases entered into by any other Unrestricted Subsidiary on or prior
to the Closing Date.
Letter of Credit. See [section]6.1(a) hereof.
Letter of Credit Application. See [section]6.1.1 hereof.
Letter of Credit Fee. See [section]6.6 hereof.
Letter of Credit Participation. See [section]6.1.4 hereof.
Leverage Ratio. As at any date of determination, the ratio of (a)
Total Funded Indebtedness of the Borrower and its Subsidiaries outstanding on
such date less cash and Cash Equivalents of the Borrower and its Subsidiaries
on such date to (b) the EBITDA of the Borrower and its Subsidiaries for any
period of four (4) consecutive fiscal quarters (treated as a single accounting
period) ended on such date provided, when calculating the Leverage Ratio for
any period in which a Permitted Acquisition occurred, the calculation of the
Leverage Ratio shall be made on a Pro Forma Basis.
Loan Documents. This Credit Agreement, the Notes, the Letter of
Credit Applications, the Letters of Credit, the Intercreditor Agreement and
the Security Documents.
Loan Request. See [section]2.6 hereof.
Loans. The Revolving Credit Loans, the Term Loans and the
Acquisition Loan.
Majority Banks. As of any date, the Banks holding at least sixty
percent (60%) of the outstanding principal amount of the Notes and the
unfunded portion of the Commitments and the Acquisition Commitments on such
date, and if no such principal is outstanding, the Banks whose aggregate
Commitments and Acquisition Commitments constitute at least sixty percent
(60%) of the Total Commitment plus the Total Acquisition Commitment.
Management Agreement. The Management Agreement as of September 1,
1994, by and among TJC Management Corp., Holdings and the Borrower, as amended
by Amendment No. 1 to Management Agreement dated February 7, 1996.
Management Subscription Agreement. The Management Subscription
Agreement, dated as of September 1, 1994, between Holdings and the
Stockholders (as defined therein).
Maximum Drawing Amount. The maximum aggregate amount that the
beneficiaries may at any time draw under outstanding Letters of Credit, as
such aggregate amount may be reduced from time to time pursuant to the terms
of the Letters of Credit.
Mortgage Amendment. The First Amendment to Leasehold Mortgage,
dated on or prior to the Closing Date, between AmeriKing Virginia and the
Agent.
Mortgaged Property. Any Real Estate which is subject to any Mortgage.
The Mortgaged Properties on the Closing Date shall include those properties
listed on Schedule 1A attached hereto.
<PAGE>
-17-
Mortgages. The several mortgages and deeds of trust, dated (a) as of
February 7, 1996, as amended by the Mortgage Amendment; (b) on or prior tothe
Closing Date; or (c) entered into after the Closing Date pursuant to
[section]10.16, from the Borrower and its Restricted Subsidiaries to the Agent
with respect to the leasehold interests of the Borrower and its Restricted
Subsidiaries in the Real Estate, in substantially the form of Exhibit K
attached hereto.
Multiemployer Plan. Any multiemployer plan within the meaning of
[section]3(37) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate.
Non-Affected Bank(s). As at any date of determination, those Banks
which are not Affected Banks.
Northland Asset Purchase Agreement. The asset Purchase Agreement
dated as of May ___, 1996 by and among Northland Bee-Kay, Inc., Stuart P. Ray,
Peter D. Van Dyke, David E. Bustraan, Theresa M. Wilkerson, David R. Reinhard,
James A. MacDonald, Steven J. Johnson and AmeriKing Michigan, in the form
delivered to the Agent on or prior to the Closing Date.
Notes. The Term Notes, the Acquisition Notes and the Revolving
Credit Notes.
Obligations. All indebtedness, obligations and liabilities of any of
Holdings, the Borrower and their Subsidiaries to any of the Banks and the
Agent, individually or collectively, existing on the date of this Credit
Agreement or arising thereafter, direct or indirect, joint or several,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
secured or unsecured, arising by contract, operation of law or otherwise,
arising or incurred under this Credit Agreement or any of the other Loan
Documents or in respect of any of the Loans made or Reimbursement Obligations
incurred or any of the Notes, Letter of Credit Application, Letter of Credit,
or arising or incurred in connection with any interest rate protection
arrangements contemplated by [section]10.15 or any documents, agreements or
instruments executed in connection therewith, or other instruments at any time
evidencing any thereof.
Option. The option of the borrower or its assignee or designee to
purchase certain real property from BNB pursuant to [section]19 of the Asset
Purchase Agreement.
outstanding. With respect to the Loans, the aggregate unpaid
principal thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by
[section]4002 of ERISA and any successor entity or entities having similar
responsibilities.
Perfection Certificate. Collectively, (a) the Second Amended and
Restated Perfection Certificates, as defined in the Security Agreements dated
prior to the Closing Date and (b) the Perfection Certificates, as defined in
the Security Agreement dated on the Closing Date.
Permitted Acquisition Closing Date. The first date on which the
conditions set forth in the relevant Permitted Acquisition Purchase Agreement
has been satisfied and such Permitted Financed Acquisition has occurred.
Permitted Acquisition Purchase Agreement. Any of the asset and/or
stock purchase agreements dated on or prior to January __, 1999 between the
Borrower and the seller of such assets, each such agreement to be in form and
substance satisfactory to the Agent and the Banks.
Permitted Financed Acquisition. The acquisition(s) by the Borrower of
certain of the assets and/or stock of a Person, which assets being acquired
consist of, among other items, BKC Restaurants, pursuant to the terms of a
Permitted Acquisition Purchase Agreement and which acquisition is (a) financed
in whole or in part by an Advance and (b) which is a Permitted Acquisition.
Permitted Acquisitions. See [section]11.5.1 hereof.
Permitted Liens. Liens, security interests and other encumbrances
permitted by [section]11.2.
Person. Any individual, corporation, partnership, trust,
unincorporated association, business, or other legal entity, and any
government or any governmental agency or political subdivision thereof.
<PAGE>
-18-
Preferred Stock. As applied to the capital stock of any Person, means
the capital stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of capital stock of any other class of such Person.
Pro Forma Basis. Following a Permitted Acquisition other than
Permitted Acquisitions in connection with the development of restaurants, the
Total Funded Indebtedness (or, in the case of Consolidated Total Interest
Expense, all Indebtedness) and EBITDA for the fiscal quarter in which such
Permitted Acquisition occurred and each of the three fiscal quarters
immediately following such Permitted Acquisition being calculated with
reference to the audited historical financial results of the Person so
acquired and the Borrower and its Subsidiaries for the applicable Test Period
after giving effect on a pro forma basis to such Permitted Acquisition and
assuming that such Permitted Acquisition had been consummated at the beginning
of such Test Period in the manner described in (i), (ii) and (iii) below:
(i) all Indebtedness (whether under this Credit Agreement or
otherwise) and any other balance sheet adjustments incurred or made
in connection with the Permitted Acquisition shall be deemed to have
been incurred or made on the first day of the Test Period, and all
Indebtedness of the Person acquired or to be acquired in such
Permitted Acquisition which was or will have been repaid in
connection with the consummation of the Permitted Acquisition shall
be deemed to have been repaid concurrently with the incurrence of the
Indebtedness incurred in connection with the Permitted Acquisition;
(ii) all Indebtedness assumed to have been incurred pursuant
to the preceding clause (i) shall be deemed to have borne interest at
the sum of (a) the arithmetic mean of (x) the Eurodollar Rate for
Eurodollar Rate Loans having an Interest Period of one month in
effect on the first day of the Test Period and (y) the Eurodollar
Rate for Eurodollar Rate Loans having an Interest Period of one month
in effect on the last day of the Test Period plus (b) the Applicable
Margin for Revolving Credit Loans then in effect (after giving effect
to the Permitted Acquisition on a Pro Forma Basis); and
(iii) other reasonable cost savings, expenses and other
income statement or operating statement adjustments which are
attributable to the change in ownership and/or management resulting
from such Permitted Acquisition as may be approved by the Agent in
writing (which approval shall not be unreasonably withheld) shall be
deemed to have been realized on the first day of the Test Period.
Pro Source Transaction. [Insert details of ProSource sale/leaseback
transaction for equipment].
Rate Adjustment Period. See the definition of Applicable Margin.
Real Estate. All real property at any time owned or leased (as
lessee or sublessee) by the Borrower or any of its Subsidiaries.
Record. The grid attached to a Note, or the continuation of such
grid, or any other similar record, including computer records, maintained by
any Bank with respect to any Loan referred to in such Note.
Reference Bank. FNBB.
Reference Period. The period of four (4) consecutive fiscal quarters
(or such shorter period of one, two or three full consecutive fiscal quarters
as has elapsed since the Closing Date).
Reimbursement Obligation. The Borrower's obligation to reimburse
the Agent and the Banks on account of any drawing under any Letter of Credit
as provided in [section]6.2.
Restaurant Cash Flow. For each restaurant, the EBITDA of such
restaurant for the period of the immediately preceding twelve (12) months
plus, to the extent deducted in calculating EBITDA, the aggregate amount of
allocated general and administrative expenses not directly associated with
such restaurant during such period in accordance with past practices of the
Borrower.
Restricted Payment. In relation to the Borrower and its
Subsidiaries, (a) any Distribution or (b) any payment or transfer of property
by the Borrower or its Subsidiaries to Holdings or to any other Affiliate of
the Borrower or Holdings.
Restricted Subsidiary. Any Subsidiary of the Borrower which is not
an Unrestricted Subsidiary.
<PAGE>
-19-
Revolving Credit Loan Maturity Date. January __, 2003.
Revolving Credit Loans. Revolving credit loans made or to be made
by the Banks to the Borrower pursuant to [section]2.
Revolving Credit Note Record. A Record with respect to a Revolving
Credit Note.
Revolving Credit Notes. See [section]2.4 hereof.
Second Security Documents Amendment. The Second Amendment of Security
Documents Agreement dated as of February 7, 1996, amending certain provisions
of certain of the Security Documents among the parties to each of the Security
Documents.
Security Agreements. Collectively, (a) the Security Agreement, dated
as of September 1, 1994, between the Borrower and the Agent, substantially in
the form of Exhibit H-1 hereto, as amended by the Security Documents
Amendment, the Second Security Documents Amendment and the Third Security
Documents Amendment, and as the same may be further amended, restated,
supplemented or modified from time to time; (b) the Security Agreement, dated
as of February 7, 1996, among AmeriKing Cincinnati, AmeriKing Virginia and the
Agent, substantially in the form of Exhibit H-2 hereto, as amended by the
Third Security Documents Amendment and as the same may be amended, restated,
supplemented or modified from time to time; and (c) the Security Agreement,
dated or to be dated on or prior to the Closing Date, among AmeriKing
Michigan, Holland and the Agent, substantially in the form of Exhibit H-2
hereto, as the same may be amended, restated supplemented or modified from
time to time.
Security Documents. The Guarantees, the Security Agreements, the
Borrower Stock Pledge Agreement, the Subsidiary Stock Pledge Agreements, the
Mortgages and the Stock Pledge Agreement.
Security Documents Amendment. The First Amendment of Security
Documents Agreement dated as of November 30, 1994, amending certain provisions
of the Security Documents between the parties to each of the Security
Documents.
Stock Pledge Agreement. The Stock Pledge Agreement, dated as of
September 1, 1994, between Holdings and the Agent, substantially in the form
of Exhibit I hereto, as amended by the Security Documents Amendment, the
Second Security Documents Amendment and the Third Security Documents Amendment
and as the same may be further amended, restated, supplemented or modified
from time to time.
Stockholders Agreement. The Stockholders Agreement, dated as of
September 1, 1994, among the Borrower, FNBB, BancBoston Investments, Inc., the
Investors and Holdings, as amended by Consent and Amendment No. 1 to the
Stockholders Agreement dated as of November 30, 1994, Consent and Amendment
No. 2 to the Stockholders Agreement as of February 7, 1996 and Consent and
Amendment No.
3 to the Stockholders Agreement date on or prior to the Closing Date.
Subsidiary. Any corporation, association, trust, or other business
entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes) of the outstanding Voting Stock.
Subsidiary Stock Pledge Agreements. Collectively, (a) the Stock
Pledge Agreement, dated as of February 7, 1996, between AmeriKing Tennessee
and the Agent, as amended by the Third Security Documents Amendment and as the
same may be amended, restated, supplemented or modified from time to time and
(b) the Stock Pledge Agreement dated or to be dated on or prior to the Closing
Date, between AmeriKing Michigan and the Agent, as the same may be amended,
restated, supplemented or modified from time to time.
Survey. In relation to each Mortgaged Property, an instrument survey
of such Mortgaged Property which shall show the location of all buildings,
structures, easements and utility lines on such Mortgaged Property, shall be
sufficient to remove the survey exception from the Title Policy, shall show
that all buildings and structures are within the lot lines of such Mortgaged
Property, shall not show any material encroachments by others, shall show the
zoning district or districts in which such Mortgaged Property is located in a
flood hazard district as established by the Federal Emergency Management
Agency or any successor agency or is located in any flood plain, flood hazard
or wetland protection district established under federal, state or local law.
Surveyor Certificate. In relation to each Mortgaged Property for
which a Survey has been conducted, a certificate executed by the surveyor who
prepared such Survey dated as of a recent date and containing such information
relating to such Mortgaged Property as the Agent or the Title Insurance
Company may require, such certificate to be reasonably satisfactory to the
Agent in form and substance.
<PAGE>
-20-
Tax Sharing Agreement. The Amended and Restated Tax Sharing
Agreement, dated as of February 7, 1996 and amended by Amendment No. 1 to the
Tax Sharing Agreement date on or prior to the Closing Date, each by and among
Holdings, the Borrower and their Subsidiaries, which shall be in form and
substance satisfactory to the Agent.
Term Loan. The term loan made or to be made by the Banks to the
Borrower on the Closing Date in the aggregate principal amount of
$75,000,000.00 pursuant to [section]4.1.1.
Term Loan Maturity Date. January ___, 2002.
Term Note Record. A Record with respect to a Term Note.
Term Notes. See [section]4.2.1 hereof.
Test Period. The period of all fiscal quarters (and any portion of a
fiscal quarter) being tested in any covenant calculation period prior to the
date of such Permitted Acquisition as set forth in the definition of Pro Forma
Basis.
Third Security Documents Amendment. The Third Amendment of Security
Documents Agreement dated or to be dated on or prior to the Closing Date,
amending certain provisions of the Security Documents among the parties to
each of the Security Documents being amended, and in form and substance
satisfactory to the Banks and the Agent.
Title Insurance Company. Lawyers Title Insurance Company.
Title Policy. In relation to each Mortgaged Property, an ALTA
standard form title insurance policy issued by the Title Insurance Company
(with such reinsurance or co-insurance as the Agent may reasonably require,
any such reinsurance to be with direct access endorsements) in such amount as
may be reasonably determined by the Agent insuring the priority of the
Mortgage of such Mortgaged Property and that the Borrower or one of its
Subsidiaries holds marketable leasehold title to such Mortgaged Property,
subject only to the encumbrances permitted by such Mortgage and which shall
not contain exceptions for mechanics liens or persons in occupancy, shall not
insure over any matter except to the extent that any such affirmative
insurance is acceptable to the Agent in its reasonable discretion, and shall
contain such endorsements and affirmative insurance as the Agent in its
discretion may reasonably require, if available in the applicable
jurisdiction, including but not limited to (a) comprehensive endorsement, (b)
variable rate of interest endorsement, (c) usury endorsement, (d) revolving
credit endorsement, (e) tie-in endorsement, (f) doing business endorsement and
(g) ALTA form 3.1 zoning endorsement.
TJC. The Jordan Company, a New York general partnership.
Total Acquisition Commitment. The sum of the Acquisition Commitments
of the Banks, as in effect from time to time.
Total Commitment. The sum of the Commitments of the Banks, as in
effect from time to time.
Total Debt Service. For any period with respect to the Borrower and
its Subsidiaries, all scheduled mandatory payments of principal on
Indebtedness of the Borrower and its Subsidiaries (other than Indebtedness
relating to Franchise Agreements, leases, licenses and other agreements with
BKC) made or required to be made in that period plus the Consolidated Total
Interest Expense of the Borrower and its Subsidiaries for that period.
Total Funded Indebtedness. All Indebtedness of the Borrower and
its Subsidiaries for borrowed money, purchase money Indebtedness and with
respect to Capitalized Leases, determined on a consolidated basis in
accordance with generally accepted accounting principles, provided, for
purposes of calculating Indebtedness of the Borrower under the Revolving
Credit Loans for any period, the amount shall be the daily average outstanding
amount of Revolving Credit Loans for such period.
Type. As to any Revolving Credit Loan or all or any portion of the
Term Loan or Acquisition Loan, its nature as a Base Rate Loan or a Eurodollar
Rate Loan.
Uniform Customs. With respect to any Letter of Credit, the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500 or any successor version thereto
adopted by the Agent in the ordinary course of its business as a letter of
credit issuer and in effect at the time of issuance of such Letter of Credit.
<PAGE>
-21-
Unpaid Reimbursement Obligation. Any Reimbursement Obligation for
which the Borrower does not reimburse the Agent and the Banks on the date
specified in, and in accordance with, [section]6.2.
Unrestricted Subsidiary. Each of (a) AmeriKing Colorado (provided it
complies with clauses (ii) through (v) hereof); (b) AmeriKing Tennessee
(provided it complies with clauses (ii) through (v) hereof), unless it is
required to become a Restricted Subsidiary pursuant to [section]10.18; and (c)
any other Subsidiary of the Borrower as to which (i) the Board of Directors of
the Borrower has designated such Subsidiary as an Unrestricted Subsidiary at
or prior to the time such Subsidiary is formed or acquired by the Borrower, as
the case may be, and the Borrower has provided written notice to the Agent in
reasonable detail of such designation within five (5) Business Days after
designation thereof; (ii) the Borrower owns not less than eighty percent (80%)
of the capital stock of such Subsidiary and eighty percent (80%) of the Voting
Stock of such Subsidiary; (iii) such Subsidiary has become a party to the Tax
Sharing Agreement; (iv) all of such Subsidiary's liabilities are non-recourse
as to Holdings, the Borrower or any Restricted Subsidiary except for (1) the
guaranty obligation of the Borrower and Holdings of certain obligations of
AmeriKing Colorado to BKC pursuant to a certain Guarantee, Indemnification and
Acknowledgment dated September 12, 1995; (2) the guaranty obligation of the
Borrower of certain obligations of AmeriKing Colorado to DMW, Inc. and WSG,
Inc. pursuant to the several Lease Assignment and Assumption Agreements dated
as of September 12, 1995; (3) the guaranty obligation of the Borrower of
certain obligations of AmeriKing Tennessee pursuant to the FFCA Guaranty; and
(4) guaranty obligations of the Borrower and Holdings of the obligations of
AmeriKing Tennessee to BKC arising out of any Franchise Agreement or Lease
between AmeriKing Tennessee and BKC; and (v) no Jordan Principal owns capital
stock of such Subsidiary (except indirectly through Holdings).
Virginia Sellers. C&N Dining, Inc. and its Affiliates (as defined in
the AmeriKing/Virginia Asset Purchase Agreement).
Voting Bank. See [section]17.12 hereof.
Voting Stock. Stock or similar equity interest of a Person pursuant
to which the holders thereof have, at the time of determination, the general
voting power under ordinary circumstances to vote for the election of
directors (or persons performing similar functions), managers, trustees or
general partners of such Person (irrespective of whether or not at the time
any other class or classes will have or might have voting power by reason of
the happening of any contingency).
Rules of Interpretation.
(a) A reference to any document or agreement shall include
such document or agreement as amended, modified or supplemented from
time to time in accordance with its terms and the terms of this
Credit Agreement.
(b) The singular includes the plural and the plural
includes the singular.
(c) A reference to any law includes any amendment or
modification to such law.
(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms not otherwise defined herein have the
meanings assigned to them by generally accepted accounting principles
applied on a consistent basis by the accounting entity to which they
refer.
(f) The words "include", "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by
generally accepted accounting principles, which terms are defined in
the Uniform Commercial Code as in effect in the Commonwealth of
Massachusetts, have the meanings assigned to them therein, with the
term "instrument" being that defined under Article 9 of the Uniform
Commercial Code.
(h) Reference to a particular "[section]" refers to that
section of this Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of
like import shall refer to this Credit Agreement as a whole and not
to any particular section or subdivision of this Credit Agreement.
THE REVOLVING CREDIT FACILITY.
--- --------- ------ --------
<PAGE>
-22-
Commitment to Lend.
---------- -- ----
Subject to the terms and conditions set forth in this Credit
Agreement, each of the Banks severally agrees to lend to the Borrower and the
Borrower may borrow, repay, and reborrow from time to time between the Closing
Date and the Revolving Credit Loan Maturity Date upon notice by the Borrower
to the Agent given in accordance with [section]2.6, such sums as are requested
by the Borrower up to a maximum aggregate amount outstanding (after giving
effect to all amounts requested) at any one time equal to such Bank's
Commitment minus such Bank's Commitment Percentage of the sum of the Maximum
Drawing Amount and all Unpaid Reimbursement Obligations, provided that the sum
of the outstanding amount of the Revolving Credit Loans (after giving effect
to all amounts requested) plus the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations shall not at any time exceed the Total Commitment.
The Revolving Credit Loans shall be made pro rata in accordance with each
Bank's Commitment Percentage. Each request for a Revolving Credit Loan
hereunder shall constitute a representation and warranty by the Borrower that
the conditions set forth in [section]13 and [section]14.1 through 14.4, in the
case of the initial Revolving Credit Loans to be made on the Closing Date, and
[section]14.1 through 14.4, in the case of all other Revolving Credit Loans,
have been satisfied on the date of such request.
Commitment Fee.
---------- ---
The Borrower agrees to pay to the Agent for the accounts of the Banks
in accordance with their respective Commitment Percentages a commitment fee
calculated at the rate of the Commitment Fee Rate per annum on the average
daily amount during each calendar quarter or portion thereof from the Closing
Date to the Revolving Credit Loan Maturity Date by which the Total Commitment
minus the sum of the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations exceeds the outstanding amount of Revolving Credit Loans during
such calendar quarter. The commitment fee shall be payable quarterly in
arrears on the first day of each calendar quarter for the immediately
preceding calendar quarter commencing on the first such date following the
date hereof, with a final payment on the Revolving Credit Maturity Date or any
earlier date on which the Commitments shall terminate.
Reduction of Total Commitment.
--------- -- ----- ----------
The Borrower shall have the right at any time and from time to time
upon three (3) Business Days prior written notice to the Agent to reduce by
[$500,000] or an integral multiple of [$100,000] in excess thereof the
unborrowed portion of the Total Commitment or terminate entirely the Total
Commitment, whereupon the Commitments of the Banks shall be reduced pro rata
in accordance with their respective Commitment Percentages of the amount
specified in such notice or, as the case may be, terminated. Promptly after
receiving any notice of the Borrower delivered pursuant to this [section]2.3,
the Agent will notify the Banks of the substance thereof. Upon the effective
date of any such reduction or termination, the Borrower shall pay to the Agent
for the respective accounts of the Banks the full amount of any commitment fee
then accrued on the amount of the reduction. No reduction or termination of
the Commitments may be reinstated.
The Revolving Credit Notes.
--- --------- ------ -----
The Revolving Credit Loans shall be evidenced by separate amended and
restated promissory notes of the Borrower in substantially the form of Exhibit
A hereto (each a "Revolving Credit Note"), dated as of the Closing Date and
completed with appropriate insertions. One Revolving Credit Note shall be
payable to the order of each Bank in a principal amount equal to such Bank's
Commitment or, if less, the outstanding amount of all Revolving Credit Loans
made by such Bank, plus interest accrued thereon, as set forth below. The
Borrower irrevocably authorizes each Bank to make or cause to be made, at or
about the time of the Drawdown Date of any Revolving Credit Loan or at the
time of receipt of any payment of principal on such Bank's Revolving Credit
Note, an appropriate notation on such Bank's Revolving Credit Note Record
reflecting the making of such Revolving Credit Loan or (as the case may be)
the receipt of such payment. The outstanding amount of the Revolving Credit
Loans set forth on such Bank's Revolving Credit Note Record shall be prima
facie evidence of the principal amount thereof owing and unpaid to such Bank,
but the failure to record, or any error in so recording, any such amount on
such Bank's Revolving Credit Note Record shall not limit or otherwise affect
the obligations of the Borrower hereunder or under any Revolving Credit Note
to make payments of principal of or interest on any Revolving Credit Note when
due.
Interest on Revolving Credit Loans.
-------- -- --------- ------ -----
Except as otherwise provided in [section]7.11,
(a) each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day
of the Interest Period with respect thereto at the rate per annum
equal to the Base Rate plus the Applicable Margin.
<PAGE>
-23-
(b) Each Eurodollar Rate Loan shall bear interest for the
period commencing with the Drawdown Date thereof and ending on the
last day of the Interest Period with respect thereto at the rate per
annum equal to the Eurodollar Rate for such Interest Period plus the
Applicable Margin.
(c) The Borrower promises to pay interest on each Revolving
Credit Loan in arrears on each Interest Payment Date with respect
thereto.
Requests for Revolving Credit Loans.
-------- --- --------- ------ -----
The Borrower shall give to the Agent written notice in the form of
Exhibit B hereto (or telephonic notice confirmed in a writing in the form of
Exhibit B hereto) of each Revolving Credit Loan requested hereunder (a "Loan
Request") no later than 1:00 p.m. (Boston time) (a) one (1) Business Day prior
to the proposed Drawdown Date of any Base Rate Loan and (b) three (3)
Eurodollar Business Days prior to the proposed Drawdown Date of any Eurodollar
Rate Loan, provided, however, the Borrower shall not request any Eurodollar
Rate Loans with an Interest Period of more than one month until the date which
is sixty (60) Business Days following the Closing Date. Each such notice shall
specify (i) the principal amount of the Revolving Credit Loan requested, (ii)
the proposed Drawdown Date of such Revolving Credit Loan, (iii) the Interest
Period for such Revolving Credit Loan and (iv) the Type of such Revolving
Credit Loan. Promptly upon receipt of any such notice, the Agent shall notify
each of the Banks thereof. Each Loan Request shall be irrevocable and binding
on the Borrower and shall obligate the Borrower to accept the Revolving Credit
Loan requested from the Banks on the proposed Drawdown Date. Each Loan Request
shall be in a minimum aggregate amount of [$500,000] or a larger integral
multiple of [$100,000].
Conversion Options.
---------- -------
Conversion to Different Type of Revolving Credit Loan.
---------- -- --------- ---- -- --------- ------ ----
The Borrower may elect from time to time to convert any
outstanding Revolving Credit Loan to a Revolving Credit Loan of
another Type, provided that (a) with respect to any such conversion
of a Revolving Credit Loan to a Base Rate Loan, the Borrower shall
give the Agent at least one (1) Business Day's prior written notice
of such election; (b) with respect to any such conversion of a Base
Rate Loan to a Eurodollar Rate Loan, the Borrower shall give the
Agent at least three (3) Eurodollar Business Days prior written
notice of such election; (c) with respect to any such conversion of a
Eurodollar Rate Loan into a Base Rate Loan, such conversion shall
only be made on the last day of the Interest Period with respect
thereto; (d) no Revolving Credit Loan may be converted into a
Eurodollar Rate Loan when any Default or Event of Default has
occurred and is continuing; (e) no Revolving Credit Loan may be
converted into a Eurodollar Rate Loan with an Interest Period of more
than thirty (30) days until the date which is sixty (60) Business
Days after the Closing Date; and (f) no more than five (5) Eurodollar
Rate Loans having different Interest Periods may be outstanding at
any time. On the date on which such conversion is being made each
Bank shall take such action as is necessary to transfer its
Commitment Percentage of such Revolving Credit Loans to its Domestic
Lending Office or its Eurodollar Lending Office, as the case may be.
All or any part of outstanding Revolving Credit Loans of any Type may
be converted into a Revolving Credit Loan of another Type as provided
herein, provided that any partial conversion shall be in an aggregate
principal amount of [$500,000] or a larger integral multiple of
[$100,000] in excess thereof. Each Conversion Request relating to the
conversion of a Base Rate Loan to a Eurodollar Rate Loan shall be
irrevocable by the Borrower.
Continuation of Type of Revolving Credit Loan.
------------ -- ---- -- --------- ------ ----
Any Revolving Credit Loan of any Type may be continued as a
Revolving Credit Loan of the same Type upon the expiration of an
Interest Period with respect thereto by compliance by the Borrower
with the notice provisions contained in [section]2.7.1; provided that
no Eurodollar Rate Loan may be continued as such when any Default or
Event of Default has occurred and is continuing, but shall be
automatically converted to a Base Rate Loan on the last day of the
first Interest Period relating thereto ending during the continuance
of any Default or Event of Default of which officers of the Agent
active upon the Borrower's account have actual knowledge. In the
event that the Borrower fails to provide any such notice with respect
to the continuation of any Eurodollar Rate Loan as such, then such
Eurodollar Rate Loan shall be automatically converted to a Base Rate
Loan on the last day of the first Interest Period relating thereto.
The Agent shall notify the Banks promptly when any such automatic
conversion contemplated by this [section]2.7 is scheduled to occur.
Eurodollar Rate Loans.
---------- ---- -----
<PAGE>
-24-
Any conversion to or from Eurodollar Rate Loans shall be in
such amounts and be made pursuant to such elections so that, after
giving effect thereto, the aggregate principal amount of all
Eurodollar Rate Loans having the same Interest Period shall not be
less than [$500,000] or a larger integral multiple of [$100,000] in
excess thereof.
Funds for Revolving Credit Loan.
----- --- --------- ------ ----
Funding Procedures.
------- ----------
Not later than 1:00 p.m. (Boston time) on the proposed
Drawdown Date of any Revolving Credit Loans, each of the Banks will
make available to the Agent, at the Agent's Head Office, in
immediately available funds, the amount of such Bank's Commitment
Percentage of the amount of the requested Revolving Credit Loans.
Upon receipt from each Bank of such amount, and upon receipt of the
documents required by [section][section]13 and 14 and the
satisfaction of the other conditions set forth therein, to the extent
applicable, the Agent will make available to the Borrower the
aggregate amount of such Revolving Credit Loans made available to the
Agent by the Banks. The failure or refusal of any Bank to make
available to the Agent at the aforesaid time and place on any
Drawdown Date the amount of its Commitment Percentage of the
requested Revolving Credit Loans shall not relieve any other Bank
from its several obligation hereunder to make available to the Agent
the amount of such other Bank's Commitment Percentage of any
requested Revolving Credit Loans.
Advances by Agent.
-------- -- -----
The Agent may, unless notified to the contrary by any Bank
prior to a Drawdown Date, assume that such Bank has made available to
the Agent on such Drawdown Date the amount of such Bank's Commitment
Percentage of the Revolving Credit Loans to be made on such Drawdown
Date, and the Agent may (but it shall not be required to), in
reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Bank makes available to the Agent such
amount on a date after such Drawdown Date, such Bank shall pay to the
Agent on demand an amount equal to the product of (a) the average
computed for the period referred to in clause (c) below, of the
weighted average interest rate paid by the Agent for federal funds
acquired by the Agent during each day included in such period, times
(b) the amount of such Bank's Commitment Percentage of such Revolving
Credit Loans, times (c) a fraction, the numerator of which is the
number of days that elapse from and including such Drawdown Date to
the date on which the amount of such Bank's Commitment Percentage of
such Revolving Credit Loans shall become immediately available to the
Agent, and the denominator of which is 365. A statement of the Agent
submitted to such Bank with respect to any amounts owing under this
paragraph shall be prima facie evidence of the amount due and owing
to the Agent by such Bank. If the amount of such Bank's Commitment
Percentage of such Revolving Credit Loans is not made available to
the Agent by such Bank within three (3) Business Days following such
Drawdown Date, the Agent shall be entitled to recover such amount
from the Borrower on demand, with interest thereon at the rate per
annum applicable to the Revolving Credit Loans made on such Drawdown
Date.
REPAYMENT OF THE REVOLVING CREDIT LOANS.
--------- -- --- --------- ------ -----
Maturity.
--------
The Borrower promises to pay on the Revolving Credit Loan Maturity
Date, and there shall become absolutely due and payable on the Revolving
Credit Loan Maturity Date, all of the Revolving Credit Loans outstanding on
such date, together with any and all accrued and unpaid interest thereon.
Mandatory Repayments of Revolving Credit Loans.
--------- ---------- -- --------- ------ -----
If at any time the sum of the outstanding amount of the Revolving
Credit Loans, the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations exceeds the Total Commitment then the Borrower shall immediately
pay the amount of such excess to the Agent for the respective accounts of the
Banks for application: first, to any Unpaid Reimbursement Obligations; second,
to the Revolving Credit Loans; and third, to provide to the Agent cash
collateral for Reimbursement Obligations as contemplated by [section]6.2(b)
and (c). Each payment of any Unpaid Reimbursement Obligations or prepayment of
Revolving Credit Loans shall be allocated among the Banks, in proportion, as
nearly as practicable, to each Reimbursement Obligation or (as the case may
be) the respective unpaid principal amount of each Bank's Revolving Credit
Note, with adjustments to the extent practicable to equalize any prior
payments or repayments not exactly in proportion.
Optional Repayments of Revolving Credit Loans.
-------- ---------- -- --------- ------ -----
<PAGE>
-25-
The Borrower shall have the right, at its election, to repay the
outstanding amount of the Revolving Credit Loans, as a whole or in part, at
any time without penalty or premium, provided that any full or partial
prepayment of the outstanding amount of any Eurodollar Rate Loans pursuant to
this [section]3.3 may be made only on the last day of the Interest Period
relating thereto, or, if such prepayment is made prior to the last day of the
Interest Period relating thereto, the Borrower pays any costs associated with
such prepayment as more fully described in [section]7.10. The Borrower shall
give the Agent, no later than 11:00 a.m. (Boston time), at least one (1)
Business Day prior written notice of any proposed prepayment pursuant to this
[section]3.3 of Base Rate Loans, and three (3) Eurodollar Business Days notice
of any proposed prepayment pursuant to this [section]3.3 of Eurodollar Rate
Loans, in each case specifying the proposed date of prepayment of Revolving
Credit Loans and the principal amount to be prepaid. Each such partial
prepayment of the Revolving Credit Loans shall be in an integral multiple of
[$100,000], shall be accompanied by the payment of accrued interest on the
principal prepaid to the date of prepayment and shall be applied, in the
absence of instruction by the Borrower, first to the principal of Base Rate
Loans and then to the principal of Eurodollar Rate Loans. Each partial
prepayment shall be allocated among the Banks, in proportion, as nearly as
practicable, to the respective unpaid principal amount of each Bank's
Revolving Credit Note, with adjustments to the extent practicable to equalize
any prior repayments not exactly in proportion.
THE TERM LOAN.
--- ---- ----
Commitment to Lend.
---------- -- ----
Subject to the terms and conditions set forth in this Credit
Agreement, each Bank severally agrees to lend to the Borrower on the Closing
Date the amount of its Commitment Percentage of the principal amount of
$75,000,000.
The Term Notes.
--- ---- -----
The Term Loan shall be evidenced by separate amended and restated
promissory notes of the Borrower in substantially the form of Exhibit C hereto
(each a "Term Note"), dated the Closing Date and completed with appropriate
insertions. One Term Note shall be payable to the order of each Bank in a
principal amount equal to such Bank's Commitment Percentage of the Term Loan
and representing the obligation of the Borrower to pay to such Bank such
principal amount or, if less, the outstanding amount of such Bank's Commitment
Percentage of the Term Loan, plus interest accrued thereon, as set forth
below. The Borrower irrevocably authorizes each Bank to make or cause to be
made a notation on such Bank's Term Note Record reflecting the original
principal amount of such Bank's Commitment Percentage of the Term Loan and, at
or about the time of such Bank's receipt of any principal payment on such
Bank's Term Note, an appropriate notation on such Bank's Term Note Record
reflecting such payment. The aggregate unpaid amount set forth on such Bank's
Term Note Record shall be prima facie evidence of the principal amount thereof
owing and unpaid to such Bank, but the failure to record, or any error in so
recording, any such amount on such Bank's Term Note Record shall not affect
the obligations of the Borrower hereunder or under any Term Note to make
payments of principal of and interest on any Term Note when due.
Mandatory Payments of Principal of Term Loan.
--------- -------- -- --------- -- ---- ----
Amortization.
------------
The Borrower promises to pay to the Agent for the account of
the Banks the principal amount of the Term Loan in twenty-two (22)
consecutive quarterly payments, payable on the last Business Day of
each calendar quarter ending within any period set forth below in the
amount set forth opposite such period, commencing on September 30,
1996 with a final payment on the Term Loan Maturity Date in an amount
equal to the unpaid balance of Term Loan.
@@
=============================================================================
Quarter Ending: Amount of Each Payment
- ------- ------ ------ -- ---- -------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
September 30, 1996 - June 30, 1997 $2,500,000
- -----------------------------------------------------------------------------
September 30, 1997 - June 30, 1998 $3,125,000
- -----------------------------------------------------------------------------
September 30, 1998 - June 30, 1999 $3,750,000
- -----------------------------------------------------------------------------
September 30, 1999 - June 30, 2000 $4,375,000
- -----------------------------------------------------------------------------
<PAGE>
-26-
- -----------------------------------------------------------------------------
September 30, 2000 - June 30, 2001 $2,500,000
- -----------------------------------------------------------------------------
September 30, 2001 - December 24, $2,500,000
2001
- -----------------------------------------------------------------------------
Term Loan A Maturity Date Remaining Unpaid Balance of Term Loan
- -----------------------------------------------------------------------------
@@ Excess Cash Flow Recapture.
For each four-quarter period of the
Borrower commencing with the fiscal
year ending December 31, 1998, the
Borrower shall make a prepayment of
principal on the Term Loan and the
Acquisition Loan in an amount equal to
fifty percent (50%) of Consolidated
Excess Cash Flow. Such mandatory
prepayment shall be due one hundred
(100) days after the end of each
applicable year and shall be applied
pro rata to the Term Loan and the
Acquisition Loan and then applied
against the scheduled installments of
principal due on the Term Loan and
Acquisition Loan, as the case may be,
in the inverse order of maturity.
Optional Prepayment of Term Loan.
-------- ---------- -- ---- ----
The Borrower shall have the right at any time to prepay the Term Note
on or before the Term Loan Maturity Date, as a whole, or in part, upon not
less than three (3) Business Days prior written notice to the Agent, without
premium or penalty, provided that (a) each partial prepayment shall be in the
principal amount of [$500,000] or a larger integral multiple of [$100,000] in
excess thereof, (b) no portion of the Term Loan bearing interest at the
Eurodollar Rate may be prepaid pursuant to this [section]4.4 except on the
last day of the Interest Period relating thereto, and (c) each partial
prepayment shall be allocated among the Banks, in proportion, as nearly as
practicable, to the respective outstanding amount of each Bank's Term Note,
with adjustments to the extent practicable to equalize any prior prepayments
not exactly in proportion. Any prepayment of principal of the Term Loan shall
include all interest accrued to the date of prepayment and shall be applied
against the scheduled installments of principal due on such Term Loan in the
inverse order of maturity. No amount repaid with respect to the Term Loan may
be reborrowed.
Interest on Term Loan.
-------- -- ---- ----
Interest Rates.
-------- -----
Except as otherwise provided in [section]7.11, the Term Loan
shall bear interest during each Interest Period relating to all or
any portion of the Term Loan at the following rates:
(a) to the extent that all or any portion of the
Term Loan bears interest during such Interest Period at the
Base Rate, the Term Loan or such portion shall bear interest
during such Interest Period at the rate per annum equal to
the Base Rate plus the Applicable Margin.
(b) To the extent that all or any portion of the
Term Loan bears interest during such Interest Period at the
Eurodollar Rate, the Term Loan or such portion shall bear
interest during such Interest Period at the rate per annum
equal to the Eurodollar Rate plus the Applicable Margin.
The Borrower promises to pay interest on the Term Loan or any portion
thereof outstanding during each Interest Period in arrears on each
Interest Payment Date applicable to such Interest Period.
Notification by Borrower.
------------ -- --------
The Borrower shall notify the Agent, such notice to be
irrevocable, at least one (1) Business Day prior to the Drawdown Date
of the Term Loan if all or any portion of the Term Loan is to bear
interest at the Base Rate and at least three (3) Eurodollar
<PAGE>
-27-
Business Days prior to the Drawdown Date of the Term Loan if all or
any portion of the Term Loan is to bear interest at the Eurodollar
Rate, provided, however, that the Borrower shall not request any
Eurodollar Rate Loans with an Interest Period of more than one month
until the date which is sixty (60) Business Days after the Closing
Date. After the Term Loan has been made, the provisions of
[section]2.7 shall apply mutatis mutandis with respect to all or any
portion of the Term Loan so that the Borrower may have the same
interest rate options with respect to all or any portion of the Term
Loan as it would be entitled to with respect to the Revolving Credit
Loans, subject to the same limitations as applied to Revolving Credit
Loans.
Amounts, etc.
-------- ----
Any portion of the Term Loan bearing interest at the
Eurodollar Rate relating to any Interest Period shall be in the
amount of [$500,000] or a larger integral multiple of [$100,000] in
excess thereof. No Interest Period relating to the Term Loan or any
portion thereof bearing interest at the Eurodollar Rate shall extend
beyond the date on which a regularly scheduled installment payment of
the principal of the Term Loan is to be made unless a portion of the
Term Loan at least equal to such installment payment has an Interest
Period ending on such date or is then bearing interest at the Base
Rate.
<PAGE>
-28-
THE ACQUISITION LOAN.
--- ----------- ----
Commitment To Lend.
---------- -- ----
Commitment.
----------
Subject to the terms and conditions set forth in this Credit
Agreement (including, but not limited to those requirements set forth
in [section]5.1.2 below), each of the Banks severally agrees during
the Disbursement Period (as hereinafter defined), upon the request of
the Borrower, to make its Commitment Percentage of the Advances (as
hereinafter defined) of the Acquisition Loan to the Borrower on each
Permitted Acquisition Closing Date. The aggregate amount of all
Advances of the Acquisition Loan shall be in the maximum principal
amount of $50,000,000 or such lesser amount as shall have been
disbursed during the Disbursement Period pursuant to [section]5.1.2
below, provided that each Bank's Acquisition Loan shall not exceed
its Acquisition Commitment. The commitments of the Banks to make any
Advance shall terminate on January __, 1999.
Conditions to Advances.
---------- -- --------
Advances of principal may be requested by the Borrower
during the period from the Closing Date through and including January
__, 1999 (the "Disbursement Period") on the following terms and
conditions (each portion of the Acquisition Loan so advanced on a
particular date being an "Advance", and such term shall only apply to
advances of the Acquisition Loan and not any other Loan). The
Borrower shall give to the Agent written notice in the form of
Exhibit E hereto (or telephonic notice confirmed in writing in the
form of Exhibit E hereto) of each Advance requested hereunder (an
"Advance Request") no later than 1:00 p.m. (Boston time) (a) three
(3) Business Days prior to the proposed Drawdown Date of any Base
Rate Loan and (b) four (4) Eurodollar Business Days prior to the
proposed Drawdown of any Eurodollar Rate Loan, provided, however, the
Borrower shall not request any Eurodollar Rate Loan with an Interest
Period of more than one month until the date which is sixty (60)
Business Days following the Closing Date. Each such notice shall
specify (i) the principal amount of the Advance requested, (ii) the
proposed Drawdown Date of such Advance; (iii) the Interest Period of
such Advance, and (iv) the Type of such Advance. Promptly upon
receipt of any such notice, the Agent shall notify each of the Banks
thereof. Each Advance Request shall be irrevocable and binding on the
Borrower and shall obligate the Borrower to accept the Advance
requested from the Banks on the proposed Drawdown Date. Each Advance
Request shall be in a minimum amount of [$100,000]. In addition, the
Borrower shall deliver to the Agent not less than ___ days prior to
the proposed Drawdown Date of any Advance a written notification
describing the relevant Permitted Financed Acquisition to be
consummated, copies of all documents, agreement and instruments to be
entered into by the Borrower in connection with such Permitted
Financed Acquisition, and the purchase price for such Permitted
Financed Acquisition (which purchase price shall not be less than the
amount of the Advance so requested). Subject to the foregoing, and
subject to satisfaction of the conditions set forth in [section]14,
so long as no Default or Event of Default shall have occurred and is
continuing, and all of the applicable conditions set forth in this
Credit Agreement have been met, including, but not limited to the
Borrower taking all action necessary to perfect the Agent's first
priority security interest in the assets being acquired (or, in the
event any Subsidiary is formed as a result of or in connection with
such acquisition, such Subsidiary shall be a Restricted Subsidiary,
and the Loan Documents shall be amended and/or supplemented as
necessary to make the terms and conditions of the Loan Documents
applicable to such Restricted Subsidiary), and the Agent and the
Banks being satisfied with the terms of the proposed Permitted
Financed Acquisition, each Bank shall lend to the Borrower such
Bank's Commitment Percentage of the Advance so requested in
immediately available funds not later than the close of business on
such Drawdown Date.
Commitment Fee.
---------- ---
The Borrower agrees to pay to the Agent for the accounts of the Banks
in accordance with their respective Acquisition Commitment a commitment fee
calculated at the rate of the Commitment Fee Rate per annum on the average
daily amount during each calendar quarter or portion thereof from the Closing
Date to January __, 1999 by which the Total Acquisition Commitment exceeds the
outstanding amount of Acquistion Loan during such calendar quarter. The
commitment fee shall be payable quarterly in arrears on the first day of each
calendar quarter for the immediately preceding calendar quarter commencing on
the first such date following the date hereof, with a final payment on January
__, 1999 or any earlier date on which the Commitments shall terminate.
Reduction of Total Commitment.
--------- -- ----- ----------
<PAGE>
-29-
The Borrower shall have the right at any time and from time to time
upon three (3) Business Days prior written notice to the Agent to reduce by
[$500,000] or an integral multiple of [$100,000] in excess thereof the
unborrowed portion of the Total Acquisition Commitment or terminate entirely
the Total Acquisition Commitment, whereupon the Acquisition Commitments of the
Banks shall be reduced pro rata in accordance with their respective Commitment
Percentages of the amount specified in such notice or, as the case may be,
terminated. Promptly after receiving any notice of the Borrower delivered
pursuant to this [section]5.3, the Agent will notify the Banks of the
substance thereof. Upon the effective date of any such reduction or
termination, the Borrower shall pay to the Agent for the respective accounts
of the Banks the full amount of any commitment fee then accrued on the amount
of the reduction. No reduction or termination of the Acquisition Commitments
may be reinstated. In addition, on January __, 1999, the Acquisition
Commitments shall permanently be reduced to zero.
The Acquisition Notes.
--- ----------- -----
The Acquisition Loan shall be evidenced by separate promissory notes
of the Borrower in substantially the form of Exhibit D hereto (each an
"Acquisition Note"), dated the Closing Date and completed with appropriate
insertions. One Acquisition Note shall be payable to the order of each Bank in
a principal amount equal to such Bank's Acquisition Commitment of the
Acquisition Loan and representing the obligation of the Borrower to pay to
such Bank such principal amount or, if less, the outstanding amount of such
Bank's Commitment Percentage of the Acquisition Loan, plus interest accrued
thereon, as set forth below. The Borrower irrevocably authorizes each Bank to
make or cause to be made a notation on such Bank's Acquisition Note Record
reflecting the original principal amount of such Bank's Commitment Percentage
of the Acquisition Loan and, at or about the time of such Bank's receipt of
any principal payment on such Bank's Acquisition Note, an appropriate notation
on such Bank's Acquisition Note Record reflecting such payment. The aggregate
unpaid amount set forth on such Bank's Acquisition Note Record shall be prima
facie evidence of the principal amount thereof owing and unpaid to such Bank,
but the failure to record, or any error in so recording, any such amount on
such Bank's Acquisition Note Record shall not affect the obligations of the
Borrower hereunder or under any Acquisition Note to make payments of principal
of and interest on any Acquisition Note when due.
Mandatory Payments of Principal on Acquisition Loan.
--------- -------- -- --------- -- ----------- ----
The Borrower promises to pay to the Agent for the account of the
Banks the principal amount of the Acquisition Loan in sixteen (16) consecutive
quarterly payments payable on the last Business Day of each calendar quarter
ending within any period set forth below in the amount set forth opposite such
period, commencing March 31, 1999, with a final payment on the Acquisition
Loan Maturity Date in an amount equal to the unpaid balance of the Acquisition
Loan.
@@
<TABLE>
<CAPTION>
=============================================================================
Quarter Ending: Amount of Each Payment
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<S> <C>
6.25% of the Acquisition Loan outstanding on
March 31, 1999 - January __, 2003 January __, 1999
- -----------------------------------------------------------------------------
Acquisition Loan Maturity Date Remaining Unpaid Balance of Term Loan
- -----------------------------------------------------------------------------
@@ Optional Prepayment of Acquisition Loan.
</TABLE>
The Borrower shall have the right
at any time to prepay the
Acquisition Note on or before the
Acquisition Loan Maturity Date, as
a whole, or in part, upon not less
than three (3) Business Days prior
written notice to the Agent,
without premium or penalty,
provided that (a) each partial
prepayment shall be in the
principal amount of [$500,000] or
a larger integral multiple of
[$100,000] in excess thereof, (b)
no portion of the Acquisition Loan
bearing interest at the Eurodollar
Rate may be prepaid pursuant to
this [section]5.6 except on the
last day of the Interest Period
relating thereto, and (c)
<PAGE>
-30-
each partial prepayment shall be
allocated among the Banks, in
proportion, as nearly as
practicable, to the respective
outstanding amount of each Bank's
Acquisition Note, with adjustments
to the extent practicable to
equalize any prior prepayments not
exactly in proportion. Any
prepayment of principal of the
Acquisition Loan shall include all
interest accrued to the date of
prepayment and shall be applied
against the scheduled installments
of principal due on such
Acquisition Loan in the inverse
order of maturity. No amount
repaid with respect to the
Acquisition Loan may be
reborrowed.
Interest on Acquisition Loan.
-------- -- ----------- ----
Interest Rates.
-------- -----
Except as otherwise provided in
[section]7.11, the Acquisition
Loan shall bear interest during
each Interest Period relating to
all or any portion of the
Acquisition Loan at the following
rates:
(a) to the extent that all or any portion of the
Acquisition Loan bears interest during such Interest Period
at the Base Rate, the Acquisition Loan or such portion shall
bear interest during such Interest Period at the rate per
annum equal to the Base Rate plus the Applicable Margin.
(b) To the extent that all or any portion of the
Acquisition Loan bears interest during such Interest Period
at the Eurodollar Rate, the Acquisition Loan or such portion
shall bear interest during such Interest Period at the rate
per annum equal to the Eurodollar Rate plus the Applicable
Margin.
The Borrower promises to pay interest on the Acquisition
Loan or any portion thereof outstanding during each Interest Period
in arrears on each Interest Payment Date applicable to such Interest
Period.
Notification by Borrower.
------------ -- --------
The Borrower shall notify the Agent, such notice to be
irrevocable, at least one (1) Business Day prior to the Drawdown Date
of any Advance if all or any portion of such Advance is to bear
interest at the Base Rate and at lease three (3) Eurodollar Business
Days prior to the Drawdown Date of the Advance if all or any portion
of the Advance is to bear interest at the Eurodollar Rate, provided,
however that the Borrower shall not request any Eurodollar Rate Loans
with an Interest Period of more than one month until the date which
is sixty (60) Business Days after the Closing Date. After any Advance
has been made, the provisions of [section]2.7 shall apply mutatis
mutandis with respect to all or any portion of the Acquisition Loan
so that the Borrower may have the same interest rate options with
respect to all or any portion of the Acquisition Loan as it would be
entitled to with respect to the Revolving Credit Loans, subject to
the same limitations as applied to Revolving Credit Loans.
Amounts, etc.
-------- ----
Any portion of the Acquisition Loan bearing interest at the
Eurodollar Rate relating to any Interest Period shall be in the
amount of [$500,000] or a larger integral multiple of [$100,000] in
excess thereof. No Interest Period relating to the Acquisition Loan
or any portion thereof bearing interest at the Eurodollar Rate shall
extend beyond the date on which a regularly scheduled installment
payment of the principal of the Acquisition Loan is to be made unless
a portion of the Acquisition Loan at least equal to such installment
payment has an Interest Period ending on such date or is then bearing
interest at the Base Rate.
Funds for Advances.
----- --- --------
Funding Procedures.
------- ----------
<PAGE>
-31-
Not later than 1:00 a.m. (Boston time) on the proposed
Drawdown Date of any Advance, each of the Banks will make available
to the Agent, at the Agent's Head Office, in immediately available
funds, such Bank's Commitment Percentage of the amount of the
requested Advance. Upon receipt from each Bank of such amount, and
upon receipt of the documents required by [section][section]13 and 14
and the satisfaction of the other conditions set forth therein, to
the extent applicable, the Agent will make available to the Borrower
the aggregate amount of such Advances made available to the Agent by
the Banks. The failure or refusal of any Bank to make available to
the Agent at the aforesaid time and place on any Drawdown Date its
Commitment Percentage of the requested Advance shall not relieve any
other Bank from its several obligation hereunder to make available to
the Agent such other Bank's Commitment Percentage of any requested
Advance.
Advances by Agent.
-------- -- -----
The Agent may, unless notified to the contrary by any Bank
prior to a Drawdown Date, assume that such Bank has made available to
the Agent on such Drawdown Date such Bank's Commitment Percentage of
the Advance to be made on such Drawdown Date, and the Agent may (but
it shall not be required to), in reliance upon such assumption, make
available to the Borrower a corresponding amount. If any Bank makes
available to the Agent such amount on a date after such Drawdown
Date, such Bank shall pay to the Agent on demand an amount equal to
the product of (a) the average computed for the period referred to in
clause (c) below, of the weighted average interest rate paid by the
Agent for federal funds acquired by the Agent during each day
included in such period, times (b) the amount of such Bank's
Commitment Percentage of such Advance, times (c) a fraction, the
numerator of which is the number of days that elapse from and
including such Drawdown Date (or, if the Drawdown Date occurs prior
to twenty-four hours after such Bank has received notice of a loan
request, twenty-four hours after receipt of such notice of a loan
request) to the date on which the amount of such Bank's Commitment
Percentage of such Advance shall become immediately available to the
Agent, and the denominator of which is 360. A statement of the Agent
submitted to such Bank with respect to any amounts owing under this
paragraph shall be prima facie evidence of the amount due and owing
to the Agent by such Bank. If the amount of such Bank's Commitment
Percentage of such Advance is not made available to the Agent by such
Bank within three (3) Business Days following such Drawdown Date, the
Agent shall be entitled to recover such amount from the Borrower on
demand, with interest thereon at the rate per annum applicable to the
Advance made on such Drawdown Date.
LETTERS OF CREDIT.
------- -- ------
Letter of Credit Commitments.
------ -- ------ -----------
Commitment to Issue Letters of Credit.
---------- -- ----- ------- -- ------
Subject to the terms and conditions hereof and the execution
and delivery by the Borrower of a letter of credit application on the
Agent's customary form (a "Letter of Credit Application"), the Agent
on behalf of the Banks and in reliance upon the agreement of the
Banks set forth in [section]6.1.4 and upon the representations and
warranties of the Borrower contained herein, agrees, in its
individual capacity, to issue, extend and renew for the account of
the Borrower one or more standby or documentary letters of credit
(individually, a "Letter of Credit"), in such form as may be
requested from time to time by the Borrower and agreed to by the
Agent; provided, however, that, after giving effect to such request,
(a) the sum of the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations shall not exceed $5,000,000 at any one
time, and (b) the sum of (i) the Maximum Drawing Amount on all
Letters of Credit, (ii) all Unpaid Reimbursement Obligations, and
(iii) the amount of all Revolving Credit Loans outstanding shall not
exceed the Total Commitment
Letter of Credit Applications.
------ -- ------ ------------
Each Letter of Credit Application shall be completed to the
satisfaction of the Agent. In the event that any provision of any
Letter of Credit Application shall be inconsistent with any provision
of this Credit Agreement, then the provisions of this Credit
Agreement shall, to the extent of any such inconsistency, govern.
Terms of Letters of Credit.
----- -- ------- -- ------
Each Letter of Credit issued, extended or renewed hereunder
shall, among other things, (a) provide for the payment of sight
drafts for honor thereunder when presented in accordance with the
terms thereof and when accompanied by the documents described
therein, and (b) have an expiry date no later than the date which is
fourteen (14) days (or, if the Letter of Credit is
<PAGE>
-32-
confirmed by a confirming bank or otherwise provides for one or more
nominated persons, forty-five (45) days) prior to the Revolving
Credit Loan Maturity Date. Each Letter of Credit so issued, extended
or renewed shall be subject to the Uniform Customs.
Reimbursement Obligations of Banks.
------------- ----------- -- -----
Each Bank severally agrees that it shall be absolutely
liable, without regard to the occurrence of any Default or Event of
Default or any other condition precedent whatsoever, to the extent of
such Bank's Commitment Percentage, to reimburse the Agent on demand
for the amount of each draft paid by the Agent under each Letter of
Credit to the extent that such amount is not reimbursed by the
Borrower pursuant to [section]6.2 (such agreement for a Bank being
called herein the "Letter of Credit Participation" of such Bank).
Participations of Banks.
-------------- -- -----
Each such payment made by a Bank shall be treated as the
purchase by such Bank of a participating interest in the Borrower's
Reimbursement Obligation under [section]6.2 in an amount equal to
such payment. Each Bank shall share in accordance with its
participating interest in any interest which accrues pursuant to
[section]6.2.
Reimbursement Obligation of the Borrower.
------------- ---------- -- --- --------
In order to induce the Agent to issue, extend and renew each Letter
of Credit and the Banks to participate therein, the Borrower hereby agrees to
reimburse or pay to the Agent, for the account of the Agent or (as the case
may be) the Banks, with respect to each Letter of Credit issued, extended or
renewed by the Agent hereunder,
(a) except as otherwise expressly provided in
[section]6.2(b) and (c), on each date that any draft presented under
such Letter of Credit is honored by the Agent, or the Agent otherwise
makes a payment with respect thereto, (i) the amount paid by the
Agent under or with respect to such Letter of Credit, and (ii) the
amount of any taxes, fees, charges or other costs and expenses
whatsoever incurred by the Agent or any Bank in connection with any
payment made by the Agent or any Bank under, or with respect to, such
Letter of Credit,
(b) upon the reduction (but not termination) of the Total
Commitment to an amount less than the Maximum Drawing Amount, an
amount equal to such difference, which amount shall be held by the
Agent for the benefit of the Banks and the Agent as cash collateral
for all Reimbursement Obligations, and
(c) upon the termination of the Total Commitment, or the
acceleration of the Reimbursement Obligations with respect to all
Letters of Credit in accordance with [section]15, an amount equal to
the then Maximum Drawing Amount on all Letters of Credit, which
amount shall be held by the Agent for the benefit of the Banks and
the Agent as cash collateral for all Reimbursement Obligations.
Each such payment shall be made to the Agent at the Agent's Head Office in
immediately available funds. Interest on any and all amounts remaining unpaid
by the Borrower under this [section]6.2 at any time from the date such amounts
become due and payable (whether as stated in this [section]6.2, by
acceleration or otherwise) until payment in full (whether before or after
judgment) shall be payable to the Agent on demand at the rate specified in
[section]7.11 for overdue principal on the Revolving Credit Loans.
Letter of Credit Payments.
------ -- ------ --------
If any draft shall be presented or other demand for payment shall be
made under any Letter of Credit, the Agent shall notify the Borrower of the
date and amount of the draft presented or demand for payment and of the date
and time when it expects to pay such draft or honor such demand for payment.
If the Borrower fails to reimburse the Agent as provided in [section]6.2 on or
before the date that such draft is paid or other payment is made by the Agent,
the Agent may at any time thereafter notify the Banks of the amount of any
such Unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston time) on
the Business Day next following the receipt of such notice, each Bank shall
make available to the Agent, at its Head Office, in immediately available
funds, such Bank's Commitment Percentage of such Unpaid Reimbursement
Obligation, together with an amount equal to the product of (a) the average,
computed for the period referred to in clause (c) below, of the weighted
average interest rate paid by the Agent for federal funds acquired by the
Agent during each day included in such period, times (b) the amount equal to
such Bank's Commitment Percentage of such Unpaid Reimbursement Obligation,
times (c) a fraction, the numerator of which is the number of days that elapse
from and including the date the Agent paid the draft presented for honor or
otherwise made payment to the date on which such
<PAGE>
-33-
Bank's Commitment Percentage of such Unpaid Reimbursement obligation shall
become immediately available to the Agent, and the denominator of which is
360. The responsibility of the Agent to the Borrower and the Banks shall be
only to determine that the documents (including each draft) delivered under
each Letter of Credit in connection with such presentment shall be in
conformity in all material respects with such Letter of Credit.
Obligations Absolute.
----------- --------
The Borrower's obligations under this [section]6 shall be absolute
and unconditional under any and all circumstances and irrespective of the
occurrence of any Default or Event of Default or any condition precedent
whatsoever or any setoff, counterclaim or defense to payment which the
Borrower may have or have had against the Agent, any Bank or any beneficiary
of a Letter of Credit. The Borrower further agrees with the Agent and the
Banks that the Agent and the Banks shall not be responsible for, and the
Borrower's Reimbursement Obligations under [section]6.2 shall not be affected
by, among other things, the validity or genuineness of documents or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, fraudulent or forged, or any dispute between or among
the Borrower, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of the Borrower against the beneficiary of
any Letter of Credit or any such transferee. The Agent and the Banks shall not
be liable for any error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however transmitted, in
connection with any Letter of Credit. The Borrower agrees that any action
taken or omitted by the Agent or any Bank under or in connection with each
Letter of Credit and the related drafts and documents, if done in good faith,
shall be binding upon the Borrower and shall not result in any liability on
the part of the Agent or any Bank to the Borrower.
Reliance by Issuer.
-------- -- ------
To the extent not inconsistent with [section]6.4, the Agent shall be
entitled to rely, and shall be fully protected in relying upon, any Letter of
Credit, draft, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype message, statement,
order or other document believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel, independent accountants and other experts
selected by the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Agreement unless it shall first have
received such advice or concurrence of the Majority Banks as it reasonably
deems appropriate or it shall first be indemnified to its reasonable
satisfaction by the Banks against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
The Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement in accordance with a request of the Majority
Banks, and such request and any action taken or failure to act pursuant
thereto shall be binding upon the Banks and all future holders of the
Revolving Credit Notes or of a Letter of Credit Participation.
Letter of Credit Fee.
------ -- ------ ---
The Borrower shall pay to the Agent a fee (in each case, a "Letter of
Credit Fee") (a) in respect of each standby Letter of Credit issued pursuant
to this Credit Agreement, calculated at the rate of the Applicable Margin per
annum on the face amount of each such Letter of Credit, and the Agent shall,
in turn, remit to each Bank its pro rata portion of such Letter of Credit Fee
calculated at a rate of the Applicable Margin minus 1/4% per annum on the face
amount of each such Letter of Credit, and (b) in respect of each documentary
Letter of Credit issued pursuant to this Credit Agreement, calculated at the
rate of the Applicable Margin minus 1/2% per annum on the face amount of such
Letter of Credit, and the Agent shall, in turn, remit to each Bank its pro
rata portion of such Letter of Credit Fee calculated at a rate of the
Applicable Margin minus 3/4% per annum on the face amount of each such Letter
of Credit. The Letter of Credit Fee for each Letter of Credit shall be payable
annually in advance, on the date of issuance of such Letter of Credit, and on
each anniversary thereof until such Letter of Credit expires or is canceled.
In addition, the Borrower shall pay to the Agent, for its own account, the
Agent's standard issuance, processing, negotiation, amendment and
administrative fees, determined in accordance with customary fees and charges
for similar facilities.
CERTAIN GENERAL PROVISIONS.
------- ------- ----------
Closing Fee and Amendment Fee.
------- --- --- --------- ---
The Borrower agrees to pay to the Agent a closing fee in the amounts
and at the times as set forth in the Fee Letter.
Agent's Fee.
------- ---
<PAGE>
-34-
The Borrower shall pay to the Agent, an Agent's fee (the "Agent's
Fee") as provided in the Fee Letter.
Funds for Payments.
----- --- --------
Payments to Agent.
-------- -- -----
All payments of principal, interest, Reimbursement
Obligations, commitment fees, Letter of Credit Fees and any other
amounts due hereunder or under any of the other Loan Documents shall
be made to the Agent, for the respective accounts of the Banks and
the Agent, at the Agent's Head Office or at such other location in
the Boston, Massachusetts, area that the Agent may from time to time
designate, in each case in immediately available funds.
No Offset, etc.
-- ------- ----
Except as otherwise provided in [section]7.7, all payments
by the Borrower hereunder and under any of the other Loan Documents
shall be made without setoff or counterclaim and free and clear of
and without deduction for any taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or
levied by any jurisdiction or any political subdivision thereof or
taxing or other authority therein unless the Borrower is compelled by
law to make such deduction or withholding. Except as otherwise
provided in [section]7.7, if any such obligation is imposed upon the
Borrower with respect to any amount payable by it hereunder or under
any of the other Loan Documents, the Borrower will pay to the Agent,
for the account of the Banks or (as the case may be) the Agent, on
the date on which such amount is due and payable hereunder or under
such other Loan Document, such additional amount in Dollars as shall
be necessary to enable the Banks or the Agent to receive the same net
amount which the Banks or the Agent would have received on such due
date had no such obligation been imposed upon the Borrower. The
Borrower will deliver promptly to the Agent certificates or other
valid vouchers for all taxes or other charges deducted from or paid
with respect to payments made by the Borrower hereunder or under such
other Loan Document.
Computations.
------------
All computations of interest on the Loans and of commitment fees,
Letter of Credit Fees or other fees shall be based on a 360-day year and paid
for the actual number of days elapsed. Except as otherwise provided in the
definition of the term "Interest Period" with respect to Eurodollar Rate
Loans, whenever a payment hereunder or under any of the other Loan Documents
becomes due on a day that is not a Business Day, the due date for such payment
shall be extended to the next succeeding Business Day, and interest shall
accrue during such extension. The outstanding amount of the Loans as reflected
on the Revolving Credit Note Records and the Term Note Records from time to
time shall be considered correct and binding on the Borrower unless within
five (5) Business Days after receipt of any notice by the Agent or any of the
Banks of such outstanding amount, the Agent or such Bank shall notify the
Borrower to the contrary.
Inability to Determine Eurodollar Rate.
--------- -- --------- ---------- ----
In the event, prior to the commencement of any Interest Period
relating to any Eurodollar Rate Loan, the Agent shall determine or be notified
by the Majority Banks that adequate and reasonable methods do not exist for
ascertaining the Eurodollar Rate that would otherwise determine the rate of
interest to be applicable to any Eurodollar Rate Loan during any Interest
Period, the Agent shall forthwith give notice of such determination (which
shall be conclusive and binding on the Borrower and the Banks) to the Borrower
and the Banks. In such event (a) any Loan Request or Conversion Request with
respect to Eurodollar Rate Loans shall be automatically withdrawn and shall be
deemed a request for Base Rate Loans, (b) each Eurodollar Rate Loan will
automatically, on the last day of the then current Interest Period relating
thereto, become a Base Rate Loan, and (c) the obligations of the Banks to make
Eurodollar Rate Loans shall be suspended until the Agent or the Majority Banks
determines that the circumstances giving rise to such suspension no longer
exist, whereupon the Agent or, as the case may be, the Agent upon the
instruction of the Majority Banks, shall so notify the Borrower and the Banks.
Illegality.
----------
Notwithstanding any other provisions herein, if any present or future
law, regulation, treaty or directive or in the interpretation or application
thereof shall make it unlawful for any Bank to make or maintain Eurodollar
Rate Loans, such Bank shall forthwith give notice of such circumstances to the
Borrower and the other Banks and thereupon (a) the commitment of such Bank to
make Eurodollar Rate Loans or convert Loans of another Type to Eurodollar Rate
Loans shall forthwith be suspended and (b) such Bank's Loans then outstanding
as Eurodollar Rate Loans, if any, shall be converted automatically to Base
Rate Loans on the last day of each Interest Period applicable to such
Eurodollar
<PAGE>
-35-
Rate Loans or within such earlier period as may be required by law. The
Borrower hereby agrees promptly to pay the Agent for the account of such Bank,
upon demand by such Bank, any additional amounts necessary to compensate such
Bank for any costs incurred by such Bank in making any conversion in
accordance with this [section]7.6, including any interest or fees payable by
such Bank to lenders of funds obtained by it in order to make or maintain its
Eurodollar Loans hereunder.
Additional Costs, etc.
---------- ------ ----
If any present or future applicable law, which expression, as used
herein, includes statutes, rules and regulations thereunder and
interpretations thereof by any competent court or by any governmental or other
regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at
any time or from time to time hereafter made upon or otherwise issued to any
Bank or the Agent by any central bank or other fiscal, monetary or other
authority (whether or not having the force of law), shall:
(a) subject any Bank or the Agent to any tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature with
respect to this Credit Agreement, the other Loan Documents, any
Letters of Credit, such Bank's Commitment, Acquisition Commitment or
the Loans (other than taxes based upon or measured by the income or
profits of such Bank or the Agent), or
(b) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to any Bank of the
principal of or the interest on any Loans or any other amounts
payable to any Bank or the Agent under this Credit Agreement or any
of the other Loan Documents, or
(c) impose or increase or render applicable (other than to
the extent specifically provided for elsewhere in this Credit
Agreement) any special deposit, reserve, assessment, liquidity,
capital adequacy or other similar requirements (whether or not having
the force of law) against assets held by, or deposits in or for the
account of, or loans by, or letters of credit issued by, or
commitments of an office of any Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan
Documents, any Letters of Credit, the Loans, such Bank's Commitment,
Acquisition Commitment or any class of loans, letters of credit or
commitments of which any of the Loans or such Bank's Commitment or
Acquisition Commitment forms a part,
and the result of any of the foregoing is:
(i) to increase the cost to any Bank of making,
funding, issuing, renewing, extending or maintaining any of
the Loans or such Bank's Commitment, Acquisition Commitment
or any Letter of Credit, or
(ii) to reduce the amount of principal, interest,
Reimbursement Obligation or other amount payable to such
Bank or the Agent hereunder on account of such Bank's
Commitment, Acquisition Commitment, any Letter of Credit or
any of the Loans, or
(iii) to require such Bank or the Agent to make any
payment or to forego any interest or Reimbursement
Obligation or other sum payable hereunder, the amount of
which payment or foregone interest or Reimbursement
Obligation or other sum is calculated by reference to the
gross amount of any sum receivable or deemed received by
such Bank or the Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by such Bank
or (as the case may be) the Agent at any time and from time to time and as
often as the occasion therefor may arise, pay to such Bank or the Agent such
additional amounts as will be sufficient to compensate such Bank or the Agent
for such additional cost, reduction, payment or foregone interest or
Reimbursement Obligation or other sum. On or before the date it becomes a
party to this Credit Agreement and from time to time thereafter upon any
change in status rendering any certificate or document previously delivered
pursuant to this [section]7.7 invalid or inaccurate, each Bank that is
organized under the laws of a jurisdiction outside the United States shall
(but, with respect to any renewal or change in status, if legally able to do
so) deliver to the Borrower, (x) if such Bank is a "bank" within the meaning
of Section 881(c)(3)(A) of the Code, such certificates, documents or other
evidence as required by the Code or Treasury Regulations issued pursuant
thereto, including Internal Revenue Service Form 1001 or Form 4224 and any
other certificate or statement of exemption required by Treasury Regulation
Section 1.1441-1, 1.1441-4 or 1.1441-6(c) or any subsequent version thereof or
subsequent version thereto, properly completed and duly executed by such Bank
establishing that such payment is (a) not subject to United States Federal
withholding tax under the Code because such payment is effectively connected
with conduct by such Bank of a trade or business in the United States or (b)
<PAGE>
-36-
totally exempt from United States Federal withholding tax, or (other than in
the case of such Bank on the date such Bank became a party to this Credit
Agreement), subject to a reduced rate of such tax under a provision of an
applicable tax treaty; or (y) if such Bank is not a "bank" within the meaning
of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224, such Bank shall deliver (a) a certificate
substantially in the form of Exhibit L hereto and (b) two completed signed
copies of Internal Revenue Service Form W-8 (or successor form) certifying to
such Bank's entitlement to an exemption for United States withholding tax with
respect to payments of interest to be made under this Credit Agreement or
under any Note. The Borrower shall not be required to pay any additional
amounts to any Bank pursuant to [section]7.3 or this [section]7.7 to the
extent that the obligation to pay such additional amounts would not have
arisen but for a failure by such Bank to comply with the provisions of the
preceding sentence.
Any Bank claiming any additional amounts payable pursuant to
[section]7.3 or this [section]7.7 shall use reasonable efforts (consistent
with legal and regulatory restrictions) to file any certificate or document
reasonably requested in writing by the Borrower or to change the jurisdiction
of its applicable lending certificate office if the making of such a filing or
change would avoid the need for or substantially reduce the amount of any such
additional amounts which may thereafter accrue and would not, in the sole and
absolute determination of such Bank be otherwise disadvantageous to such Bank,
which determination by such Bank shall be conclusive.
If a Bank or the Agent shall become aware that it is entitled to
receive a refund in respect of taxes as to which it has been indemnified by
the Borrower pursuant to [section]7.3 or this [section]7.7, it shall promptly
notify the Borrower of the availability of such refund and shall, within
thirty (30) days after receipt of a request by the Borrower, apply for such
refund at the Borrower's expense. If any Bank or the Agent, as applicable,
receives a refund in respect of any taxes to which it has been indemnified by
the Borrower pursuant to [section]7.3 or this [section]7.7, it shall promptly
repay such refund to the Borrower (to the extent of amounts that have been
paid by the Borrower under [section]7.3 or this [section]7.7 with respect to
such refund), net of all out-of-pocket expenses (including taxes imposed with
respect to such refund) of such Bank or the Agent, as applicable, and without
interest; provided, however, that the Borrower, upon the request of such Bank
or the Agent, as applicable, agrees to return such refund (plus penalties,
interest or other charges) to such Bank or the Agent in the event such Bank or
the Agent is required to repay such refund.
Capital Adequacy.
------- --------
If after the date hereof any Bank or the Agent determines that (a)
the adoption of or change after the Closing Date in any law, governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law) regarding capital requirements for banks or bank holding
companies or any change in the interpretation or application thereof by a
court or governmental authority with appropriate jurisdiction, or (b)
compliance by such Bank or the Agent or any corporation controlling such Bank
or the Agent with any law, governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law) of any such entity
regarding capital adequacy, has the effect of reducing the return on such
Bank's or the Agent's Commitment or Acquisition Commitment with respect to any
Loans or the Loans to a level below that which such Bank or the Agent could
have achieved but for such adoption, change or compliance (taking into
consideration such Bank's or the Agent's then existing policies with respect
to capital adequacy and assuming full utilization of such entity's capital) by
any amount deemed by such Bank or (as the case may be) the Agent to be
material, then such Bank or the Agent may notify the Borrower of such fact. To
the extent that the amount of such reduction in the return on capital is not
reflected in the Base Rate, the Borrower and such Bank shall thereafter
attempt to negotiate in good faith, within thirty (30) days of the day on
which the Borrower receives such notice, an adjustment payable hereunder that
will adequately compensate such Bank in light of these circumstances. If the
Borrower and such Bank are unable to agree to such adjustment within thirty
(30) days of the date on which the Borrower receives such notice, then
commencing on the date of such notice (but not earlier than the effective date
of any such increased capital requirement), the fees payable hereunder shall
increase by an amount that will, in such Bank's reasonable determination,
provide adequate compensation. Each Bank shall allocate such cost increases
among its customers in good faith and on an equitable basis.
Certificate.
-----------
A certificate setting forth any additional amounts payable pursuant
to [section][section]7.7 or 7.8 and a brief explanation of such amounts which
are due, submitted by any Bank or the Agent to the Borrower, shall be
conclusive, absent manifest error, that such amounts are due and owing.
Indemnity.
---------
The Borrower agrees to indemnify each Bank and to hold each Bank
harmless from and against any loss, cost or expense (including loss of
anticipated profits) that such Bank may sustain or incur as a consequence of
(a) default by the Borrower in payment of the principal amount of or any
interest on any Eurodollar Rate Loans as and when due and payable, including
any such loss or expense arising from interest or fees payable by such Bank to
lenders of funds obtained by it in order to maintain its Eurodollar Rate
Loans, (b) default by the Borrower in
<PAGE>
-37-
making a borrowing or conversion after the Borrower has given (or is deemed to
have given) a Loan Request, Advance Request, notice (in the case of all or any
portion of the Term Loan) pursuant to [section]4.5.2 or a Conversion Request
relating thereto in accordance with [section]2.6 ,[section]2.7 or [section]5.7
or (c) the making of any payment of a Eurodollar Rate Loan or the making of
any conversion of any such Loan to a Base Rate Loan on a day that is not the
last day of the applicable Interest Period with respect thereto, including
interest or fees payable by such Bank to lenders of funds obtained by it in
order to maintain any such Loans.
Interest on Overdue Amounts.
-------- -- ------- -------
Overdue principal and (to the extent permitted by applicable law)
interest on the Loans and all other overdue amounts payable hereunder or under
any of the other Loan Documents shall bear interest compounded monthly and
payable on demand at a rate per annum equal to two percent (2%) above the Base
Rate until such amount shall be paid in full (after as well as before
judgment).
Replacement Banks.
----------- -----
Within thirty (30) days after (a) any Bank has demanded compensation
from the Borrower pursuant to [section][section]7.7 or 7.8 hereof, or (b)
there shall have occurred a change in law with respect to any Bank as a
consequence of which it shall have become unlawful for such Bank to make a
Eurodollar Rate Loan on any Drawdown Date, as described in [section]6.6 hereof
(any such Bank described in the foregoing clauses (a) or (b) is hereinafter
referred to as an "Affected Bank"), the Borrower may request that the
Non-Affected Banks acquire all, but not less than all, of the Affected Bank's
outstanding Loans and assume all, but not less than all, of the Affected
Bank's Commitment and Acquisition Commitment. If the Borrower so requests, the
Non-Affected Banks may elect to acquire all or any portion of the Affected
Bank's outstanding Loans and to assume all or any portion of the Affected
Bank's Commitment and Acquisition Commitment. If the Non-Affected Banks do not
elect to acquire and assume all of the Affected Bank's outstanding Loans,
Commitment and Acquisition Commitment, the Borrower may designate a
replacement bank or banks, which must be satisfactory to the Agent, to acquire
and assume that portion of the outstanding Loans, Commitment and Acquisition
Commitment of the Affected Bank not being acquired and assumed by the Non-
Affected Banks. The provisions of [section]21 hereof shall apply to all
reallocations pursuant to this [section]7.12, and the Affected Bank and any
Non-Affected Banks and/or replacement banks which are to acquire the Loans,
Commitment and Acquisition Commitment of the Affected Bank shall execute and
deliver to the Agent, in accordance with the provisions of [section]21 hereof,
such Assignments and Acceptances and other instruments, including, without
limitation, Notes, as are required pursuant to [section]21 hereof to give
effect to such reallocations. Any Non-Affected Banks and/or replacement banks
which are to acquire the Revolving Credit Loans, Commitment, Acquisition Loan
and Acquisition Commitment of the Affected Bank shall be deemed to be Eligible
Assignees for all purposes of [section]21 hereof. On the effective date of the
applicable Assignments and Acceptances, the Borrower shall pay to the Affected
Bank all interest accrued on its Loans up to but excluding such date, along
with any fees payable to such Affected Bank hereunder up to but excluding such
date.
COLLATERAL SECURITY AND GUARANTEES.
---------- -------- --- ----------
Security of Borrower and Subsidiaries; Guaranty of Subsidiaries.
-------- -- -------- --- ------------ -------- -- ------------
The Obligations shall be secured by a perfected first priority
security interest in certain of the assets of the Borrower (including a pledge
of the non-voting capital stock of each of the Borrower's Subsidiaries,
including, without limitation, the Unrestricted Subsidiaries, provided,
however, in the event such Unrestricted Subsidiary has incurred Indebtedness
permitted by [section]11.1(g) hereof and the lender of such Indebtedness has
requested a pledge of the non-voting capital stock of such Unrestricted
Subsidiary by the Borrower, the Borrower shall only be required to grant to
the Agent for the benefit of the Banks a second priority security interest in
such non-voting capital stock until such Indebtedness has been repaid in
full), whether now owned or hereafter acquired, pursuant to the terms of the
Security Documents to which the Borrower is a party. The Obligations shall
also be secured by a pledge of the non-voting capital stock of each
Unrestricted Subsidiary's Subsidiaries, provided, however, in the event such
Unrestricted Subsidiary has incurred Indebtedness permitted by
[section]11.1(g) hereof and the lender of such Indebtedness has requested a
pledge of the non-voting capital stock of such Unrestricted Subsidiary's
Subsidiaries, such Unrestricted Subsidiary shall only be required to grant to
the Agent for the benefit of the Banks a second priority security interest in
such non-voting capital stock until such Indebtedness has been repaid in full.
In addition, the Obligations shall also be guaranteed by each of the
Borrower's Restricted Subsidiaries pursuant to the terms of the Guaranty of
such Restricted Subsidiaries, and the Restricted Subsidiaries' obligations
under such Guaranty shall be secured by a perfected first priority security
interest in certain of the assets of such Restricted Subsidiary (including a
pledge of the non-voting capital stock of each of the Restricted Subsidiaries'
Subsidiaries), whether now owned or hereafter acquired, pursuant to the terms
of the Security Documents to which the such Restricted Subsidiaries are
parties.
Guaranties and Security of Holdings.
---------- --- -------- -- --------
<PAGE>
-38-
Certain of the Obligations shall also be guaranteed by Holdings
pursuant to the terms of the Guaranty. The Obligations shall be secured by a
perfected first priority security interest in certain of the stock owned by
Holdings, pursuant to the terms of the Stock Pledge Agreement to which
Holdings is a party.
REPRESENTATIONS AND WARRANTIES.
--------------- --- ----------
Each of the Borrower and, to the extent applicable, Holdings
represents and warrants to the Banks and the Agent as follows:
Corporate Authority.
--------- ---------
Incorporation; Good Standing.
------------- ---- --------
Each of Holdings, the Borrower and each of their respective
Subsidiaries (a) is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation,
(b) has all requisite corporate power to own its property and conduct
its business as now conducted and as presently contemplated, and (c)
is in good standing as a foreign corporation and is duly authorized
to do business in each jurisdiction where such qualification is
necessary except where a failure to be so qualified would not have a
materially adverse effect on the business, assets or financial
condition of the Borrower or such Subsidiary.
Authorization.
-------------
The execution, delivery and performance of this Credit
Agreement and the other Loan Documents to which Holdings, the
Borrower or any of their Subsidiaries is or is to become a party and
the transactions contemplated hereby and thereby (a) are within the
corporate authority of such Person, (b) have been duly authorized by
all necessary corporate proceedings, (c) do not conflict with or
result in any breach or contravention of any provision of law,
statute, rule or regulation to which Holdings, the Borrower or any of
their Subsidiaries is subject or any judgment, order, writ,
injunction, license or permit applicable to Holdings, the Borrower or
any of their Subsidiaries, the violation of which would have a
materially adverse effect on the business, assets or financial
condition of Holdings, the Borrower or such Subsidiary and (d) do not
conflict with any provision of the corporate charter or bylaws of, or
any agreement or other instrument binding upon, Holdings, the
Borrower or any of their Subsidiaries.
Enforceability.
--------------
The execution and delivery of this Credit Agreement and the
other Loan Documents to which Holdings, the Borrower or any of their
Subsidiaries is or is to become a party will result in valid and
legally binding obligations of such Person enforceable against it in
accordance with the respective terms and provisions hereof and
thereof, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors' rights and except
to the extent that availability of the remedy of specific performance
or injunctive relief is subject to the discretion of the court before
which any proceeding therefor may be brought.
Governmental Approvals.
------------ ---------
The execution, delivery and performance by Holdings, the Borrower and
any of their Subsidiaries of this Credit Agreement and the other Loan
Documents, the AmeriKing Michigan Acquisition Documents and the Capitalization
Documents to which Holdings, the Borrower or any of their Subsidiaries is or
is to become a party and the transactions contemplated hereby and thereby do
not require the approval or consent of, or filing with, any governmental
agency or authority other than those already obtained and are not in violation
of any municipal or other local law, ordinance or governmental rule or
regulation relating to the occupancy or operation of any of the BKC
restaurants, which violation would have a material adverse effect on the
business, assets or financial condition of Holdings, the Borrower and their
Subsidiaries, taken as a whole
Title to Properties; Leases.
----- -- ---------- ------
Except as indicated on Schedule 9.3 hereto, Holdings, the Borrower
and their Subsidiaries own or lease all of the assets reflected in the pro
forma consolidated balance sheet of Holdings, the Borrower and their
Subsidiaries as at the Balance Sheet Date or acquired since that date (except
property and assets sold or otherwise disposed of in the ordinary course of
business since that date) and to be acquired pursuant
<PAGE>
-39-
to the AmeriKing Michigan Acquisition, subject to no rights of others,
including any mortgages, leases, conditional sales agreements, title retention
agreements, liens or other encumbrances except Permitted Liens.
Financial Statements and Projections.
--------- ---------- --- -----------
Financial Statements.
--------- ----------
There has been furnished to each of the Banks a pro forma
consolidated balance sheet of Holdings, the Borrower and their
Subsidiaries as at the Closing Date, which properly gives effect to
the Loans and the AmeriKing Michigan Acquisition. Such balance sheet
fairly presents the financial condition of the Borrower and its
Subsidiaries as at the close of business on the date thereof. There
are no contingent liabilities of Holdings, the Borrower or any of
their Subsidiaries as of such date involving material amounts, which
were not disclosed in such balance sheet and the notes related
thereto or in this Credit Agreement or the AmeriKing Michigan
Acquisition Documents.
Projections.
-----------
The projections of the annual operating budgets of Holdings,
the Borrower and their Subsidiaries on a consolidated basis,
including balance sheets and cash flow statements for the 1996
through ____ fiscal years (with the projections for the 1996 fiscal
year being calculated on a pro forma basis), copies of which have
been delivered to each Bank, disclose all assumptions made with
respect to general economic, financial and market conditions used in
formulating such projections. To the knowledge of Holdings, the
Borrower or any of their Subsidiaries, no facts exist that
(individually or in the aggregate) would result in any material
change in any of such projections. The projections are based upon
reasonable estimates and assumptions, have been prepared on the basis
of the assumptions stated therein and reflect the reasonable
estimates of Holdings, the Borrower and their Subsidiaries of the
results of operations and other information projected therein.
No Material Changes, etc.
-- -------- -------- ----
(a) Since the Balance Sheet Date there has occurred no materially
adverse change in the assets, financial condition or business of Holdings, the
Borrower and their Subsidiaries as shown on or reflected in the consolidated
balance sheet of Holdings, the Borrower and their Subsidiaries as at the
Balance Sheet Date other than changes in the ordinary course of business that
have not had any materially adverse effect either individually or in the
aggregate on the assets, business or financial condition of Holdings, the
Borrower or any of their Subsidiaries. Since ____________ there have been no
changes in the business or assets to be acquired in the AmeriKing Michigan
Acquisition which have been, either individually or in the aggregate,
materially adverse.
(b) Each of Holdings, the Borrower and each of its Subsidiaries
(before and after giving effect to the transactions contemplated by this
Credit Agreement and the other Loan Documents) (i) is solvent, (ii) has assets
having a fair value in excess of its liabilities, (iii) has assets having a
fair value in excess of the amount required to pay its liabilities on existing
debts as such debts become absolute and matured, and (iv) has, and expects to
continue to have, access to adequate capital for the conduct of its business
and the ability to pay its debts from time to time incurred in connection with
the operation of its business as such debts mature.
Franchises, Patents, Copyrights, etc.
----------- -------- ----------- ----
Each of the Borrower and its Subsidiaries possesses all franchises,
patents, copyrights, trademarks, trade names, licenses and permits, and rights
in respect of the foregoing, adequate for the conduct of its business
substantially as now conducted without known conflict with any rights of
others.
Litigation.
----------
Except as set forth in Schedule 9.7 hereto, there are no actions,
suits, proceedings or investigations of any kind pending or threatened against
Holdings, the Borrower or any of their Subsidiaries before any court, tribunal
or administrative agency or board that, if adversely determined, might, either
in any case or in the aggregate, materially adversely affect the properties,
assets, financial condition or business of Holdings, the Borrower and their
Subsidiaries or materially impair the right of Holdings, the Borrower and
their Subsidiaries, considered as a whole, to carry on business substantially
as now conducted by them, or result in any substantial liability not
adequately covered by insurance,
<PAGE>
-40-
or for which adequate reserves are not maintained on the consolidated balance
sheet of Holdings, the Borrower and their Subsidiaries, or which question the
validity of this Credit Agreement or any of the other Loan Documents, or any
action taken or to be taken pursuant hereto or thereto.
No Materially Adverse Contracts, etc.
-- ---------- ------- ---------- ----
None of Holdings, the Borrower nor any of their Subsidiaries is
subject to any charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation that has or is expected in the future to
have a materially adverse effect on the business, assets or financial
condition of Holdings, the Borrower or any of their Subsidiaries. None of
Holdings, the Borrower nor any of their Subsidiaries is a party to any
contract or agreement that has or is expected, in the judgment of the
Borrower's officers, to have any materially adverse effect on the business of
Holdings, the Borrower or any of their Subsidiaries considered as a whole.
Compliance with Other Instruments, Laws, etc.
---------- ---- ----- ------------ ----- ----
None of Holdings, the Borrower nor any of their Subsidiaries is in
violation of any provision of its charter documents, bylaws, or any agreement
or instrument to which it may be subject or by which it or any of its
properties may be bound or any decree, order, judgment, statute, license, rule
or regulation, in any of the foregoing cases in a manner that could result in
the imposition of substantial penalties or materially and adversely affect the
financial condition, properties or business of Holdings, the Borrower or any
of their Subsidiaries considered as a whole.
Tax Status.
--- ------
Each of Holdings, the Borrower and their Subsidiaries (a) have made
or filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which any of them is subject, (b)
have paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings and (c) have set
aside on their books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Borrower know of no basis for any such claim.
No Event of Default.
-- ----- -- -------
No Default or Event of Default has occurred and is continuing.
Holding Company and Investment Company Acts.
------- ------- --- ---------- ------- ----
None of Holdings, the Borrower nor any of their Subsidiaries is a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company", as such terms are defined in the Public
Utility Holding Company Act of 1935; nor is it an "investment company", or an
"affiliated company" or a "principal underwriter" of an "investment company",
as such terms are defined in the Investment Company Act of 1940.
Absence of Financing Statements, etc.
------- -- --------- ----------- ----
Except with respect to Permitted Liens or as permitted by this Credit
Agreement or the Security Documents, there is no financing statement, security
agreement, chattel mortgage, real estate mortgage or other document filed or
recorded with any filing records, registry or other public office, that
purports to cover, affect or give notice of any present or possible future
lien on, or security interest in, any assets or property of Holdings, the
Borrower or any of their Subsidiaries or any rights relating thereto.
Perfection of Security Interest.
---------- -- -------- --------
All filings, assignments, pledges and deposits of documents or
instruments have been made and all other actions have been taken that are
necessary or advisable, under applicable law, to establish and perfect the
Agent's security interest in the Collateral. The Collateral and the Agent's
rights with respect to the Collateral are not subject to any setoff, claims,
withholdings or other defenses. The Borrower, its Subsidiaries or Holdings, as
the case may be, is the owner of the Collateral free from any lien, security
interest, encumbrance and any other claim or demand, except for Permitted
Liens.
<PAGE>
-41-
Certain Transactions.
------- ------------
Except as set forth on Schedule 9.15 hereto, and for arm's length
transactions pursuant to which Holdings, the Borrower or any of their
Subsidiaries makes payments in the ordinary course of business upon terms no
less favorable than Holdings, the Borrower or such Subsidiary could obtain
from third parties, none of the officers, directors, or employees of Holdings,
the Borrower or any of their Subsidiaries is presently a party to any
transaction with Holdings, the Borrower or any of their Subsidiaries (other
than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Borrower, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee has
a substantial interest or is an officer, director, trustee or partner.
Employee Benefit Plans.
-------- ------- -----
In General.
-- -------
Each Employee Benefit Plan has been maintained and operated
in compliance in all material respects with the provisions of ERISA
and, to the extent applicable, the Code, including but not limited to
the provisions thereunder respecting prohibited transactions.
Terminability of Welfare Plans.
------------- -- ------- -----
Under each Employee Benefit Plan which is an employee
welfare benefit plan within the meaning of [section]3(1) or
[section]3(2)(B) of ERISA, no benefits are due unless the event
giving rise to the benefit entitlement occurs prior to plan
termination (except as required by Title I, Part 6 of ERISA). The
Borrower or an ERISA Affiliate, as appropriate, may terminate each
such Plan at any time (or at any time subsequent to the expiration of
any applicable bargaining agreement) in the discretion of the
Borrower or such ERISA Affiliate without liability to any Person.
Guaranteed Pension Plans.
---------- ------- -----
Each contribution required to be made to a Guaranteed
Pension Plan, whether required to be made to avoid the incurrence of
an accumulated funding deficiency, the notice or lien provisions of
[section]302(f) of ERISA, or otherwise, has been timely made. No
waiver of an accumulated funding deficiency or extension of
amortization periods has been received with respect to any Guaranteed
Pension Plan. No liability to the PBGC (other than required insurance
premiums, all of which have been paid) has been incurred by the
Borrower or any ERISA Affiliate with respect to any Guaranteed
Pension Plan and there has not been any ERISA Reportable Event, or
any other event or condition which presents a material risk of
termination of any Guaranteed Pension Plan by the PBGC. Based on the
latest valuation of each Guaranteed Pension Plan (which in each case
occurred within twelve months of the date of this representation),
and on the actuarial methods and assumptions employed for that
valuation, the aggregate benefit liabilities of all such Guaranteed
Pension Plans within the meaning of [section]4001 of ERISA did not
exceed the aggregate value of the assets of all such Guaranteed
Pension Plans, disregarding for this purpose the benefit liabilities
and assets of any Guaranteed Pension Plan with assets in excess of
benefit liabilities.
Multiemployer Plans.
------------- -----
Neither the Borrower nor any ERISA Affiliate has incurred
any material liability (including secondary liability) to any
Multiemployer Plan as a result of a complete or partial withdrawal
from such Multiemployer Plan under [section]4201 of ERISA or as a
result of a sale of assets described in [section]4204 of ERISA.
Neither the Borrower nor any ERISA Affiliate has been notified that
any Multiemployer Plan is in reorganization or insolvent under and
within the meaning of [section]4241 or [section]4245 of ERISA or that
any Multiemployer Plan intends to terminate or has been terminated
under [section]4041A of ERISA.
Regulations G, U and X.
----------- - - --- -
The proceeds of the Loans shall be used (a) for the AmeriKing
Michigan Acquisition, the Permitted Financed Acquisitions, (b) to convert
existing Indebtedness to the Banks under the Original Credit Agreement to
Loans and Letters of Credit, as the case may be, hereunder, and (c) for
working capital and general corporate purposes. The Borrower will obtain
Letters of Credit solely for working capital and general
<PAGE>
-42-
corporate purposes. No portion of any Loan is to be used, and no portion of
any Letter of Credit is to be obtained, for the purpose of purchasing or
carrying any "margin security" or "margin stock" as such terms are used in
Regulations G, U and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R. Parts 221 and 224.
Environmental Compliance.
------------- ----------
To the best of the Borrower's knowledge, except as disclosed on
Schedule 9.18 attached hereto:
(a) none of the Borrower, its Subsidiaries or any operator
of the Real Estate or any operations thereon is in violation, nor has
the Borrower or any of its Subsidiaries received notice that it, or
any operator of the Real Estate is in alleged violation, of any
judgment, decree, order, law, license, rule or regulation pertaining
to environmental matters, including without limitation, those arising
under the Resource Conservation and Recovery Act ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980 as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act,
the Federal Clean Air Act, the Toxic Substances Control Act, or any
state or local statute, regulation, ordinance, order or decree
relating to health, safety or the environment (hereinafter
"Environmental Laws"), which violation would have a material adverse
effect on the environment or the business, assets or financial
condition of the Borrower and its Subsidiaries considered as a whole;
(b) neither the Borrower nor any of its Subsidiaries has
received notice from any third party including, without limitation:
any federal, state or local governmental authority: (i) that any one
of them has been identified by the United States Environmental
Protection Agency ("EPA") as a potentially responsible party under
CERCLA with respect to a site listed on the National Priorities List,
40 C.F.R. Part 300 Appendix B (1986); (ii) that any hazardous waste,
as defined by 42 U.S.C. [section]6903(5), any hazardous substances as
defined by 42 U.S.C. [section]9601(14), any pollutant or contaminant
as defined by 42 U.S.C. [section]9601(33) and any toxic substances,
oil or hazardous materials or other chemicals or substances regulated
by any Environmental Laws ("Hazardous Substances") which any one of
them has generated, transported or disposed of has been found at any
site at which a federal, state or local agency or other third party
has conducted or has ordered that the Borrower or any of its
Subsidiaries conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; or (iii) except to
the extent that the following would not have a material adverse
effect on the business, assets of financial condition of the Borrower
and its Subsidiaries, taken as a whole, that it is or shall be a
named party to any claim, action, cause of action, complaint, or
legal or administrative proceeding (in each case, contingent or
otherwise) arising out of any third party's incurrence of costs,
expenses, losses or damages of any kind whatsoever in connection with
the release of Hazardous Substances;
(c) (i) no portion of the Real Estate has been used for the
handling, processing, storage or disposal of Hazardous Substances
other than in accordance with applicable Environmental Laws the
noncompliance with which would have a material adverse effect on the
business, assets or financial condition of the Borrower and its
Subsidiaries, taken as a whole; and no underground tank or other
underground storage receptacle for Hazardous Substances is located on
any portion of the Real Estate in violation of any applicable
Environmental Law the noncompliance with which would have a material
adverse effect on the business, assets or financial condition of the
Borrower and its Subsidiaries, taken as a whole; (ii) in the course
of any activities conducted by the Borrower, its Subsidiaries or
operators of such Person's properties, no Hazardous Substances have
been generated or are being used on the Real Estate except in
accordance (in all material respects) with applicable Environmental
Laws the noncompliance with which would have a material adverse
effect on the business, assets or financial condition of the Borrower
and its Subsidiaries, taken as a whole; (iii) there have been no
releases (i.e. any past or present releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting,
escaping, disposing or dumping) or threatened releases of Hazardous
Substances on, upon, into or from the properties of the Borrower or
its Subsidiaries, which releases would have a material adverse effect
on the value of any of the business, assets or financial condition of
the Borrower and its Subsidiaries, taken as a whole; (iv) there have
been no releases on, upon, from or into any real property in the
vicinity of any of the Real Estate which, through soil or groundwater
contamination, may have come to be located on any of the Real Estate,
and which would have a material adverse effect on the business,
assets or financial condition of the Borrower and its Subsidiaries,
taken as a whole and (v) in addition, except to the extent that the
following would not have a materially adverse effect on the business,
assets, or financial conditions of the Borrower and its Subsidiaries,
taken as a whole any Hazardous Substances that have been generated on
any of the Real Estate have been transported offsite only by carriers
having an identification number issued by the EPA, treated or
disposed of only by treatment or disposal facilities maintaining
valid permits as required under applicable Environmental Laws, which
transporters and facilities have been and are operating in compliance
with such permits and applicable Environmental Laws; and
<PAGE>
-43-
(d) none of the Borrower and its Subsidiaries, or any of the
Real Estate is subject to any applicable environmental law requiring
the performance of Hazardous Substances site assessments, or the
removal or remediation of Hazardous Substances, or the giving of
notice to any governmental agency or the recording or delivery to
other Persons of an environmental disclosure document or statement by
virtue of the transactions set forth herein and contemplated hereby.
Subsidiaries, etc.
------------ ---
As of the Closing Date, the Borrower's Subsidiaries are AmeriKing
Colorado, AmeriKing Tennessee, AmeriKing Cincinnati, AmeriKing Virginia and
AmeriKing Michigan, each of which is a wholly-owned Subsidiary of the
Borrower. As of the Closing Date, Holland is a wholly-owned Subsidiary of
AmeriKing Michigan. No other Subsidiary of the Borrower has any other
Subsidiaries. Holdings is the record and beneficial owner of 100% of the
outstanding capital stock of the Borrower. Except as set forth on Schedule
9.19 hereto, neither the Borrower nor any Subsidiary of the Borrower is
engaged in any joint venture or partnership with any other Person.
Chief Executive Offices.
----- --------- -------
Each of the Borrower's and Holdings' chief executive office is at
2215 Enterprise Drive, Suite 1502, Westchester, Illinois 60154, at which
location its books and records are kept. The chief executive office of each
Subsidiary is as set forth on Schedule 9.20 hereto.
Fiscal Year.
------ ----
Each of Holdings and the Borrower has a fiscal year which is the
twelve (12) months ending on the date set forth opposite the respective years
on Schedule 9.21 attached hereto.
No Amendments to Certain Documents.
-- ---------- -- ------- ---------
Neither the Borrower nor its Subsidiaries has amended any of the
AmeriKing Michigan Acquisition Documents in any material respect. Each of the
representations and warranties made by the Borrower and its Subsidiaries in
any of the Loan Documents and the AmeriKing Michigan Acquisition Documents was
true and correct in all material respects when made and continues to be true
and correct in all material respects on the Closing Date, except to the extent
that any of such representations and warranties relate, by the express terms
thereof, solely to a date falling prior to the Closing Date, and except to the
extent that any of such representations and warranties may have been affected
by the consummation of the transactions contemplated and permitted or required
by the Loan Documents or the AmeriKing Michigan Acquisition.
Disclosure
----------
No representation or warranty made by Holdings, the Borrower or any
of their Subsidiaries in this Credit Agreement or in any agreement,
instrument, document, certificate, statement or letter furnished to the Agent
or any Bank by or on behalf of Holdings, the Borrower or any of their
Subsidiaries in connection with any of the transactions contemplated by any of
the Loan Documents or the AmeriKing Michigan Acquisition Documents, contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained therein not misleading in
light of the circumstances in which they are made. There is no fact known to
Holdings or the Borrower as of the Closing Date (other than general economic
and political conditions affecting business generally) which materially
adversely affects, or which is reasonably likely in the future materially
adversely to affect, the financial position, business, operations, or affairs
of Holdings, the Borrower and their respective Subsidiaries taken, as a whole.
Representations Under AmeriKing Michigan Acquisition Document.
--------------- ----- --------- -------- ----------- --------
To the best of the Borrower's knowledge, each of the representations
and warranties of the sellers contained in the AmeriKing Michigan Acquisition
Documents are true and correct in all material respects as of the Closing
Date, and the AmeriKing Michigan Acquisition Closing Date.
Insurance.
---------
The Borrower and each of its Subsidiaries maintains with financially
sound and reputable insurers insurance with respect to its properties and
businesses against such casualties and contingencies as are in accordance with
general practices and businesses engaged in similar activities and similar
geographic areas, with the details of such coverage being more fully described
on Schedule 9.25 hereto.
<PAGE>
-44-
Special Purpose Holding Company.
------- ------- ------- -------
Except as contemplated by this Credit Agreement and the other Loan
Documents, on September 1, 1994 Holdings was created solely for the purposes
of the transactions contemplated by the Revolving Credit and Term Loan
Agreement dated as of September 1, 1994 among the Borrower, Holdings, certain
of the Banks and the Agent, and, as of the Closing Date, Holdings does not
have any significant liabilities (other than liabilities arising under the
Certificate of Incorporation of Holdings, the Stockholders Agreement
(including under the agreements and instruments which are exhibits thereto) or
this Credit Agreement), own any significant assets (other than the capital
stock of the Borrower) or engage in any other significant activity or
business.
AFFIRMATIVE COVENANTS OF THE BORROWER.
----------- --------- -- --- --------
Each of Holdings and the Borrower covenant and agree that, so long as
any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is
outstanding or any Bank has any obligation to make any Loans or the Agent has
any obligation to issue, extend or renew any Letters of Credit:
Punctual Payment.
-------- -------
The Borrower will duly and punctually pay or cause to be paid the
principal and interest on the Loans, all Reimbursement Obligations, the Letter
of Credit Fees, the commitment fees, the Agent's Fee and all other amounts
provided for in this Credit Agreement and the other Loan Documents to which
the Borrower or any of its Subsidiaries is a party, all in accordance with the
terms of this Credit Agreement and such other Loan Documents.
Maintenance of Office.
----------- -- ------
Each of Holdings and the Borrower will maintain its chief executive
office at 2215 Enterprise Drive, Suite 1502, Westchester, Illinois 60154, or
at such other place in the United States of America as the Borrower shall
designate upon written notice to the Agent, where notices, presentations and
demands to or upon Holdings or the Borrower in respect of the Loan Documents
to which Holdings or the Borrower is a party may be given or made.
Records and Accounts.
------- --- --------
Each of Holdings and the Borrower will (a) keep, and cause each of
its Subsidiaries to keep, true and accurate records and books of account in
which full, true and correct entries will be made in accordance with generally
accepted accounting principles and (b) maintain adequate accounts and reserves
for all taxes (including income taxes), depreciation, depletion, obsolescence
and amortization of its properties and the properties of its Subsidiaries,
contingencies, and other reserves.
Financial Statements, Certificates and Information.
--------- ---------- ------------ --- -----------
The Borrower will deliver to the Agent, with sufficient copies for
each of the Banks:
(a) as soon as practicable, but in any event not later than
ninety (90) days after the end of each fiscal year of Holdings and
the Borrower, (i) the consolidated balance sheet of Holdings and its
Subsidiaries as at the end of such year, and the related consolidated
statement of income and consolidated statement of cash flow for such
year, each setting forth in comparative form the figures for the
previous fiscal year and all such consolidated statements to be in
reasonable detail, prepared in accordance with generally accepted
accounting principles, and certified without qualification by
Deloitte & Touche or by other independent certified public
accountants satisfactory to the Agent, and (ii) the unaudited
consolidating balance sheet of Holdings and its Subsidiaries as at
the end of such year, and the related unaudited consolidating
statement of income and unaudited consolidating statements of cash
flow for such year, each setting forth in comparative form the
figures for the previous fiscal year and all such consolidating
statements to be in reasonable detail, prepared by management in
accordance with the past financial practice of Holdings and its
Subsidiaries and that the information contained in such financial
statements fairly presents the financial position of Holdings and its
Subsidiaries on the date hereof;
(b) as soon as practicable, but in any event not later than
forty-five (45) days after the end of each of the fiscal quarters of
the Borrower, copies of the unaudited consolidated and consolidating
balance sheets of Holdings and its Subsidiaries each as at
<PAGE>
-45-
the end of such quarter, and the related consolidated and
consolidating statements of income and consolidated and consolidating
statements of cash flow for the portion of Holdings' fiscal year then
elapsed, each setting forth in comparative form the figures for the
previous fiscal year and a comparison setting forth the corresponding
figures from the budgeted or projected figures set forth in the
projections described in [section]9.4 hereof for such period and all
in reasonable detail and prepared in accordance with generally
accepted accounting principles, and in each case together with a
certification by the principal financial or accounting officer of the
Borrower that the information contained in such financial statements
fairly presents the financial position of Holdings and its
Subsidiaries on the date thereof (subject to year-end adjustments);
(c) as soon as practicable, but in any event within thirty
(30) days after the end of each month in each fiscal year of the
Borrower, unaudited monthly consolidated and consolidating financial
statements of Holdings and its Subsidiaries for such month, each
setting forth in comparative form the figures for the previous fiscal
year and a comparison setting forth the corresponding figures from
the budgeted or projected figures set forth in the projections
described in [section]9.4 for such period, prepared in accordance
with generally accepted accounting principles, together with a
certification by the principal financial or accounting officer of the
Borrower that the information contained in such financial statements
fairly presents the financial condition of Holdings and its
Subsidiaries on the date thereof (subject to year-end adjustments);
(d) simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b) above, a statement
certified by the principal financial or accounting officer of the
Borrower in substantially the form of Exhibit F (the "Compliance
Certificate") hereto and setting forth in reasonable detail
computations evidencing compliance with the covenants contained in
[section]12 and (if applicable) reconciliations to reflect changes in
generally accepted accounting principles since the Balance Sheet
Date;
(e) contemporaneously with the filing or mailing thereof,
copies of all material of a financial nature filed with the
Securities and Exchange Commission or sent to the stockholders of
Holdings or the Borrower;
(f) not later than the beginning of each fiscal year of the
Borrower, projections of Holdings, the Borrower and their
Subsidiaries updating those projections delivered to the Banks and
referred to in [section]9.4.2 or, if applicable, updating any later
such projections delivered pursuant to this [section]10.4(f);
(g) contemporaneously with the delivery thereof, copies
of all accountants' management letters delivered to Holdings, the
Borrower or any of their Subsidiaries; and
(h) from time to time such other financial data and
information as the Agent or any Bank may reasonably request.
The Banks and the Agent agree that they will treat in confidence all financial
information with respect to Holdings and its Subsidiaries which has not become
public, and will not, without the consent of the Borrower, disclose such
information to any third party, and, if any representative or agent of the
Banks or the Agent shall not be an employee of one of the Banks or the Agent
or any affiliate of the Banks or the Agent, such designee shall be reputable
and of recognized standing and shall agree to treat in confidence the
information obtained during any such inspection and, without the prior written
consent of the Borrower, not to disclose such information to any third party
or make use of such information for personal gain. Notwithstanding the
foregoing, the Borrower hereby authorizes the Agent and each of the Banks to
disclose information obtained pursuant to this Credit Agreement which has not
become public to banks or other financial institutions who are participants or
assignees or potential participants or assignees of the Loans made or to be
made hereunder with the Borrower's consent, such consent not to be
unreasonably withheld, and where required or requested by governmental or
regulatory authorities.
Notices.
-------
Defaults.
--------
The Borrower will give notice in writing to the Agent
promptly (but in no event later than five (5) days) of becoming aware
of the occurrence of any Default or Event of Default. If any Person
shall give any notice or take any other action in respect of a
claimed default (whether or not constituting an Event of Default)
under this Credit Agreement or any other note, evidence of
indebtedness, indenture or other obligation to which or with respect
to which the Borrower or any of its Subsidiaries is a party or
obligor, whether as principal, guarantor, surety or otherwise, the
Borrower shall forthwith give written notice thereof to the Agent and
each of the Banks, describing the notice or action and the nature of
the claimed default.
<PAGE>
-46-
Environmental Events.
------------- ------
The Borrower will promptly give notice to the Agent and each
of the Banks (a) of any violation of any Environmental Law that the
Borrower or any of its Subsidiaries reports in writing or is
reportable by such Person in writing (or for which any written report
supplemental to any oral report is made) to any federal, state or
local environmental agency and (b) upon becoming aware thereof, of
any inquiry, proceeding, investigation, or other action, including a
notice from any agency of potential environmental liability, or any
federal, state or local environmental agency or board, that has the
potential to materially affect the assets, liabilities, financial
conditions or operations of the Borrower or any of its Subsidiaries,
or the Agent's security interests pursuant to the Security Documents.
Notification of Claim against Collateral.
------------ -- ----- ------- ----------
The Borrower will, immediately upon becoming aware thereof,
notify the Agent and each of the Banks in writing of any setoff,
claims (including, with respect to the Real Estate, environmental
claims), withholdings or other defenses (collectively, the
"Collateral Claims") to which any of the Collateral, or the Agent's
rights with respect to the Collateral, are subject if the amount of
such Collateral Claim is in excess of $750,000 in the aggregate.
Notice of Litigation and Judgments.
------ -- ---------- --- ---------
Each of Holdings and the Borrower will, and will cause each
of its Subsidiaries to, give notice to the Agent and each of the
Banks in writing within ten (10) Business Days of becoming aware of
any litigation or proceedings threatened in writing or any pending
litigation and proceedings affecting Holdings, the Borrower or any of
their Subsidiaries or to which Holdings, the Borrower or any of their
Subsidiaries is or becomes a party involving an uninsured claim of
more than $1,500,000 against Holdings, the Borrower or any of their
Subsidiaries that could reasonably be expected to have a materially
adverse effect on Holdings, the Borrower or any of their Subsidiaries
and stating the nature and status of such litigation or proceedings.
Each of Holdings and the Borrower will, and will cause each of its
Subsidiaries to, give notice to the Agent and each of the Banks, in
writing, in form and detail satisfactory to the Agent, within ten
(10) Business Days of any judgment not covered by insurance, final or
otherwise, against the Borrower or any of its Subsidiaries in an
amount in excess of $750,000.
Notice of Change of Landlord on BKC Leases.
------ -- ------ -- -------- -- --- ------
The Borrower will, and will cause each of its Restricted
Subsidiaries to give, immediately upon becoming aware thereof, notice
to the Agent in writing of any sale, assignment or other transfer by
BKC of BKC's ownership interest in any Real Estate leased by the
Borrower or any of its Restricted Subsidiaries from BKC.
Corporate Existence; Maintenance of Properties.
--------- ---------- ----------- -- ----------
Each of Holdings and the Borrower will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights and franchises and those of its Subsidiaries except as
permitted under [section]11.5.1 hereof or the dissolution of any Subsidiary of
the Borrower whose operation has been discontinued if such dissolution is, in
the judgment of the Borrower, desirable in the conduct of its business and
does not materially adversely affect the business of the Borrower and its
Subsidiaries on a consolidated basis. Each (a) will cause all of its
properties and those of its Subsidiaries used or useful in the conduct of its
business or the business of its Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment,
(b) will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of Holdings and
the Borrower may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, and (c)
will, and will cause each of its Subsidiaries to, continue to engage primarily
in the businesses now conducted by them and in related businesses; provided
that nothing in this [section]10.6 shall prevent Holdings or the Borrower from
discontinuing the operation and maintenance of any of its properties or any of
those of its Subsidiaries if such discontinuance is, in the judgment of
Holdings or the Borrower, as the case may be, desirable in the conduct of its
or their business and that do not in the aggregate materially adversely affect
the business of Holdings, the Borrower and their Subsidiaries on a
consolidated basis.
Insurance.
---------
<PAGE>
-47-
The Borrower will, and will cause each of its Subsidiaries to,
maintain with financially sound and reputable insurers insurance with respect
to its properties and business against such casualties and contingencies as
shall be in accordance with the general practices of businesses engaged in
similar activities in similar geographic areas and in amounts, containing such
terms, in such forms and for such periods as may be reasonable and prudent and
in accordance with the terms of the Security Agreements and Schedule 9.25.
Taxes.
-----
Each of Holdings and the Borrower will, and will cause each of its
Subsidiaries to, duly pay and discharge, or cause to be paid and discharged,
before the same shall become overdue, all taxes, assessments and other
governmental charges imposed upon it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by
law become a lien or charge upon any of its property; provided that any such
tax, assessment, charge, levy or claim need not be paid if the validity or
amount thereof shall currently be contested in good faith by appropriate
proceedings and if Holdings, the Borrower or such Subsidiary shall have set
aside on its books adequate reserves with respect thereto; and provided
further that Holdings, the Borrower and each Subsidiary of Holdings and the
Borrower will pay all such taxes, assessments, charges, levies or claims
forthwith upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor.
Inspection of Properties and Books, etc.
---------- -- ---------- --- ------ ----
General.
-------
Each of Holdings and the Borrower shall permit the Banks,
through the Agent or any of the Banks' other designated
representatives, to (a) visit and inspect any of the properties of
Holdings, the Borrower or any of their Subsidiaries, (b) to examine
the books of account of the Borrower and their Subsidiaries (and to
make copies thereof and extracts therefrom), (c) to discuss the
affairs, finances and accounts of Holdings, the Borrower and their
Subsidiaries with, and to be advised as to the same by, its and their
officers, all at such reasonable times during normal business hours
and at such reasonable intervals as the Agent or any Bank may
reasonably request and (d) conduct commercial finance examinations
and appraisals of assets, all at such reasonable times during normal
business hours and such reasonable intervals as the Agent or any Bank
may reasonably request. Each of the Banks agrees that it will treat
in confidence the information obtained during any inspection which is
designated by the Borrower as confidential and will not, without the
consent of the Borrower disclose such information to any third party
and, if any representative or agent of any Bank or the Agent shall
not be an employee of such Bank or the Agent, as the case may be, or
any affiliate of such Bank or the Agent, as the case may be, such
designee shall be reputable and of recognized standing and shall
agree in writing to treat in confidence the information obtained
during any such inspection and, without the prior written consent of
the Borrower, not to disclose such information to any third party or
make use of such information for personal gain. Notwithstanding the
foregoing, the Banks and the Agent may disclose information obtained
pursuant to this Credit Agreement to other banks or financial
institutions who are potential participants or potential assignees or
participants in the Loans made or to be made hereunder with the
Borrower's consent not to be unreasonably withheld, and where
required or requested by governmental or regulatory authorities.
Communications with Accountants.
-------------- ---- -----------
Each of Holdings and the Borrower authorizes the Agent and,
if accompanied by the Agent, the Banks to communicate directly with
Holdings' and the Borrower's independent certified public accountants
and authorizes such accountants to disclose to the Agent and the
Banks any and all financial statements and other supporting financial
documents and schedules including copies of any management letter
with respect to the business, financial condition and other affairs
of Holdings, the Borrower or any of their Subsidiaries. At the
request of the Agent, the Borrower shall deliver a letter addressed
to such accountants instructing them to comply with the provisions of
this [section]10.9.2.
Environmental Assessments.
------------- -----------
The Agent may, from time to time, in its discretion, obtain
one or more environmental assessments or audits of any Mortgaged
Property prepared by a hydrogeologist, an independent engineer or
other qualified consultant or expert approved by the Agent to
evaluate or confirm (a) whether any Hazardous Materials are present
in the soil or water at such Mortgaged Property and (b) whether the
use and operation of such Mortgaged Property complies with all
Environmental Laws. Environmental assessments may include detailed
visual inspections of such Mortgaged Property including any and all
storage areas, storage tanks, drains, dry wells, and leaching areas,
and the taking of soil samples, surface water samples and ground
water samples, as well as such other
<PAGE>
-48-
investigations or analysis as the Agent deems appropriate. The Agent
shall provide the Borrower with written notice prior to beginning any
such assessment and shall provide the Borrower with reasonable detail
as to the scope of work to be conducted. In addition, the Borrower
shall be given the option to conduct such assessments on behalf of
the Agent, provided the Borrower commences and completes such
assessments within a reasonable time of the request by the Agent for
such assessment. Except after the occurrence and during the
continuance of an Event of Default pursuant to [section]15.1(a) or
(b), all such environmental assessments shall be conducted and made
at the expense of the Banks.
Compliance with Laws, Contracts, Licenses, and Permits.
---------- ---- ----- ---------- --------- --- -------
Each of Holdings and the Borrower will, and will cause each of its
Subsidiaries to, comply with (a) the applicable laws and regulations wherever
its business is conducted, including all Environmental Laws the noncompliance
with which would have a material adverse effect on the business, assets or
financial condition of Holdings, the Borrower and the Subsidiaries considered
as a whole or the ability of Holdings or the Borrower or any of their
Subsidiaries to fulfill its obligations under this Credit Agreement or the
other Loan Documents to which such Person is a party, (b) the provisions of
its charter documents and by-laws, (c) all agreements and instruments by which
it or any of its properties may be bound, including, without limitation, all
leases and Franchise Agreements, the noncompliance with which could have a
material adverse effect on the business, assets or financial condition of
Holdings, the Borrower and the Subsidiaries considered as a whole or the
ability of Holdings or the Borrower or any of their Subsidiaries to fulfill
its obligations under this Credit Agreement or the other Loan Documents to
which such Person is a party, and (d) all applicable decrees, orders, and
judgments the noncompliance with which could have a material adverse affect on
the business, assets or financial condition of Holdings, the Borrower and the
Subsidiaries considered as a whole or the ability of Holdings or the Borrower
or any of their Subsidiaries to fulfill its obligations under this Credit
Agreement or the other Loan Documents to which such Person is a party. If any
authorization, consent, approval, permit or license from any officer, agency
or instrumentality of any government shall become necessary or required in
order that Holdings, the Borrower or any of their Subsidiaries may fulfill any
of its obligations hereunder or any of the other Loan Documents to which such
Person is a party, Holdings or the Borrower will, or (as the case may be) will
cause such Subsidiary to, immediately take or cause to be taken all reasonable
steps within the power of such Person to obtain such authorization, consent,
approval, permit or license and furnish the Agent and the Banks with evidence
thereof.
Employee Benefit Plans.
-------- ------- -----
Each of Holdings and the Borrower will (a) promptly upon filing the
same with the Department of Labor or Internal Revenue Service upon request of
the Agent, furnish to the Agent a copy of the most recent actuarial statement
required to be submitted under [section]103(d) of ERISA and Annual Report,
Form 5500, with all required attachments, in respect of each Guaranteed
Pension Plan and (b) promptly upon receipt or dispatch, furnish to the Agent
any notice, report or demand sent or received in respect of a Guaranteed
Pension Plan under [section][section]302, 4041, 4042, 4043, 4063, 4065, 4066
and 4068 of ERISA, or in respect of a Multiemployer Plan, under
[section][section]4041A, 4202, 4219, 4242, or 4245 of ERISA.
Use of Proceeds.
--- -- --------
The Borrower will use the proceeds of the Loans (a) to finance the
AmeriKing Michigan Acquisition, the Permitted Acquisitions, (b) to convert
existing Indebtedness to the Banks under the Original Credit Agreement to
Loans or Letters of Credit, as the case may be, hereunder and (c) and for
general corporate and working capital purposes. The Borrower will obtain
Letters of Credit solely for general corporate and working capital purposes.
Fair Labor Standards Act.
---- ----- --------- ---
Each of Holdings and the Borrower will, and each of their
Subsidiaries shall at all times operate its business in compliance with all
material applicable provisions of the Fair Labor Standards Act of 1938, as
amended. None of the inventory of Holdings, the Borrower or any of their
Subsidiaries are or will be produced by employees of (a) Holdings, the
Borrower or any of their Subsidiaries or (b) to the best knowledge of
Holdings, the Borrower and each of their Subsidiaries, by employees of
suppliers, who are, in each case, employed in violation of the minimum wage or
maximum hour provisions of the Fair Labor Standards Act (29 U.S.C.
[section][section]206 and 207) or any regulations promulgated thereunder, in
each case, as in effect from time to time.
Further Assurances.
------- ----------
<PAGE>
-49-
Each of Holdings and the Borrower will, and will cause each of its
Subsidiaries to, cooperate with the Banks and the Agent and execute such
further instruments and documents as the Banks or the Agent shall reasonably
request to carry out to their satisfaction the transactions contemplated by
this Credit Agreement and the other Loan Documents.
Interest Rate Protection.
-------- ---- ----------
The Borrower will, not later than _________, purchase an interest
rate cap or swap or effect other interest rate protection arrangements for a
minimum period of ____ years applicable to not less than _______ percent
(___%) of the _________ Loan, on terms and conditions satisfactory to the
Agent.
Mortgaged Property.
--------- --------
If, after the Closing Date, the Borrower or any of its Restricted
Subsidiaries acquires in any one transaction or a series of related
transactions real estate with either a fair market value or acquisition price
of more than [$500,000], the Borrower or such Restricted Subsidiary, as the
case may be, shall forthwith deliver to the Agent, if the Agent so requests, a
fully executed mortgage or deed of trust over such real estate (which shall
exclude fixtures, furniture and equipment), in form and substance satisfactory
to the Agent, together with title insurance policies, surveys, evidences of
insurance with the Agent named as loss payee and additional insured, legal
opinions and other documents and certificates with respect to such real estate
consistent with the Mortgages and related documents delivered hereunder. In
addition, if, after the Closing Date, the Borrower or any of its Restricted
Subsidiaries leases any real estate and, immediately after giving effect to
such lease, a single landlord and/or its affiliates other than BKC owns twenty
(20) or more pieces of real property leased to the Borrower or any of the
Restricted Subsidiaries, the Borrower or such Restricted Subsidiary, as the
case may be, shall use commercially reasonable efforts to obtain and deliver
to the Agent, if the Agent so requests, a fully executed leasehold mortgage or
leasehold deed of trust over all such real estate (which shall exclude
fixtures, furniture and equipment) owned by such landlord and/or its
affiliates, in form and substance satisfactory to the Agent, together with
title insurance policies, surveys, evidences of insurance with the Agent named
as loss payee and additional insured, legal opinions and other documents and
certificates with respect to such real estate consistent with the Mortgages
and related documents delivered hereunder. The Borrower further agrees that,
following the taking of any such actions with respect to such real estate, the
Agent shall have for the benefit of the Banks and the Agent a valid and
enforceable first priority mortgage or deed of trust over such real estate,
free and clear of all defects and encumbrances except for Permitted Liens.
Class of Stock.
----- -- -----
Each of the Borrower and its Subsidiaries shall at all times have a
voting class of capital stock and a non-voting class of capital stock,
provided that not less than ninety-five percent (95%) of the value of the
Borrower or such Subsidiary, as the case may be, shall be represented by the
non-voting class of capital stock.
Reclassification of Subsidiary.
---------------- -- ----------
In the event the Borrower consummates the sale of certain of its
restaurants to Bruce Taylor or his designee pursuant to [section]11.5.2(f) and
any of the proceeds thereof are used to repay the BKC Note and, within ninety
(90) days of such sale the capital represented by the repaid amount of the BKC
Note has not been completely replaced with other financing and the proceeds of
such other financing have not been distributed to the Borrower by AmeriKing
Tennessee, AmeriKing Tennessee shall become a Restricted Subsidiary and shall
immediately execute and deliver to the Agent a guaranty and security agreement
in form and substance satisfactory to the Agent.
Application of Proceeds of Distribution.
----------- -- -------- -- ------------
In the event the Borrower receives a dividend from AmeriKing
Tennessee pursuant to [section]10.18 hereof, the amount of such dividend
received by the Borrower shall be applied as set forth in either
[section]11.5.2(B) or (C).
CERTAIN NEGATIVE COVENANTS OF THE BORROWER.
------- -------- --------- -- --- --------
Each of Holdings and the Borrower covenant and agree that, so long as
any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is
outstanding or any Bank has any obligation to make any Loans or the Agent has
any obligations to issue, extend or renew any Letters of Credit:
<PAGE>
-50-
Restrictions on Indebtedness.
------------ -- ------------
Each of Holdings and the Borrower will not, and will not permit any
of its Subsidiaries to, create, incur, assume, guarantee or be or remain
liable, contingently or otherwise, with respect to any Indebtedness other
than:
(a) Indebtedness to the Banks and the Agent arising under
any of the Loan Documents;
(b) current liabilities of Holdings, the Borrower or such
Subsidiary incurred in the ordinary course of business not incurred
through (i) the borrowing of money, or (ii) the obtaining of credit
except for credit on an open account basis customarily extended and
in fact extended in connection with normal purchases of goods and
services;
(c) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, materials and
supplies to the extent that payment therefor shall not at the time be
required to be made in accordance with the provisions of
[section]10.8;
(d) Indebtedness in respect of judgments or awards that have
been in force for less than the applicable period for taking an
appeal so long as execution is not levied thereunder and Holdings,
the Borrower or such Subsidiary shall at the time in good faith be
prosecuting an appeal or proceedings for review and in respect of
which a stay of execution shall have been obtained pending such
appeal or review;
(e) endorsements for collection, deposit or negotiation
and warranties of products or services, in each case incurred in
the ordinary course of business;
(f) Indebtedness consisting of (i) unsecured Indebtedness of
the Borrower and the Restricted Subsidiaries not otherwise permitted
hereunder, (ii) obligations of the Borrower and the Restricted
Subsidiaries under Capitalized Leases, and (iii) purchase money
Indebtedness incurred in connection with the acquisition after the
date hereof of any real or personal property by the Borrower or such
Restricted Subsidiary in an amount not to exceed $__________ in the
aggregate, provided that the Borrower or such Restricted Subsidiary
shall not be permitted to finance more than ______ percent (___%) of
the purchase price of the property acquired, and further provided,
that the aggregate principal amount of all such Indebtedness
permitted under this clause (f) shall not exceed $__________
outstanding at any one time;
(g) Indebtedness existing on the date hereof and listed
and described on Schedule 11.1 hereto;
(h) Indebtedness in respect of interest rate protection
arrangements so long as such arrangements are purchased from or
issued by any of the Banks;
(i) Indebtedness in respect of performance, surety,
statutory, appeal or similar bonds obtained in the ordinary course of
business;
(j) Indebtedness to BKC arising under the Franchise
Agreements or the Leases (including, but not limited to, (i) any
guaranty by Holdings of the Borrower's obligations to BKC under the
Franchise Agreements or the Leases or (ii) any guaranty by the
Borrower or a Restricted Subsidiary of another Restricted
Subsidiary's obligations to BKC under the Franchise Agreements or the
Leases);
(k) contingent obligations to Jaro Enterprises, Inc.
consisting of earn-out payments relating to the sale of one restaurant
to the Borrower by Jaro Enterprises, Inc.;
(l) Indebtedness to TJC Management Corp. and Holdings
arising under the Management Agreement and Tax Sharing Agreement;
(m) Indebtedness consisting of obligations of the Borrower
or any of its Subsidiaries under any operating lease or real estate
lease other than guarantees by Holdings, the Borrower or any
Restricted Subsidiary of the obligations under any operating lease or
real estate lease of an Unrestricted Subsidiary; and
(n) Indebtedness of any Unrestricted Subsidiary.
<PAGE>
-51-
Notwithstanding anything to the contrary contained in this [section]11.1, in
no event shall Holdings, the Borrower or its Restricted Subsidiaries, after
the Closing Date, incur Indebtedness under [section]11.1(f) if an Event of
Default exists or would exist after giving effect to the incurrence of such
additional Indebtedness.
Restrictions on Liens.
------------ -- -----
Each of Holdings and the Borrower will not, and will not permit any
of its Subsidiaries to, (a) create or incur or suffer to be created or
incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its property or
assets of any character whether now owned or hereafter acquired, or upon the
income or profits therefrom; (b) transfer any of such property or assets or
the income or profits therefrom for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors; (c) acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device or arrangement; (d) suffer to
exist for a period of more than thirty (30) days after the same shall have
been incurred any Indebtedness or claim or demand against it that if unpaid
might by law or upon bankruptcy or insolvency, or otherwise, be given any
priority whatsoever over its general creditors; or (e) sell, assign, pledge or
otherwise transfer any accounts, contract rights, general intangibles, chattel
paper or instruments, with or without recourse; provided that Holdings, the
Borrower and any Subsidiary of Holdings or the Borrower may create or incur or
suffer to be created or incurred or to exist:
(i) liens to secure taxes, assessments and other government
charges in respect of obligations not overdue or liens on properties
to secure claims for labor, material or supplies in respect of
obligations not overdue;
(ii) deposits or pledges made in connection with, or to
secure payment of, workmen's compensation, unemployment insurance,
old age pensions or other social security obligations;
(iii) liens on properties other than the Mortgaged
Properties in respect of judgments or awards, the Indebtedness with
respect to which is permitted by [section]11.1(d);
(iv) liens of carriers, warehousemen, mechanics and
materialmen, and other like liens on properties, in existence less
than 120 days from the date of creation thereof in respect of
obligations not overdue;
(v) encumbrances on Real Estate other than the Mortgaged
Properties consisting of easements, rights of way, zoning
restrictions, restrictions on the use of real property and defects
and irregularities in the title thereto, landlord's or lessor's liens
under leases to which Holdings, the Borrower or a Subsidiary of
Holdings or the Borrower is a party, and other minor liens or
encumbrances none of which in the opinion of Holdings, the Borrower
interferes materially with the use of the property affected in the
ordinary conduct of the business of Holdings, the Borrower and their
Subsidiaries, which defects do not individually or in the aggregate
have a materially adverse effect on the business of the Borrower
individually or of Holdings, the Borrower and their Subsidiaries on a
consolidated basis;
(vi) liens existing on the date hereof and listed on
Schedule 11.2 hereto;
(vii) purchase money security interests in or purchase money
mortgages on real or personal property acquired after the date hereof
to secure purchase money Indebtedness of the type and amount
permitted by [section]11.1(f), incurred in connection with the
acquisition of such property, which security interests or mortgages
cover only the real or personal property so acquired;
(viii) liens in favor of the Agent for the benefit of the
Banks and the Agent under the Loan Documents;
(ix) liens in favor of BKC to the extent provided in the
Franchise Agreements and Leases;
(x) encumbrances or restrictions on the restaurant
identified as BKC Restaurant #209, to the extent provided in the
Aaseby Sale Agreement; and
(xi) liens on assets of the Unrestricted Subsidiaries.
Restrictions on Investments.
------------ -- -----------
<PAGE>
-52-
Neither Holdings nor the Borrower will, and neither will permit any
of their Subsidiaries to, make or permit to exist or to remain outstanding any
Investment except Investments in:
(a) marketable direct or guaranteed obligations of the
United States of America that mature within one (1) year from the
date of purchase by Holdings or the Borrower;
(b) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks having total
assets in excess of $500,000,000;
(c) securities commonly known as "commercial paper" issued
by a corporation organized and existing under the laws of the United
States of America or any state thereof that at the time of purchase
have been rated and the ratings for which are not less than "P 1" if
rated by Moody's Investors Services, Inc., and not less than "A 1" if
rated by Standard and Poor's;
(d) Repurchase agreements secured by any one or more of
the foregoing;
(e) Investments existing on the date hereof and listed on
Schedule 11.3 hereto and in amounts not to exceed the amounts listed
on Schedule 11.3 hereto;
(f) Investments consisting of the Guaranty or Investments
by the Borrower in Subsidiaries of the Borrower existing on
July __, 1996;
(g) Investments by Holdings in Subsidiaries of Holdings
formed or acquired after September 1, 1994 other than Unrestricted
Subsidiaries, provided (i) such Subsidiary has become a party to the
Credit Agreement as a Borrower and has complied with [section]11.5.1,
(ii) such Investments do not exceed, in the aggregate, $_________
outstanding at any one time and (iii) the Agent has approved such
Investments;
(h) Investments by the Borrower in any of its Restricted
Subsidiaries, provided, such Restricted Subsidiary has executed and
delivered to the Agent for the benefit of the Agent and the Banks a
guaranty and security agreement and such Investments do not exceed,
in the aggregate, $_________ outstanding at any one time;
(i) Investments by the Borrower in any of its Unrestricted
Subsidiaries, provided, such Investments in such Unrestricted
Subsidiaries do not exceed, in the aggregate, $_________ outstanding
at any one time;
(j) Investments by the Borrower in Jaro Enterprises, Inc.
and/or its affiliates pursuant to the terms of the Jaro Loan
Agreement;
(k) Investments by the Borrower or any of its Subsidiaries
made in connection with any Indebtedness permitted under
[section]11.1(l) hereof;
(l) Investments by the Borrower consisting of
Distributions permitted by [section]11.4;
(m) Investments by the Borrower in AmeriKing Tennessee,
provided (i) the aggregate amount of such Investment is not more than
the aggregate amount outstanding under the BKC Note at the time of
such Investment, (ii) such Investment is made simultaneously with a
permitted disposition to Bruce Taylor pursuant to [section]11.5.2 and
(iii) the proceeds of such Investment shall be used solely to repay
the BKC Note; and
(n) Investment by Unrestricted Subsidiaries in Persons other
than Holdings, the Borrower or any Restricted Subsidiary.
Distributions.
-------------
Holdings will not make any Distributions, and the Borrower and its
Subsidiaries will not make any Restricted Payments, other than dividends or
payments:
<PAGE>
-53-
(a) by the Borrower to Holdings required under the Tax
Sharing Agreement to permit Holdings to pay income, franchise and
other taxes and governmental levies owed or payable by Holdings,
provided such dividends or payments shall not be made earlier than
fifteen (15) days prior to the date such payments are due and payable
pursuant to the Tax Sharing Agreement;
(b) by the Borrower to Holdings to permit Holdings to pay
director fees (not to exceed [$75,000] in the aggregate in any
calendar year);
(c) so long as no Default or Event of Default exists and is
continuing at the time of such payment or would result therefrom,
payments by the Borrower to Holdings to permit Holdings to (i) fund
indemnity payments required by Holdings' certificate of incorporation
or by-laws or director indemnity agreements existing on the date
hereof, (ii) pay filing, registration and reporting fees and
expenses, and fees and expenses associated with state qualifications
and other state, federal or regulatory compliance matters, (iii)
comply with expense reimbursement and indemnity provisions under the
Management Agreement, and (iv) comply with expense reimbursement
provisions under the Capitalization Documents, but only to the extent
no Default or Event of Default exists and is continuing at the time
of such payment or result therefrom, provided, such dividends or
payments permitted by this 11.4(c)(i) - (iv) shall not be made
earlier than fifteen (15) days prior to the date such payments are
due and payable from Holdings;
(d) by the Borrower to:
(i) TJC Management Corporation and/or Holdings
consisting of quarterly management fee payments in an
aggregate annual amount of not more than $300,000 per fiscal
year, which are due and payable in such fiscal year pursuant
to the Management Agreement or the Intercompany Management
Agreement and indemnity payments required to be made under
the Management Agreement, provided such dividends or
payments shall not be made earlier than fifteen (15) days
prior to the date such payments are due and payable pursuant
to the terms of the Management Agreement or the Intercompany
Management Agreement, as the case may be; and
(ii) TJC Management Corporation and/or its designee
on or after the Closing Date an investment banking fee of
not more than $_________ in the aggregate and ______________
and/or its designee on or after the Closing Date a broker's
fee of not more than $_________ in the aggregate; and
(e) by any Subsidiary of the Borrower to the Borrower.
Merger, Consolidation and Disposition of Assets.
------- ------------- --- ----------- -- ------
Mergers and Acquisitions.
------- --- ------------
Neither Holdings nor the Borrower will, and neither will
permit any of its Subsidiaries to, become a party to any merger or
consolidation, or agree to or effect any asset acquisition or stock
acquisition (other than the acquisition of assets in the ordinary
course of business consistent with past practices) except (a) the
merger or consolidation of one or more of the Subsidiaries of
Holdings (other than the Borrower) or the Borrower with and into its
parent provided that the survivor of such merger may not be an
Unrestricted Subsidiary, (b) the merger or consolidation of two or
more Subsidiaries of Holdings (other than the Borrower) or the
Borrower, provided that the survivor of such merger may not be an
Unrestricted Subsidiary unless the merger involves only Unrestricted
Subsidiaries, (c) the AmeriKing Michigan Acquisition and (d) other
acquisitions of the assets and businesses of BKC Restaurants, or the
development of such restaurants or other quick service restaurants
(the "Permitted Acquisitions") where (i) no Default or Event of
Default has occurred or is continuing or would exist after giving
effect thereto; (ii) the Borrower has provided the Agent with prior
written notice of such acquisition or development; (iii) the Borrower
or the Restricted Subsidiary, as the case may be, has taken all
necessary actions to grant to the Agent a first priority perfected
lien in such assets other than those assets which are not permitted
to be encumbered by any Franchise Agreement or lease affecting such
restaurant or which secure purchase money Indebtedness permitted
pursuant to [section]11.1(f), and, in the case of an Unrestricted
Subsidiary, such Unrestricted Subsidiary has taken all necessary
action to grant to the Agent a perfected lien on the non-voting
capital stock of its Subsidiaries pursuant to the requirements of
[section]8.1 hereof; (iv) the Borrower and its Subsidiaries do not
acquire or develop in any fiscal year that number of restaurants
which would exceed [twenty percent (20%)] of the number of
restaurants owned by the Borrower and its Subsidiaries at the end of
the immediately preceding fiscal year; provided, however, for the
period from the Closing Date through the next fiscal year, those
restaurants owned by AmeriKing Virginia and AmeriKing Cincinnati
shall be deemed to have been owned in the immediately preceding
fiscal year; (v) the Borrower has demonstrated to the Agent based on
a pro forma Compliance Certificate
<PAGE>
-54-
covenant compliance with [section]12 on a Pro Forma Basis immediately
prior to and after giving effect to such acquisition or development;
(vi) any acquisition-related Indebtedness would not violate the
restrictions on Indebtedness set forth in [section]11.1; (vii)
immediately after giving effect to such acquisition or development,
the Total Commitment exceeds the sum of (1) the aggregate outstanding
Revolving Credit Loans plus (2) the Maximum Drawing Amount plus (3)
all Unpaid Reimbursement Obligations by at least $_________; (viii)
immediately after giving effect to such acquisition and/or
development, the total number of non-BKC Restaurants does not exceed,
in the aggregate, ten (10) restaurants and the total number of
Dual-Use Establishments does not exceed ten percent (10%) of the
number of restaurants owned by the Borrower and its Subsidiaries at
the end of the immediately preceding fiscal year; (ix) the aggregate
cash purchase price for such acquisition is not in excess of six (6)
times the Restaurant Cash Flow of the business to be acquired for the
twelve (12) months immediately prior to such acquisition; (x) the
Borrower has demonstrated to the Agent that immediately after giving
effect to the proposed acquisition the Leverage Ratio does not exceed
3.50:1.00; and (xi) the Borrower has demonstrated to the Agent that
the aggregate revenues of the business to be acquired does not exceed
twenty percent (20%) of the Borrower's revenues prior to the proposed
acquisition, determined on a Pro Forma Basis.
In the event any new Restricted Subsidiary is formed as a
result of or in connection with any acquisition or development, the
Loan Documents shall be amended and/or supplemented as necessary to
make the terms and conditions of the Loan Documents applicable to
such Restricted Subsidiary. In the case of Holdings forming such
Subsidiary or the Borrower forming such Restricted Subsidiary, such
Subsidiary shall become a guarantor hereunder.
Disposition of Assets.
----------- -- ------
Neither Holdings nor the Borrower will, and neither will
permit any of its Subsidiaries to, become a party to or agree to or
effect any disposition of assets, other than (a) the sale of
inventory in the ordinary course of business, consistent with past
practices, (b) the disposition of obsolete assets which are no longer
used or useful in current or planned business operations of such
Person, (c) the disposition of assets in the ordinary course of
business, consistent with past practices, (d) the assignment of the
Borrower's Option, so long as at the time such assignee exercises the
Option, the Borrower and such assignee enter into a lease with terms
no less favorable to the Borrower than the terms of the lease being
replaced as a result of the exercise of the Option, (e) so long as no
Default or Event of Default has occurred or is continuing, the sale
of the restaurant identified as BKC Restaurant #209 to Joel Aaseby,
provided such sale is on terms and conditions substantially as set
forth in the Aaseby Sale Agreement and (f) so long as no Default or
Event of Default has occurred or is continuing or would result
therefrom, the sale to BKC or its minority designee of not more than
twenty (20) of the restaurants acquired by the Borrower in the
Initial Acquisition (as such term is defined in the Original Credit
Agreement) and the Acquisition (as defined in the Original Credit
Agreement), provided (i) the cash consideration for each restaurant
sold is at least equal to 4.75 times Restaurant Cash Flow for such
restaurant, (ii) all cash proceeds of each such sale is applied to
either (A) repay existing Indebtedness to BKC owing under the BKC
Note in an amount not to exceed $6,920,700 in the aggregate in the
event such sale is to Bruce Taylor or his designee; (B) the purchase
within ninety (90) days of such sale of a replacement restaurant from
BKC for a purchase price of not more than 4.75 times the Restaurant
Cash Flow of the restaurant purchased or (C) pro rata to the
repayment of the Term Loan with such payments then applied against
the scheduled installments of principal due on the respective Term
Loan in the inverse order of maturity; and (iii) such sales are on
terms and conditions satisfactory to the Agent.
Sale and Leaseback.
---- --- ---------
Other than the FFCA Transaction and the ProSource Transaction,
neither Holdings nor the Borrower will, and neither will permit any of its
Subsidiaries to, enter into any arrangement, directly or indirectly, whereby
Holdings, the Borrower or any Subsidiary of Holdings or the Borrower shall
sell or transfer any property owned by it in order then or thereafter to lease
such property or lease other property that Holdings or the Borrower or any
Subsidiary of Holdings or the Borrower intends to use for substantially the
same purpose as the property being sold or transferred, provided, however,
that Holdings, the Borrower or any of their Subsidiaries may enter into such
sale-leaseback transactions to the extent that the Indebtedness incurred in
connection with such transactions is permitted under [section]11.1(g) hereof.
Compliance with Environmental Laws.
---------- ---- ------------- ----
Except as set forth on Schedule 11.7 hereto, neither Holdings nor the
Borrower will, and neither will permit any of its Subsidiaries to, (a) use any
of the Real Estate or any portion thereof for the handling, processing,
storage or disposal of Hazardous Substances in violation of any Environmental
Law the noncompliance with which would have a material adverse effect on the
business, assets or financial condition of Holdings, the Borrower or their
Subsidiaries taken as a whole, (b) cause or permit to be located on any of the
Real Estate any underground
<PAGE>
-55-
tank or other underground storage receptacle for Hazardous Substances in
violation of any Environmental Law the noncompliance with which would have a
material adverse effect on the business, assets or financial condition of
Holdings, the Borrower or their Subsidiaries taken as a whole, (c) generate
any Hazardous Substances on any of the Real Estate in violation of any
Environmental Law the noncompliance with which would have a material adverse
effect on the business, assets or financial condition of Holdings, the
Borrower or their Subsidiaries taken as a whole, (d) conduct any activity at
any Real Estate or use any Real Estate in any manner so as to cause a release
(i.e. releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, disposing or dumping) or
threatened release of Hazardous Substances on, upon or into the Real Estate or
(e) otherwise conduct any activity at any Real Estate or use any Real Estate
in any manner that would violate any Environmental Law or bring such Real
Estate in violation of any Environmental Law in each case if such violation
would have a material adverse effect on the business, assets or financial
condition of Holdings, the Borrower and its Subsidiaries, taken as a whole.
Stockholders' Agreement.
------------- ---------
From and after the Closing Date neither Holdings nor the Borrower
will, and neither will permit any of its Subsidiaries to, amend, supplement or
otherwise modify the terms of the Stockholders Agreement if such amendment,
supplement or modification could reasonably be expected to adversely affect
the Agent's or the Banks' rights or impact the Borrower's or Holdings'
abilities to fulfill their obligations under the Loan Documents.
Employee Benefit Plans.
-------- ------- -----
Neither Holdings, the Borrower nor any ERISA Affiliate will
(a) engage in any "prohibited transaction" within the
meaning of [section]406 of ERISA or [section]4975 of the Code which
could result in a material liability for the Borrower or any of its
Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is defined in
[section]302 of ERISA, whether or not such deficiency is or may be
waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner
which, could result in the imposition of a lien or encumbrance on the
assets of the Borrower or any of its Subsidiaries pursuant to
[section]302(f) or [section]4068 of ERISA; or
(d) permit or take any action which would result in the
aggregate benefit liabilities (with the meaning of [section]4001 of
ERISA) of all Guaranteed Pension Plans exceeding the value of the
aggregate assets of such Plans, disregarding for this purpose the
benefit liabilities and assets of any such Plan with assets in excess
of benefit liabilities, by more than the amount set forth in
[section]8.16.3.
Change in Terms of Capital Stock.
------ -- ----- -- ------- -----
The Borrower will not, and will not permit any of its Restricted
Subsidiaries to effect or permit any change in or amendment to any document or
instrument pertaining to the terms of such Person's capital stock without the
written consent of the Banks unless such change or amendment is of an
immaterial or ministerial nature that would not have any adverse effect on the
Agent's or the Banks' rights under the Loan Documents or the Borrower's or
Holdings' obligations under the Loan Documents.
Fiscal Year.
------ ----
Neither Holdings nor the Borrower nor any Subsidiaries will change
the date of the end of their respective fiscal years from that set forth in
[section]9.21 hereof.
Business Activities.
-------- ----------
Holdings will not engage in any business activity, except its
consummation of the AmeriKing Michigan Acquisition, activities in connection
with Investments permitted by [section]11.3(g), its ownership of the Borrower
and its performance from time to time of its obligations under this Credit
Agreement, the other Loan Documents, the Stock Purchase Agreement, the
Capitalization Documents and each other agreement, instrument or document
contemplated hereby, whether or not executed on or before the Closing Date.
<PAGE>
-56-
Modification of Documents.
------------ -- ---------
Neither Holdings nor the Borrower will consent to or agree to any
amendment, supplement or other modification to the Tax Sharing Agreement, the
Management Agreement, the Management Subscription Agreement or the
Intercompany Management Agreement which affects, in a manner adverse to
Holdings or the Borrower, the amount or timing of payments required to be made
by the Borrower or Holdings thereunder, or if such amendment, supplement or
modification could reasonably be expected to adversely affect the Agent's or
the Banks' rights or interests or adversely affect the Borrower's or Holdings'
abilities to fulfill their obligations under the Loan Documents.
Negative Pledges.
-------- -------
Neither Holdings, the Borrower nor any of their Subsidiaries other
than the Unrestricted Subsidiaries will enter into any agreement (excluding
this Credit Agreement and the Loan Documents) prohibiting the creation or
assumption of any lien upon its properties, revenues or assets or those of any
of its Subsidiaries, whether now owned or hereafter acquired other than
agreements with Persons prohibiting any such lien on assets in which such
Person has a prior security interest which is permitted by [section]11.2.
Transactions with Affiliates.
------------ ---- ----------
Neither Holdings nor the Borrower will, nor will they permit any of
their Subsidiaries to, enter into, or cause, suffer or permit to exist (a) any
arrangement or contract with any of its other Affiliates of a nature
customarily entered into by Persons which are Affiliates of each other
(including management or similar contracts or arrangements relating to the
allocation of revenues, taxes and expenses or otherwise) requiring any
payments to be made by Holdings, the Borrower or any of their Subsidiaries to
any Affiliate unless such arrangement is fair and equitable to Holdings, the
Borrower or such Subsidiary; or (b) any other transaction, arrangement,
contract with any of their other Affiliates which would not be entered into by
a prudent Person in the position of Holdings, the Borrower or such Subsidiary
with, or which is on terms which are less favorable than are obtainable from,
any Person which is not one of its Affiliates, provided, however, nothing
contained in this [section]11.15 shall prohibit Holdings or the Borrower from
making or receiving payments otherwise permitted by [section]11.4 hereof.
Upstream Limitations.
-------- -----------
The Borrower will not, nor will the Borrower permit any of its
Restricted Subsidiaries to enter into any agreement, contract or arrangement
(other than the Credit Agreement and the other Loan Documents) restricting the
ability of any Restricted Subsidiary to pay or make dividends or distributions
in cash or kind, to make loans, advances or other payments of whatsoever
nature or to make transfers or distributions of all or any part of its assets
to the Borrower or to any Subsidiary of such Restricted Subsidiary.
Inconsistent Agreements.
------------ ----------
Neither Holdings nor the Borrower will, nor will they permit any of
their Subsidiaries to, enter into any agreement containing any provision which
would be violated or breached by the performance by Holdings, the Borrower or
such Subsidiary of its obligations hereunder or under any of the Loan
Documents.
Capital Expenditures.
------- ------------
The Borrower will not make, or permit any Subsidiary to make, Capital
Expenditures in any fiscal period set forth on the table below that exceed, in
the aggregate the amount set forth opposite such fiscal period in such table:
===========================================================================
Fiscal Period Ending Amount
------ ------ ------ ------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
<PAGE>
-57-
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
FINANCIAL COVENANTS OF THE BORROWER.
--------- --------- -- --- --------
The Borrower covenants and agrees that, so long as any
Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding
or any Bank has any obligation to make any Loans or the Agent has any
obligation to issue, extend or renew any Letters of Credit:
Debt Service Coverage Ratio.
---- ------- -------- -----
The Borrower will not, as of the end of any fiscal quarter
ending during any period described in the table set forth below, permit the
Debt Service Coverage Ratio for the Reference Period ending on such date to be
less than the ratio set forth opposite such period in such table:
=============================================================================
Fiscal Quarter Ending Ratio
------ ------- ------ -----
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Interest Coverage Ratio.
-------- -------- -----
The Borrower will not, as of the end of any fiscal
quarter ending during any period described in the table set forth below,
permit the Interest Coverage Ratio for the Reference Period ending on such
date to be less than the ratio set forth opposite such period in such table:
=============================================================================
Fiscal Quarter Ending Ratio
------ ------- ------ -----
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<PAGE>
-58-
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Leverage Ratio.
-------- -----
The Borrower will not, at any time during any
period described in the table set forth below, permit the Leverage Ratio to
exceed the ratio set forth opposite such period in such table:
=============================================================================
Fiscal Quarter Ending Ratio
------ ------- ------ -----
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
CLOSING CONDITIONS.
------- ----------
The obligations of the Banks to make the initial
Revolving Credit Loans and the Term Loan and of the Agent to issue any initial
Letters of Credit shall be subject to the satisfaction of the following
conditions precedent on or prior to July __, 1996:
Loan Documents etc.
---- --------- ---
Loan Documents.
---- ---------
Each of the Loan Documents shall have been duly executed and
delivered by the respective parties thereto, shall be in full force
and effect and shall be in form and substance satisfactory to each of
the Banks. Each Bank shall have received a fully executed copy of
each such document.
Acquisition and Capitalization Documents.
----------- --- -------------- ---------
Each of the AmeriKing Michigan Acquisition Documents, the
Capitalization Documents not previously executed and delivered
pursuant to the Original Credit Agreement, and any amendments thereto
shall have been duly executed and delivered by the respective parties
thereto, shall be in full force and effect and shall be in form and
substance satisfactory to each of the Banks. The Agent shall have
received a fully executed copy of each such document.
Certified Copies of Charter Documents.
--------- ------ -- ------- ---------
Each of the Banks shall have received from Holdings, the Borrower and
each of its Subsidiaries a copy, certified by a duly authorized officer of
such Person to be true and complete on the Closing Date, of each of (a) its
charter or other incorporation documents as in effect on such date of
certification, and (b) its by-laws as in effect on such date.
Corporate Action.
--------- ------
All corporate action necessary for the valid execution, delivery and
performance by Holdings, the Borrower and its Subsidiaries of this Credit
Agreement and the other Loan Documents to which it is or is to become a party
shall have been duly and effectively taken, and evidence thereof satisfactory
to the Banks shall have been provided to each of the Banks.
Incumbency Certificate.
---------- -----------
<PAGE>
-59-
Each of the Banks shall have received from Holdings, the Borrower and
its Subsidiaries an incumbency certificate, dated as of the Closing Date,
signed by a duly authorized officer of Holdings, the Borrower and its
Subsidiaries, and giving the name and bearing a specimen signature of each
individual who shall be authorized: (a) to sign, in the name and on behalf of
each of Holdings, the Borrower and its Subsidiaries, each of the Loan
Documents to which the Borrower and its Subsidiaries is or is to become a
party; (b) in the case of the Borrower, to make Loan Requests, Advance
Requests and Conversion Requests and to apply for Letters of Credit; and (c)
to give notices and to take other action on its behalf under the Loan
Documents.
Validity of Liens.
-------- -- -----
The Security Documents shall be effective to create in favor of the
Agent a legal, valid and enforceable first (except for Permitted Liens
entitled to priority under applicable law) security interest in and lien upon
the Collateral. All filings, recordings, deliveries of instruments and other
actions necessary or desirable in the opinion of the Agent to protect and
preserve such security interests shall have been duly effected. The Agent
shall have received evidence thereof in form and substance satisfactory to the
Agent.
Perfection Certificates and UCC Search Results.
---------- ------------ --- --- ------ -------
The Agent shall have received from each of Holdings, the Borrower and
its Subsidiaries other than the Unrestricted Subsidiaries a completed and
fully executed Perfection Certificate and the results of UCC searches with
respect to the Collateral, indicating no liens other than Permitted Liens and
otherwise in form and substance satisfactory to the Agent.
Certificates of Insurance.
------------ -- ---------
The Agent shall have received a certificate of insurance from an
independent insurance broker dated as of the Closing Date, identifying
insurers, types of insurance, insurance limits, and policy terms, and
otherwise describing the insurance obtained in accordance with the provisions
of the Security Documents.
Solvency Certificate.
-------- -----------
Each of the Banks shall have received an officer's certificate of the
Borrower dated as of the Closing Date as to the solvency of Holdings, the
Borrower and their Subsidiaries following the consummation of the transactions
contemplated herein and in form and substance satisfactory to the Banks.
Opinion of Counsel.
------- -- -------
Each of the Banks and the Agent shall have received a favorable legal
opinion addressed to the Banks and the Agent, dated as of the Closing Date, in
form and substance reasonably satisfactory to the Agent, from Mayer, Brown &
Platt, special counsel to Holdings and the Borrower and Freeborn & Peters,
special counsel to AmeriKing Michigan.
Payment of Fees and other Arrangements.
------- -- ---- --- ----- ------------
The Borrower shall have paid to the Banks or the Agent, as
appropriate, the closing fee, the amendment fee and the Agent's Fee and
complied with all other arrangements set forth in the Fee Letter between the
Agent and the Borrower.
Disbursement Instructions.
------------ ------------
The Agent shall have received disbursement instructions from the
Borrower with respect to the proceeds of the Term Loan and the initial
Revolving Credit Loan.
Satisfaction of Conditions of AmeriKing Michigan Acquisition
Documents.
The Agent shall have received evidence that all of the closing
conditions in the AmeriKing Michigan Acquisition Documents have been satisfied
or waived in writing by the appropriate parties.
Completion of AmeriKing Michigan Acquisition, etc.
---------- -- --------- -------- ------------ ----
<PAGE>
-60-
The AmeriKing Michigan Acquisition shall have been completed pursuant
to the AmeriKing Michigan Acquisition Documents and otherwise on terms and
conditions that are satisfactory to the Agent in all respects.
Completion of Successful Financial Inquiry.
---------- -- ---------- --------- -------
The Agent and the Bank, shall be satisfied that all information
provided to the Agent prior to the Closing Date accurately sets forth the cash
flow for such period attributable to the assets and business to be acquired in
the AmeriKing Michigan Acquisition.
Taxes.
-----
The Agent shall have received evidence of payment of real estate
taxes and municipal charges on all Real Estate due on or before the Closing
Date.
Title Insurance.
----- ---------
The Agent shall have received a Title Policy covering each Mortgaged
Property (or commitments to issue such policies, with all conditions to
issuance of the Title Policy deleted by an authorized agent of the Title
Insurance Company) together with proof of payment of all fees and premiums for
such policies, from the Title Insurance Company and in amounts satisfactory to
the Agent, insuring the interest of the Agent and each of the Banks as
mortgagee under the Mortgages.
Landlord Consents.
-------- --------
The Borrower and its Subsidiaries shall have delivered to the Agent
all consents which are required for the Agent to receive, as part of the
Security Documents, a leasehold mortgage on each of the Mortgaged Properties
existing on the Closing Date and estoppel certificates on each of the
Mortgaged Properties as the Agent may reasonably request.
Hazardous Waste Assessments.
--------- ----- -----------
The Agent shall have received hazardous waste site assessments from
environmental engineers and in form and substance reasonably satisfactory to
the Agent, covering all Mortgaged Properties in which the Mortgage is dated as
of the Closing Date and all other real property in respect of which the
Borrower or any of its Subsidiaries may have material liability, whether
contingent or otherwise, for dumping or disposal of Hazardous Substances.
Consents and Approvals.
-------- --- ---------
The Agent shall have received evidence that all consents and
approvals necessary to complete the Acquisitions and the transactions
contemplated hereby, including but not limited to all consents and approvals
contemplated by the AmeriKing Michigan Acquisition Documents, have been
obtained.
Completion of IPO.
---------- -- ---
The Agent shall have received evidence satisfactory to the Agent that
(a) Holdings has completed an initial public offering of its common stock in
accordance with the registration statement on Form S-1 substantially in the
form filed by Holdings with the Securities and Exchange Commission on June
___, 1996; (b) Holdings has received net cash proceeds from such initial
public offering in an aggregate amount of not less than $85,000,000; and (c)
Holdings has applied the proceeds received from such initial public offering
in the manner set forth in the use of proceeds section of such registration
statement, including to (i) repay all existing Indebtedness of Holdings
existing on the Closing Date and redeem all of its Preferred Stock issued and
outstanding on such date and (ii) make a capital contribution to the Borrower
in an amount equal to the net cash proceeds received by Holdings from such
offering less the amount used to repay existing Indebtedness and redeem its
Preferred Stock as set forth in subparagraph (c)(ii) hereof.
Repayment of PMI Debt.
--------- -- --- ----
<PAGE>
-61-
The Agent shall have received evidence satisfactory to the Agent that
the Borrower has repaid in full all Indebtedness of the Borrower owing to PMI
Mezzanine Fund, L.P. arising pursuant to the Note Purchase Agreement dated as
of February 7, 1996 among the Borrower, Holdings and PMI Mezzanine Fund, L.P.
Allocation Adjustments.
---------- -----------
The Agent shall have received evidence that the parties hereto have
agreed to any necessary adjustments regarding interest and fees owing to any
of the Banks under the Original Credit Agreement resulting from the
reallocation of the Commitments under this Credit Agreement.
CONDITIONS TO ALL BORROWINGS.
---------- -- --- ----------
The obligations of the Banks to make any Loan, including the
Revolving Credit Loan and the Term Loan, and of the Agent to issue, extend or
renew any Letter of Credit, in each case whether on or after the Closing Date,
shall also be subject to the satisfaction of the following conditions
precedent:
Representations True; No Event of Default.
--------------- ----- -- ----- -- -------
Each of the representations and warranties of any of Holdings, the
Borrower and their Subsidiaries contained in this Credit Agreement, the other
Loan Documents or in any document or instrument delivered pursuant to or in
connection with this Credit Agreement shall be true as of the date as of which
they were made and shall also be true at and as of the time of the making of
such Loan or the issuance, extension or renewal of such Letter of Credit, with
the same effect as if made at and as of that time (except to the extent of
changes resulting from transactions contemplated or permitted by this Credit
Agreement and the other Loan Documents and changes occurring in the ordinary
course of business that singly or in the aggregate are not materially adverse,
and to the extent that such representations and warranties relate expressly to
an earlier date) and no Default or Event of Default shall have occurred and be
continuing.
No Legal Impediment.
-- ----- ----------
No change shall have occurred in any law or regulations thereunder or
interpretations thereof that in the reasonable opinion of any Bank would make
it illegal for such Bank to make such Loan or to participate in the issuance,
extension or renewal of such Letter of Credit or in the reasonable opinion of
the Agent would make it illegal for the Agent to issue, extend or renew such
Letter of Credit.
Governmental Regulation.
------------ ----------
Each Bank shall have received such statements in substance and form
reasonably satisfactory to such Bank as such Bank shall require for the
purpose of compliance with any applicable regulations of the Comptroller of
the Currency or the Board of Governors of the Federal Reserve System.
Proceedings and Documents.
----------- --- ---------
All proceedings in connection with the transactions contemplated by
this Credit Agreement, the other Loan Documents and all other documents
incident thereto shall be satisfactory in substance and in form to the Banks
and to the Agent and the Agent's Special Counsel, and the Banks, the Agent and
such counsel shall have received all information and such counterpart
originals or certified or other copies of such documents as the Agent may
reasonably request.
Conditions to Advances of Acquisition Loan.
---------- -- -------- -- ----------- ----
Due Diligence Inquiry.
--- --------- -------
The Agent and each Bank shall be satisfied with the results
of any due diligence conducted by the Borrower, the Agent or any Bank
in connection with the relevant Permitted Financed Acquisition.
Acquisition Documents.
----------- ---------
<PAGE>
-62-
The Agent and the Banks shall have received copies of all
documents to be entered into in connection with each such Permitted
Financed Acquisition, and shall be satisfied with the terms thereof.
Pro Forma Compliance.
--- ----- ----------
The Agent and each Bank shall have received a Compliance
Certificate from the Borrower showing pro forma compliance with the
covenants set forth in [section]12 both prior to and after giving
effect to each Permitted Financed Acquisition.
Use of Proceeds.
--- -- --------
The Agent shall have received evidence that the Borrower has
used the proceeds of each Advance requested solely to finance the
cash portion of the purchase price of each Permitted Financed
Acquisition for which such Advance is being requested.
EVENTS OF DEFAULT; ACCELERATION; ETC.
------ -- -------- ------------- ---
Events of Default and Acceleration.
------ -- ------- --- ------------
If any of the following events ("Events of Default" or, if the giving
of notice or the lapse of time or both is required, then, prior to such notice
or lapse of time, "Defaults") shall occur:
(a) the Borrower shall fail to pay any principal of the
Loans or any Reimbursement Obligation when the same shall become due
and payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment;
(b) the Borrower shall fail to pay any (i) interest on the
Loans, (ii) the commitment fee, (iii) any Letter of Credit Fee, (iv)
the Agent's fee, or (v) other sums due hereunder or under any of the
other Loan Documents, when the same shall become due and payable,
whether at the stated date of maturity or any accelerated date of
maturity or at any other date fixed for payment and such failure
shall continue for five (5) days;
(c) the Borrower or Holdings shall fail to comply with any
of its covenants contained in the first sentence of
[section][section]10.6, [section]10.9, 10.12, 10.13, 11.1 through
11.6, 11.8, 11.10, 11.11 or [section]12;
(d) Holdings, the Borrower or any of their Subsidiaries
shall fail to perform any term, covenant or agreement contained
herein or in any of the other Loan Documents (other than those
specified elsewhere in this [section]15.1) for thirty (30) days after
written notice of such failure has been given to the Borrower by the
Agent;
(e) any representation or warranty of Holdings, the Borrower
or any of their Subsidiaries in this Credit Agreement or any of the
other Loan Documents or in any other document or instrument delivered
pursuant to or in connection with this Credit Agreement shall prove
to have been false in any material respect upon the date when made or
deemed to have been made or repeated;
(f) Holdings, the Borrower or any of their Subsidiaries
other than the Unrestricted Subsidiaries shall (i) fail to pay at
maturity, or within any applicable period of grace, any obligation
for borrowed money or credit received or in respect of any
Capitalized Leases in an aggregate amount in excess of $___________,
or (ii) fail to observe or perform any material term, covenant or
agreement contained in any agreement by which it is bound, evidencing
or securing borrowed money or credit received or in respect of any
Capitalized Leases in an aggregate amount in excess of $_________ for
such period of time as would permit (assuming the giving of
appropriate notice if required) the holder or holders thereof or of
any obligations issued thereunder to accelerate the maturity thereof,
or any Indebtedness of any of the Unrestricted Subsidiaries shall be
accelerated by the holders thereof;
(g) Holdings, the Borrower or any of their Subsidiaries
shall make an assignment for the benefit of creditors, or admit in
writing its inability to pay or generally fail to pay its debts as
they mature or become due, or shall petition or apply for the
appointment of a trustee or other custodian, liquidator or receiver
of such Person or of any substantial part of the assets of such
Person or shall commence any case or other proceeding relating to
such Person under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or
similar law of any jurisdiction, now or hereafter in effect, or shall
take any action to authorize or in furtherance of any of the
foregoing, or if any such petition or application shall be filed or
any such case
<PAGE>
-63-
or other proceeding shall be commenced against such Person and such
Person shall indicate its approval thereof, consent thereto or
acquiescence therein;
(h) a decree or order is entered appointing any such
trustee, custodian, liquidator or receiver or adjudicating Holdings,
the Borrower or any of their Subsidiaries bankrupt or insolvent, or
approving a petition in any such case or other proceeding, or a
decree or order for relief is entered in respect of any such Person
in an involuntary case under federal bankruptcy laws as now or
hereafter constituted and such case or proceeding remains undismissed
for sixty (60) days;
(i) there shall remain in force, undischarged, unsatisfied
and unstayed, for more than thirty (30) days, whether or not
consecutive, any final judgment against Holdings, the Borrower or any
of their Subsidiaries that, with other outstanding final judgments,
undischarged, against such Persons exceeds in the aggregate $_____;
(j) all or any part of any Preferred Stock of Holdings, the
Borrower or any of their respective Subsidiaries shall be prepaid,
redeemed or repurchased in whole or in part;
(k) if any of the Loan Documents shall be cancelled,
terminated, revoked or rescinded or the Agent's security interests,
mortgages or liens in substantially all of the Collateral shall cease
to be perfected, or shall cease to have the priority contemplated by
the Security Documents, in each case otherwise than in accordance
with the terms thereof or with the express prior written agreement,
consent or approval of the Banks, or any action at law, suit or in
equity or other legal proceeding to cancel, revoke or rescind any of
the Loan Documents shall be commenced by or on behalf of Holdings,
the Borrower or any of their Subsidiaries party thereto or any of
their respective stockholders, or any court or any other governmental
or regulatory authority or agency of competent jurisdiction shall
make a determination that, or issue a judgment, order, decree or
ruling to the effect that, any one or more of the Loan Documents is
illegal, invalid or unenforceable in accordance with the terms
thereof;
(l) with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and the Majority Banks shall
have determined in their reasonable discretion that such event
reasonably could be expected to result in liability of the Borrower
or any of its Subsidiaries to the PBGC or such Guaranteed Pension
Plan in an aggregate amount exceeding $__________ and such event in
the circumstances occurring reasonably could constitute grounds for
the termination of such Guaranteed Pension Plan by the PBGC or for
the appointment by the appropriate United States District Court of a
trustee to administer such Guaranteed Pension Plan; or a trustee
shall have been appointed by the United States District Court to
administer such Plan; or the PBGC shall have instituted proceedings
to terminate such Guaranteed Pension Plan;
(m) Holdings, the Borrower or any of their Subsidiaries
shall be enjoined, restrained or in any way prevented by the order of
any court or any administrative or regulatory agency from conducting
any material part of its business and such order shall continue in
effect for more than thirty (30) days;
(n) there shall occur any material damage to, or loss, theft
or destruction of, any Collateral, whether or not insured, or any
strike, lockout, labor dispute, embargo, condemnation, act of God or
public enemy, or other casualty, which in any such case causes, for
more than fifteen (15) consecutive days, the cessation or substantial
curtailment of revenue producing activities at any facility of the
Borrower or any of its Subsidiaries if such event or circumstance is
not covered by business interruption insurance and would have a
material adverse effect on the business or financial condition of the
Borrower or such Subsidiary;
(o) there shall occur the loss, suspension or revocation of,
or failure to renew, any license or permit now held or hereafter
acquired by Holdings, the Borrower or any of their Subsidiaries if
such loss, suspension, revocation or failure to renew would have a
material adverse effect on the business or financial condition of
Holdings, the Borrower and their Subsidiaries taken as a whole;
(p) Holdings shall at any time, legally or beneficially own
less than 100% of the outstanding capital stock of the Borrower, or
the Borrower shall at any time, legally or beneficially own less than
100% of the outstanding capital stock of any of its Restricted
Subsidiaries and 80% of the outstanding capital stock of any of its
Unrestricted Subsidiaries;
(q) TJC and its Affiliates shall at any time have less than
a majority of the directors on the board of directors of each of
Holdings and the Borrower;
<PAGE>
-64-
(r) The Jordan Affiliates and MCIT PLC shall at any time,
legally or beneficially own less than twenty-four percent (24%) of
the outstanding common stock of Holdings;
(s) any person or group of persons (within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as amended),
other than the Jordan Affiliates and MCIT PLC, shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the Securities and Exchange Commission under said Act) of ____
percent (___%) or more of the outstanding shares of the common stock
of Holdings;
(t) Leases on or Franchise Agreements with respect to
restaurants representing more then fifteen percent (15%) of
Restaurant Cash Flow shall have been terminated or expired without
renewal (determined in the aggregate over the term of this Credit
Agreement), or at the time of any Lease or Franchise Agreement
termination or expiration the Borrower fails to demonstrate pro forma
compliance with [section]12 hereof for a period of twelve (12)
months, after eliminating the results of all such terminated
restaurants;
(u) The Unrestricted Subsidiaries shall at any time have
aggregate revenues of greater than twenty percent 20% of the
consolidated revenues of the Borrower at such time;
then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Banks shall, by notice in writing to
the Borrower declare all amounts owing with respect to this Credit Agreement,
the Notes and the other Loan Documents and all Reimbursement Obligations to
be, and they shall thereupon forthwith become, immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Borrower; provided that in the event of any
Event of Default specified in [section][section]15.1(g) or 15.1(h), all such
amounts shall become immediately due and payable automatically and without any
requirement of notice from the Agent or any Bank.
Termination of Commitments.
----------- -- -----------
If any one or more of the Events of Default specified in
[section]15.1(g) or [section]15.1(h) shall occur, any unused portion of the
credit hereunder shall forthwith terminate and each of the Banks shall be
relieved of all further obligations to make Loans to the Borrower and the
Agent shall be relieved of all further obligations to issue, extend or renew
Letters of Credit. If any other Event of Default shall have occurred and be
continuing, the Agent may and, upon the request of the Majority Banks, shall,
by notice to the Borrower, terminate the unused portion of the credit
hereunder, and upon such notice being given such unused portion of the credit
hereunder shall terminate immediately and each of the Banks shall be relieved
of all further obligations to make Loans and the Agent shall be relieved of
all further obligations to issue, extend or renew Letters of Credit. No
termination of the credit hereunder shall relieve Holdings, the Borrower or
any of their Subsidiaries of any of the Obligations.
Remedies.
--------
In case any one or more of the Events of Default shall have occurred
and be continuing, and whether or not the Banks shall have accelerated the
maturity of the Loans pursuant to [section]15.1, each Bank, if owed any amount
with respect to the Loans or the Reimbursement Obligations, may, with the
consent of the Majority Banks but not otherwise, proceed to protect and
enforce its rights by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Credit Agreement and the other Loan Documents or any
instrument pursuant to which the Obligations to such Bank are evidenced,
including as permitted by applicable law the obtaining of the ex parte
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of such Bank. No remedy herein conferred upon any
Bank or the Agent or the holder of any Note or purchaser of any Letter of
Credit Participation is intended to be exclusive of any other remedy and each
and every remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or any other provision of law.
Distribution of Collateral Proceeds.
------------ -- ---------- --------
In the event that following the occurrence or during the continuance
of any Default or Event of Default, the Agent or any Bank, as the case may be,
receives any monies in connection with the enforcement of any the Security
Documents, or otherwise with respect to the realization upon any of the
Collateral, such monies shall be distributed for application as follows:
<PAGE>
-65-
(a) first, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent in connection with the collection of such
monies by the Agent, for the exercise, protection or enforcement by
the Agent of all or any of the rights, remedies, powers and
privileges of the Agent under this Credit Agreement or any of the
other Loan Documents or in respect of the Collateral or in support of
any provision of adequate indemnity to the Agent against any taxes or
liens which by law shall have, or may have, priority over the rights
of the Agent to such monies;
(b) second, to all other Obligations on a pro rata basis
among the Loans, and applied to interest, principal, fees and
expenses on such Loans in such order of preference as the Majority
Banks may determine; provided, however, that (i) distributions in
respect of such Obligations shall be made pari passu among
Obligations with respect to the Agent's Fee payable pursuant to
[section]7.2 and all other Obligations and (ii) Obligations owing to
the Banks with respect to each type of Obligation such as interest,
principal, fees and expenses, shall be made among the Banks pro rata;
and provided, further, that the Agent may in its discretion make
proper allowance to take into account any Obligations not then due
and payable;
(c) third, upon payment and satisfaction in full or other
provisions for payment in full satisfactory to the Banks and the
Agent of all of the Obligations, to the payment of any obligations
required to be paid pursuant to [section]9-504(1)(c) of the Uniform
Commercial Code of the Commonwealth of Massachusetts; and
(d) fourth, the excess, if any, of proceeds from the sale of
stock pledged pursuant to the Stock Pledge Agreement shall be turned
over to the Mezzanine Agent (as defined in the Subordinated Pledge
Agreement); and
(e) fifth, the excess, if any, shall be returned to the
Borrower or to such other Persons as are entitled thereto.
SETOFF.
------
Regardless of the adequacy of any collateral, during the continuance
of any Event of Default, any deposits or other sums credited by or due from
any of the Banks to the Borrower and any securities or other property of the
Borrower in the possession of such Bank may be applied to or set off by such
Bank against the payment of Obligations and any and all other liabilities,
direct, or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, of the Borrower to such Bank. Each of the Banks
agrees with each other Bank that (a) if an amount to be set off is to be
applied to Indebtedness of the Borrower to such Bank, other than Indebtedness
evidenced by the Notes held by such Bank or constituting Reimbursement
Obligations owed to such Bank, such amount shall be applied ratably to such
other Indebtedness and to the Indebtedness evidenced by all such Notes held by
such Bank or constituting Reimbursement Obligations owed to such Bank, and (b)
if such Bank shall receive from the Borrower, whether by voluntary payment,
exercise of the right of setoff, counterclaim, cross action, enforcement of
the claim evidenced by the Notes held by, or constituting Reimbursement
Obligations owed to, such Bank by proceedings against the Borrower at law or
in equity or by proof thereof in bankruptcy, reorganization, liquidation,
receivership or similar proceedings, or otherwise, and shall retain and apply
to the payment of the Note or Notes held by, or Reimbursement Obligations owed
to, such Bank any amount in excess of its ratable portion of the payments
received by all of the Banks with respect to the Notes held by, and
Reimbursement Obligations owed to, all of the Banks, such Bank will make such
disposition and arrangements with the other Banks with respect to such excess,
either by way of distribution, pro tanto assignment of claims, subrogation or
otherwise as shall result in each Bank receiving in respect of the Notes held
by it or Reimbursement Obligations owed it, its proportionate payment as
contemplated by this Credit Agreement; provided that if all or any part of
such excess payment is thereafter recovered from such Bank, such disposition
and arrangements shall be rescinded and the amount restored to the extent of
such recovery, but without interest.
THE AGENT.
--- -----
Authorization.
-------------
The Agent is authorized to take such action on behalf of each of the
Banks and to exercise all such powers as are hereunder and under any of the
other Loan Documents and any related documents delegated to the Agent,
together with such powers as are reasonably incident thereto, provided that no
duties or responsibilities not expressly assumed herein or therein shall be
implied to have been assumed by the Agent. The relationship between the Agent
and the Banks is and shall be that of agent and principal only, and nothing
contained in this Credit Agreement or any of the other Loan Documents shall be
construed to constitute the Agent as a trustee for any Bank.
Employees and Agents.
--------- --- ------
<PAGE>
-66-
The Agent may exercise its powers and execute its duties by or
through employees or agents and shall be entitled to take, and to rely on,
advice of counsel concerning all matters pertaining to its rights and duties
under this Credit Agreement and the other Loan Documents. The Agent may
utilize the services of such Persons as the Agent in its sole discretion may
reasonably determine, and all reasonable fees and expenses of any such Persons
shall be paid by the Borrower.
No Liability.
-- ---------
Neither the Agent nor any of its shareholders, directors, officers or
employees nor any other Person assisting them in their duties nor any agent or
employee thereof, shall be liable for any waiver, consent or approval given or
any action taken, or omitted to be taken, in good faith by it or them
hereunder or under any of the other Loan Documents, or in connection herewith
or therewith, or be responsible for the consequences of any oversight or error
of judgment whatsoever, except that the Agent or such other Person, as the
case may be, may be liable for losses due to its willful misconduct or gross
negligence.
No Representations.
-- ---------------
The Agent shall not be responsible for the execution or validity or
enforceability of this Credit Agreement, the Notes, the Letters of Credit, any
of the other Loan Documents or any instrument at any time constituting, or
intended to constitute, collateral security for the Notes, or for the value of
any such collateral security or for the validity, enforceability or
collectability of any such amounts owing with respect to the Notes, or for any
recitals or statements, warranties or representations made herein or in any of
the other Loan Documents or in any certificate or instrument hereafter
furnished to it by or on behalf of Holdings, the Borrower or any of their
Subsidiaries, or be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements herein or
in any instrument at any time constituting, or intended to constitute,
collateral security for the Notes or to inspect any of the properties, books
or records of Holdings, the Borrower or any of their Subsidiaries. The Agent
shall not be bound to ascertain whether any notice, consent, waiver or request
delivered to it by the Borrower or any holder of any of the Notes shall have
been duly authorized or is true, accurate and complete. The Agent has not made
nor does it now make any representations or warranties, express or implied,
nor does it assume any liability to the Banks, with respect to the credit
worthiness or financial conditions of Holdings, the Borrower or any of their
Subsidiaries. Each Bank acknowledges that it has, independently and without
reliance upon the Agent or any other Bank, and based upon such information and
documents as it has deemed appropriate, made its own credit analysis and
decision to enter into this Credit Agreement.
<PAGE>
-67-
Payments.
--------
Payments to Agent.
-------- -- -----
A payment by the Borrower to the Agent hereunder or any of
the other Loan Documents for the account of any Bank shall constitute
a payment to such Bank. The Agent agrees promptly to distribute to
each Bank such Bank's pro rata share of payments received by the
Agent for the account of the Banks except as otherwise expressly
provided herein or in any of the other Loan Documents.
Distribution by Agent.
------------ -- -----
If in the opinion of the Agent the distribution of any
amount received by it in such capacity hereunder, under the Notes or
under any of the other Loan Documents might involve it in liability,
it may refrain from making distribution until its right to make
distribution shall have been adjudicated by a court of competent
jurisdiction. If a court of competent jurisdiction shall adjudge that
any amount received and distributed by the Agent is to be repaid,
each Person to whom any such distribution shall have been made shall
either repay to the Agent its proportionate share of the amount so
adjudged to be repaid or shall pay over the same in such manner and
to such Persons as shall be determined by such court.
Delinquent Banks.
---------- -----
Notwithstanding anything to the contrary contained in this
Credit Agreement or any of the other Loan Documents, any Bank that
fails (i) to make available to the Agent its pro rata share of any
Loan or to purchase any Letter of Credit Participation or (ii) to
comply with the provisions of [section]16 with respect to making
dispositions and arrangements with the other Banks, where such Bank's
share of any payment received, whether by setoff or otherwise, is in
excess of its pro rata share of such payments due and payable to all
of the Banks, in each case as, when and to the full extent required
by the provisions of this Credit Agreement, shall be deemed
delinquent (a "Delinquent Bank") and shall be deemed a Delinquent
Bank until such time as such delinquency is satisfied. A Delinquent
Bank shall be deemed to have assigned any and all payments due to it
from the Borrower, whether on account of outstanding Loans, Unpaid
Reimbursement Obligations, interest, fees or otherwise, to the
remaining nondelinquent Banks for application to, and reduction of,
their respective pro rata shares of all outstanding Loans and Unpaid
Reimbursement Obligations. The Delinquent Bank hereby authorizes the
Agent to distribute such payments to the nondelinquent Banks in
proportion to their respective pro rata shares of all outstanding
Loans and Unpaid Reimbursement Obligations. A Delinquent Bank shall
be deemed to have satisfied in full a delinquency when and if, as a
result of application of the assigned payments to all outstanding
Loans and Unpaid Reimbursement Obligations of the nondelinquent
Banks, the Banks' respective pro rata shares of all outstanding Loans
and Unpaid Reimbursement Obligations have returned to those in effect
immediately prior to such delinquency and without giving effect to
the nonpayment causing such delinquency.
Holders of Notes.
------- -- -----
The Agent may deem and treat the payee of any Note or the purchaser
of any Letter of Credit Participation as the absolute owner or purchaser
thereof for all purposes hereof until it shall have been furnished in writing
with a different name by such payee or by a subsequent holder, assignee or
transferee.
Indemnity.
---------
The Banks ratably agree hereby to indemnify and hold harmless the
Agent from and against any and all claims, actions and suits (whether
groundless or otherwise), losses, damages, costs, expenses (including any
expenses for which the Agent has not been reimbursed by the Borrower as
required by [section]18), and liabilities of every nature and character
arising out of or related to this Credit Agreement, the Notes, or any of the
other Loan Documents or the transactions contemplated or evidenced hereby or
thereby, or the Agent's actions taken hereunder or thereunder, except to the
extent that any of the same shall be directly caused by the Agent's willful
misconduct or gross negligence.
Agent as Bank.
----- -- ----
<PAGE>
-68-
In its individual capacity, FNBB shall have the same obligations and
the same rights, powers and privileges in respect to its Commitment and the
Loans made by it, and as the holder of any of the Notes and as the purchaser
of any Letter of Credit Participations, as it would have were it not also the
Agent.
Resignation.
-----------
The Agent may resign at any time by giving sixty (60) days prior
written notice thereof to the Banks and the Borrower. Upon any such
resignation, the Majority Banks shall have the right to appoint a successor
Agent. Unless a Default or Event of Default shall have occurred and be
continuing, such successor Agent shall be reasonably acceptable to the
Borrower. If no successor Agent shall have been so appointed by the Majority
Banks and shall have accepted such appointment within thirty (30) days after
the retiring Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Banks, appoint a successor Agent, which shall be a
financial institution having a rating of not less than A or its equivalent by
Standard & Poor's Corporation. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation, the provisions
of this Credit Agreement and the other Loan Documents shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as Agent.
Notification of Defaults and Events of Default.
------------ -- -------- --- ------ -- -------
Each Bank hereby agrees that, upon learning of the existence of a
Default or an Event of Default, it shall promptly notify the Agent thereof.
The Agent hereby agrees that upon receipt of any notice under this
[section]17.10 it shall promptly notify the other Banks of the existence of
such Default or Event of Default.
Duties in the Case of Enforcement.
------ -- --- ---- -- -----------
In case one of more Events of Default have occurred and shall be
continuing, and whether or not acceleration of the Obligations shall have
occurred, the Agent shall, if (i) so requested by the Majority Banks and (ii)
the Banks have provided to the Agent such additional indemnities and
assurances against expenses and liabilities as the Agent may reasonably
request, proceed to enforce the provisions of the Security Documents
authorizing the sale or other disposition of all or any part of the Collateral
and exercise all or any such other legal and equitable and other rights or
remedies as it may have in respect of such Collateral. The Majority Banks may
direct the Agent in writing as to the method and the extent of any such sale
or other disposition, the Banks hereby agreeing to indemnify and hold the
Agent, harmless from all liabilities incurred in respect of all actions taken
or omitted in accordance with such directions, provided that the Agent need
not comply with any such direction to the extent that the Agent reasonably
believes the Agent's compliance with such direction to be unlawful or
commercially unreasonable in any applicable jurisdiction.
Removal of Agent.
------- -- -----
All Banks other than the Agent may remove the Agent from its capacity
as Agent at any time by giving sixty (60) days prior written notice thereof to
the Agent (the "Former Agent"), the Banks and the Borrower. Upon any such
removal, the Banks holding at least eighty percent (80%) of the outstanding
principal amount of the Notes on such date, and if no such principal is
outstanding, the Banks whose aggregate Commitments constitute at least eighty
percent (80%) of the Total Commitment (the "Voting Banks") on such date shall
have the right to appoint a successor Agent. Unless a Default or Event of
Default shall have occurred and be continuing, such successor Agent shall be
reasonably acceptable to the Borrower. If no successor Agent shall have been
so appointed by the Voting Banks and shall have accepted such appointment
within thirty (30) days after the Majority Banks vote to remove the Former
Agent, then any Bank shall have the right to petition a court of competent
jurisdiction for the appointment of a successor Agent. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the Former Agent, and the Former Agent shall be
discharged from its duties and obligations hereunder. After any Former Agent's
removal, the provisions of this Credit Agreement and the other Loan Documents
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Agent.
EXPENSES.
--------
Whether or not the transactions contemplated hereby shall be
consummated, and subject to [section]10.9.3 hereof, the Borrower promises to
pay (a) the reasonable costs of (i) producing and reproducing this Credit
Agreement, the other Loan Documents and the other agreements and
<PAGE>
-69-
instruments mentioned herein and (ii) any taxes (including any interest and
penalties in respect thereto), filing fees or recording fees or taxes payable
by any Bank (other than taxes based upon the Bank's net income) on or with
respect to the transactions contemplated by this Credit Agreement or the other
Loan Documents (the Borrower hereby agreeing to indemnify each Bank with
respect thereto), (b) the documented fees, expenses and disbursements of the
Agent's Special Counsel or any local counsel to the Agent incurred in
connection with the preparation of this Credit Agreement, the other Loan
Documents and other instruments mentioned herein, each closing hereunder,
amendments, modifications, approvals, consents or waivers hereto or hereunder
and the syndication and the termination hereof, (c) all reasonable fees,
expenses and disbursements incurred by FNBB in connection with the syndication
of its Commitment hereunder, provided that the Borrower shall not bear the
costs of syndication hereunder which are in excess of $5,000; and (d) all
out-of-pocket expenses (including reasonable attorneys' fees and costs),
incurred by any Bank or the Agent in connection with (i) the enforcement of or
preservation of rights under any this Credit Agreement, the Notes and the
other Loan Documents against Holdings, the Borrower or any of their
Subsidiaries or the administration thereof after the occurrence of a Default
or Event of Default and (ii) in connection with any litigation, proceeding or
dispute whether arising hereunder or under the other Loan Document or arising
out of the transactions contemplated hereby or thereby. The covenants of this
[section]18 shall survive payment or satisfaction of all other Obligations.
INDEMNIFICATION.
---------------
The Borrower further agrees to indemnify and hold harmless the Agent
and the Banks as well as each such Person's shareholders, directors, agents,
officers, Subsidiaries and affiliates, from and against all damages, losses,
settlement payments, obligations, liabilities, claims, actions or causes of
action, and costs and expenses incurred, suffered, sustained or required to be
paid by an indemnified party by reason of or resulting from the transactions
contemplated hereby, except any of the foregoing which result from the gross
negligence or willful misconduct of the indemnified party. In any
investigation, proceeding or litigation, or the preparation therefor, each
Bank and the Agent shall be entitled to select its own counsel and, in
addition to the foregoing indemnity, the Borrower agrees to pay promptly the
fees and expenses of such counsel. If, and to the extent that the obligations
of the Borrower under this [section]18 are unenforceable for any reason, the
Borrower hereby agrees to make the maximum contribution to the payment in
satisfaction of such obligations which is permissible under applicable law.
The covenants contained in this [section]19 shall survive payment or
satisfaction in full of all other Obligations.
SURVIVAL OF COVENANTS, ETC.
-------- -- ---------- ---
All covenants, agreements, representations and warranties made
herein, in the Notes, in any of the other Loan Documents or in any documents
or other papers delivered by or on behalf of Holdings, the Borrower or any of
their Subsidiaries pursuant hereto shall be deemed to have been relied upon by
the Banks and the Agent, notwithstanding any investigation heretofore or
hereafter made by any of them, and shall survive the making by the Banks of
any of the Loans and the issuance, extension or renewal of any Letters of
Credit, as herein contemplated, and shall continue in full force and effect so
long as any Letter of Credit or any amount due under this Credit Agreement or
the Notes or any of the other Loan Documents remains outstanding or any Bank
has any obligation to make any Loans or the Agent has any obligation to issue,
extend or renew any Letter of Credit, and for such further time as may be
otherwise expressly specified in this Credit Agreement. All statements
contained in any certificate or other paper delivered to any Bank or the Agent
at any time by or on behalf of Holdings, the Borrower or any of their
Subsidiaries pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by
Holdings, the Borrower or such Subsidiary hereunder.
<PAGE>
-70-
ASSIGNMENT AND PARTICIPATION.
---------- --- -------------
Conditions to Assignment by Banks.
---------- -- ---------- -- -----
Except as provided herein, each Bank may assign to one or more
Eligible Assignees all or a portion of its interests, rights and obligations
under this Credit Agreement (including all or a portion of its Commitment
Percentage with respect to Revolving Credit Loans, Term Loan or Acquisition
Loan and the same portion of the Loans at the time owing to it, the Notes held
by it and its participating interest in the risk relating to any Letters of
Credit); provided that (a) each of the Agent and the Borrower shall have given
its prior written consent to such assignment, which consent, in the case of
the Borrower, will not be unreasonably withheld, (b) each such assignment
shall be of a constant, and not a varying, percentage of all the assigning
Bank's rights and obligations in respect of the Revolving Credit Loans, Term
Loan or Acquisition Loan under this Credit Agreement, (c) each assignment
shall be in an amount no less than $5,000,000 or, if less, the entire
remaining amount of the assigning Bank's interest in the Loans, or a larger
integral multiple of $1,000,000, and (d) the parties to such assignment shall
execute and deliver to the Agent, for recording in the Register (as
hereinafter defined), an Assignment and Acceptance, substantially in the form
of Exhibit J hereto (an "Assignment and Acceptance"), together with any Notes
subject to such assignment. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five (5) Business Days
after the execution thereof, (i) the assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Bank hereunder, and (ii) the assigning Bank shall,
to the extent provided in such assignment and upon payment to the Agent of the
registration fee referred to in [section]21.3, be released from its
obligations under this Credit Agreement.
Certain Representations and Warranties; Limitations; Covenants.
------- --------------- --- ----------- ------------ ---------
By executing and delivering an Assignment and Acceptance, the parties
to the assignment thereunder confirm to and agree with each other and the
other parties hereto as follows:
(a) other than the representation and warranty that it is
the legal and beneficial owner of the interest being assigned thereby
free and clear of any adverse claim, the assigning Bank makes no
representation or warranty, express or implied, and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Credit Agreement
or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant
hereto or the attachment, perfection or priority of any security
interest or mortgage,
(b) the assigning Bank makes no representation or warranty
and assumes no responsibility with respect to the financial condition
of the Borrower and its Subsidiaries or any other Person primarily or
secondarily liable in respect of any of the Obligations, or the
performance or observance by the Borrower and its Subsidiaries or any
other Person primarily or secondarily liable in respect of any of the
Obligations of any of their obligations under this Credit Agreement
or any of the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto;
(c) such assignee confirms that it has received a copy of
this Credit Agreement, together with copies of the most recent
financial statements referred to in [section]8.4 and [section]9.4 and
such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such
Assignment and Acceptance;
(d) such assignee will, independently and without reliance
upon the assigning Bank, the Agent or any other Bank and based on
such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not
taking action under this Credit Agreement;
(e) such assignee represents and warrants that it is an
Eligible Assignee and that, on the effective date of such Assignment
and Acceptance, the circumstances described in [section][section]7.7
and 7.8 hereof are not applicable to such assignee;
(f) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under
this Credit Agreement and the other Loan Documents as are delegated
to the Agent by the terms hereof or thereof, together with such
powers as are reasonably incidental thereto;
<PAGE>
-71-
(g) such assignee agrees that it will perform in accordance
with their terms all of the obligations that by the terms of this
Credit Agreement are required to be performed by it as a Bank;
(h) such assignee represents and warrants that it is
legally authorized to enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements
with the assigning Bank satisfactory to such assignee with respect to
its pro rata share of Letter of Credit Fees in respect of outstanding
Letters of Credit.
Register.
--------
The Agent shall maintain a copy of each Assignment and Acceptance
delivered to it and a register or similar list (the "Register") for the
recordation of the names and addresses of the Banks and the Commitment
Percentage of, and principal amount of the Revolving Credit Loans owing to and
Letter of Credit Participations purchased by, the Banks from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, the Agent and the Banks may treat each Person whose name is
recorded in the Register as a Bank hereunder for all purposes of this Credit
Agreement. The Register shall be available for inspection by the Borrower and
the Banks at any reasonable time and from time to time upon reasonable prior
notice. Upon each such recordation, the assigning Bank agrees to pay to the
Agent a registration fee in the sum of $5,000.00.
New Notes.
--- -----
Upon its receipt of an Assignment and Acceptance executed by the
parties to such assignment, together with each Note subject to such
assignment, the Agent shall (a) record the information contained therein in
the Register, and (b) give prompt notice thereof to the Borrower and the Banks
(other than the assigning Bank). Within five (5) Business Days after receipt
of such notice, the Borrower, at its own expense, shall execute and deliver to
the Agent, in exchange for each surrendered Note, a new Note to the order of
such Eligible Assignee in an amount equal to the amount assumed by such
Eligible Assignee pursuant to such Assignment and Acceptance and, if the
assigning Bank has retained some portion of its obligations hereunder, a new
Note to the order of the assigning Bank in an amount equal to the amount
retained by it hereunder. Such new Notes shall provide that they are
replacements for the surrendered Notes, shall be in an aggregate principal
amount equal to the aggregate principal amount of the surrendered Notes, shall
be dated the effective date of such in Assignment and Acceptance and shall
otherwise be substantially the form of the assigned Notes. Within five (5)
days of issuance of any new Notes pursuant to this [section]21.4, the Borrower
shall, if requested by the assigning Bank or the assignee Bank, deliver an
opinion of counsel, addressed to the Banks and the Agent, relating to the due
authorization, execution and delivery of such new Notes and the legality,
validity and binding effect thereof, in form and substance satisfactory to the
Banks. The surrendered Notes shall be cancelled and returned to the Borrower.
Participations.
--------------
Each Bank may sell participations to one or more banks or other
entities in all or a portion of such Bank's rights and obligations under this
Credit Agreement and the other Loan Documents; provided that (a) each such
participation shall be in an amount of not less than $5,000,000, (b) any such
sale or participation shall not affect the rights and duties of the selling
Bank hereunder to the Borrower and (c) the only rights granted to the
participant pursuant to such participation arrangements with respect to
waivers, amendments or modifications of the Loan Documents shall be the rights
to approve waivers, amendments or modifications that would forgive any
principal of or reduce the interest rate on any Loans, extend the term or
increase the amount of the Commitment of such Bank as it relates to such
participant, reduce the amount of any commitment fees or Letter of Credit Fees
to which such participant is entitled or extend any regularly scheduled
payment date for principal or interest.
Disclosure.
----------
The Borrower agrees that in addition to disclosures made in
accordance with standard and customary banking practices any Bank may disclose
information obtained by such Bank pursuant to this Credit Agreement to
assignees or participants and potential assignees or participants hereunder;
provided that such assignees or participants or potential assignees or
participants shall agree (a) to treat in confidence such information unless
such information otherwise becomes public knowledge, (b) not to disclose such
information to a third party, except as required by law or legal process and
(c) not to make use of such information for purposes of transactions unrelated
to such contemplated assignment or participation.
Assignee or Participant Affiliated with the Borrower.
-------- -- ----------- ---------- ---- --- --------
<PAGE>
-72-
If any assignee Bank is an Affiliate of the Borrower, then any such
assignee Bank shall have no right to vote as a Bank hereunder or under any of
the other Loan Documents for purposes of granting consents or waivers or for
purposes of agreeing to amendments or other modifications to any of the Loan
Documents or for purposes of making requests to the Agent pursuant to
[section]15.1 or [section]15.2, and the determination of the Majority Banks
shall for all purposes of this Agreement and the other Loan Documents be made
without regard to such assignee Bank's interest in any of the Loans. If any
Bank sells a participating interest in any of the Loans or Reimbursement
Obligations to a participant, and such participant is the Borrower or an
Affiliate of the Borrower, then such transferor Bank shall promptly notify the
Agent of the sale of such participation. A transferor Bank shall have no right
to vote as a Bank hereunder or under any of the other Loan Documents for
purposes of granting consents or waivers or for purposes of agreeing to
amendments or modifications to any of the Loan Documents or for purposes of
making requests to the Agent pursuant to [section]15.1 or [section]15.2 to the
extent that such participation is beneficially owned by the Borrower or any
Affiliate of the Borrower, and the determination of the Majority Banks shall
for all purposes of this Agreement and the other Loan Documents be made
without regard to the interest of such transferor Bank in the Loans to the
extent of such participation.
Miscellaneous Assignment Provisions.
------------- ---------- ----------
Any assigning Bank shall retain its rights to be indemnified pursuant
to [section]19 with respect to any claims or actions arising prior to the date
of such assignment. If any assignee Bank is not incorporated under the laws of
the United States of America or any state thereof, it shall, prior to the date
on which any interest or fees are payable hereunder or under any of the other
Loan Documents for its account, deliver to the Borrower and the Agent
certification as to its exemption from deduction or withholding of any United
States federal income taxes. If FNBB transfers all of its interest, rights and
obligations under this Credit Agreement, the Agent shall, in consultation with
the Borrower and with the consent of the Borrower and the Majority Banks,
appoint another Bank to act as the Reference Bank hereunder. Anything
contained in this [section]21 to the contrary notwithstanding, any Bank may at
any time pledge all or any portion of its interest and rights under this
Credit Agreement (including all or any portion of its Notes) to any of the
twelve Federal Reserve Banks organized under [section]4 of the Federal Reserve
Act, 12 U.S.C. [section]341. No such pledge or the enforcement thereof shall
release the pledgor Bank from its obligations hereunder or under any of the
other Loan Documents.
Assignment by Borrower.
---------- -- --------
The Borrower shall not assign or transfer any of its rights or
obligations under any of the Loan Documents without the prior written consent
of each of the Banks.
NOTICES, ETC.
-------- ---
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Notes or any Letter of Credit Applications shall be in
writing and shall be delivered in hand, mailed by United States registered or
certified first class mail, postage prepaid, sent by overnight courier, or
sent by telegraph, telecopy, facsimile or telex and confirmed by delivery via
courier or postal service, addressed as follows:
(a) if to the Borrower, at 2215 Enterprise Drive, Suite
1502, Westchester, Illinois 60154, Attention: Joel Aaseby, or at such
other address for notice as the Borrower shall last have furnished in
writing to the Person giving the notice;
(b) if to the Agent, at 100 Federal Street, Boston,
Massachusetts 02110, USA, Attention: Timothy M. Barns, Division
Executive, or such other address for notice as the Agent shall last
have furnished in writing to the Person giving the notice; and
(c) if to any Bank, at such Bank's address set forth on
Schedule 1 hereto, or such other address for notice as such Bank
shall have last furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if delivered by hand, overnight courier
or facsimile to a responsible officer of the party to which it is directed, at
the time of the receipt thereof by such officer or the sending of such
facsimile and (ii) if sent by registered or certified first-class mail,
postage prepaid, on the third Business Day following the mailing thereof.
GOVERNING LAW.
--------- ---
<PAGE>
-73-
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER
AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH
SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN
[section]22. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH
SUIT IS BROUGHT IN AN INCONVENIENT COURT.
HEADINGS.
--------
The captions in this Credit Agreement are for convenience of
reference only and shall not define or limit the provisions hereof.
COUNTERPARTS.
------------
This Credit Agreement and any amendment hereof may be executed in
several counterparts and by each party on a separate counterpart, each of
which when executed and delivered shall be an original, and all of which
together shall constitute one instrument. In proving this Credit Agreement it
shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought.
ENTIRE AGREEMENT, ETC.
------ ---------- ---
The Loan Documents and any other documents executed in connection
herewith or therewith express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Credit Agreement
nor any term hereof may be changed, waived, discharged or terminated, except
as provided in [section]28.
WAIVER OF JURY TRIAL.
------ -- ---- -----
Each of Holdings and the Borrower hereby waives its right to a jury
trial with respect to any action or claim arising out of any dispute in
connection with this Credit Agreement, the Notes or any of the other Loan
Documents, any rights or obligations hereunder or thereunder or the
performance of which rights and obligations. Except as prohibited by law, each
of Holdings and the Borrower hereby waives any right it may have to claim or
recover in any litigation referred to in the preceding sentence any special,
exemplary, punitive or consequential damages or any damages other than, or in
addition to, actual damages. Each of Holdings and the Borrower (a) certifies
that no representative, agent or attorney of any Bank or the Agent has
represented, expressly or otherwise, that such Bank or the Agent would not, in
the event of litigation, seek to enforce the foregoing waivers and (b)
acknowledges that the Agent and the Banks have been induced to enter into this
Credit Agreement, the other Loan Documents to which it is a party and the
Subordination Documents to which it is a party by, among other things, the
waivers and certifications contained herein.
CONSENTS, AMENDMENTS, WAIVERS, ETC.
--------- ----------- -------- ---
Any consent or approval required or permitted by this Credit
Agreement to be given by all of the Banks may be given, and any term of this
Credit Agreement, the other Loan Documents or any other instrument related
hereto or mentioned herein may be amended, and the performance or observance
by Holdings, the Borrower or any of their Subsidiaries of any terms of this
Credit Agreement, the other Loan Documents or such other instrument or the
continuance of any Default or Event of Default may be waived (either generally
or in a particular instance and either retroactively or prospectively) with,
but only with, the written consent of the Borrower and the written consent of
the Majority Banks. Notwithstanding the foregoing, the rate of interest on the
Notes, the maturity of or extension of scheduled payments on the Notes, the
release of all or substantially all of the Collateral, the amount of the
Commitments of the Banks, an increase in the maximum principal amounts of the
Term Loan of the Banks and the amount of commitment fee or Letter of Credit
Fees hereunder may not be changed without the written consent of the Borrower
and the written consent of each Bank; the definition of Majority Banks and
this [section]28 may not be amended without the written consent of all of the
Banks; and the amount of the Agent's Fee or any Letter of Credit Fees payable
for the Agent's account and [section]17 may not be amended without the written
consent of the Agent. No waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon. No course of dealing
or delay or omission on the part of the Agent or any Bank in exercising any
right shall
<PAGE>
-74-
operate as a waiver thereof or otherwise be prejudicial thereto. No notice to
or demand upon the Borrower shall entitle the Borrower to other or further
notice or demand in similar or other circumstances.
SEVERABILITY.
------------
The provisions of this Credit Agreement are severable and if any one
clause or provision hereof shall be held invalid or unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect only such clause or provision, or part thereof, in such jurisdiction,
and shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Credit Agreement in any
jurisdiction.
TRANSITIONAL ARRANGEMENTS
------------ ------------
Original Credit Agreement Superseded.
-------- ------ --------- ----------
This Credit Agreement shall on the Closing Date supersede the
Original Credit Agreement in its entirety, except as provided in this
[section]30. On the Closing Date, the rights and obligations of the parties
evidenced by the Original Credit Agreement shall be evidenced by the Credit
Agreement and other Loan Documents, the "Revolving Credit Loans" as defined in
the Original Credit Agreement shall be converted to Revolving Credit Loans as
defined herein, "Term Loan A" and "Term Loan B" as each are defined in the
Original Credit Agreement shall be converted to a portion of the Term Loan as
defined herein, and all outstanding letters of credit issued by the Agent for
the account of the Borrower prior to the Closing Date shall, for the purposes
of this Credit Agreement, be Letters of Credit.
Return and Cancellation of Notes.
------ --- ------------ -- -----
As soon as reasonably practicable after its receipt of its Revolving
Credit Note and Term Notes hereunder on the Closing Date, the Banks will
promptly return to the Borrower, marked "Substituted" or "Cancelled", as the
case may be, any notes of the Borrower held by the Banks pursuant to the
Original Credit Agreement.
Interest and Fees Under Superseded Agreement.
-------- --- ---- ----- ---------- ---------
All interest and fees and expenses, if any, owing or accruing under
or in respect of the Original Credit Agreement through the Closing Date shall
be calculated as of the Closing Date (prorated in the case of any fractional
periods), and shall be paid in accordance with the method, and on the dates,
specified in the Original Credit Agreement, as if the Original Credit
Agreement were still in effect. Commencing on the Closing Date, the commitment
fees shall be payable by the Borrower to the Agent for the account of the
Banks in accordance with [section]2.2.
<PAGE>
-75-
IN WITNESS WHEREOF, the undersigned have duly executed this Credit Agreement
as a sealed instrument as of the date first set forth above.
NATIONAL RESTAURANT ENTERPRISES, INC.
By:
Name:
Title:
AMERIKING, INC.
By:
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON, individually and as
Agent
By:
Name:
Title:
EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
-----------------------------------------
This Employment and Non-Interference Agreement (this "Agreement") is
dated as of ______, 1996, by and between Lawrence Jaro (the "Executive") and
National Restaurant Enterprises, Inc., a Delaware corporation (the "Company")
and a wholly-owned subsidiary of AmeriKing, Inc., a Delaware corporation
("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 of 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;
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)), (a) as Chairman of the Board and Chief Executive
Officer of Parent and the Company and to undertake such duties and
responsibilities as may be reasonably assigned to Executive from time to time
by the Board of Directors of Parent or the Company and (b) as Managing Owner
of Parent and the Company 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
<PAGE>
requirements, from time to time in effect (the "Burger King Regulations") of
the Burger King Corporation.
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
principal executive offices of the Company, under the direction of the 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 all 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),
consistent with past practices and norms in similar positions.
(c) Nothing contained herein shall require Executive to follow any
directive or to perform any act which would violate any Burger King
Regulations 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. 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 his employment, the Executive shall live in
the Chicago area and generally perform his duties under this Agreement from
the Company's offices in the Chicago area.
3. Term of Employment; Termination
-------------------------------
(a) The "Term of Employment" shall commence on the date hereof and
shall continue for a term of five years. Should the Executive's employment by
the Company be earlier terminated pursuant to Section 3(b) or by the Executive
pursuant to Section 3(c), 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) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company and as certified
-2-
<PAGE>
by a competent medical physician, his duties hereunder for a
continuous period of 180 days;
(iii) for Cause (as defined in Section 3(c));
(iv) for any other reason not referred to in clauses (i)
through (iii) or no reason, such that this Agreement, subject to the
provisions of Section 3(e), shall be construed as terminable at will
by the Company.
Executive acknowledges that no representations or promises have been
made concerning the grounds for termination or the future operation of the
Company's business, and that nothing contained herein or otherwise stated by
or on behalf of the Company modifies or amends the right of the Company to
terminate Executive at any time, with or without Cause. Termination shall
become effective upon the delivery by the Company to the Executive of notice
specifying such termination and the reasons therefor.
(c) Subject to the payments contemplated by Section 3(e), the Term of
Employment may be terminated at any time by the Executive:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company, and as certified by a competent medical
physician, his duties hereunder for a continuous period of 180 days;
(iii) as a result of material reduction in Executive's
authority, perquisites, position or responsibilities (other than such
a reduction which affects all of the Company's senior executives on a
substantially equal or proportionate basis) or the Company's willful,
material violation of its obligations under this Agreement, in each
case, after 30 days' prior written notice to the Company and its
Board of Directors and the Company's failure thereafter to cure such
reduction or violation; or
(iv) voluntarily or for any reason or no reason not referred
to in clauses (i) through (iii) in each case, after 120 days' prior
written notice to the Company and its Board of Directors.
(d) 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
-3-
<PAGE>
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; (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, each as amended to date, provided, that the Executive has
been given notice and 90 days from such notice fails to cure the
violation; or (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.
(e) In the event Executive's employment is terminated pursuant to
(i) Section 3(b)(i) or (ii) or 3(c)(i) or (ii), 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)(iii) or 3(c)(iv) 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
(iii) Section 3(b)(iv) or 3(c)(iii), the Company will pay
the Executive the full amounts to which he would be entitled under
Section 4(a) for the period from effectiveness of termination through
the fifth anniversary of this Agreement, payable
-4-
<PAGE>
in two installments, half payable upon the effectiveness of
termination and half payable upon the last day of such period.
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).
(f) Upon the conclusion of the original five year term of this
Agreement ("Original Term") and upon each succeeding anniversary of this
Agreement, the Executive's Term of Employment will be automatically renewed
for another year; provided that neither the Company nor the Executive
terminates this Agreement pursuant to Section 3 during the Original Term; and
provided further that after such Original Term neither the Company nor the
Executive provides notice of termination to the other at least 120 days before
the anniversary of this Agreement. Pursuant to such termination notice, this
Agreement will terminate upon the succeeding anniversary.
(g) Notwithstanding the foregoing, if Executive is a Managing Owner
in respect of the Company for purposes of the Burger King Regulations, then
the foregoing termination rights will be subject to either (i) the Company
identifying and obtaining another Managing Owner, for purposes of the Burger
King Regulations, if the Company shall then have no other Managing Owner prior
to or concurrently with such termination, (ii) compliance with the Burger King
Regulations, or (iii) the prior approval of Burger King Corporation.
4. Compensation. During the Term of Employment, the Company shall pay
compensation to Executive as follows:
(a) As base compensation for his services hereunder, in bimonthly
installments, a base salary at a rate of $300,000 per annum, as increased, on
an annual basis to reflect the increase in the United States Government cost
of living index for the Chicago, Illinois area. Notwithstanding the minimum
increase set forth above, the Board of Directors in their sole discretion, may
establish a higher compensation level.
(b) An annual bonus compensation of up to 70% of his annual base
compensation based on Executive's performance as determined and approved by
the Board of Directors, in its sole discretion. Such bonus will be at the full
discretion of the Board of Directors, and may not be paid at all. Executive
acknowledges that no such bonuses have been agreed upon or promised. If the
Board of Directors decides to pay a bonus, it is to be paid within thirty days
after the issuance of audited financial statements for the Company. The Board
of
-5-
<PAGE>
Directors in their sole discretion may establish a higher bonus level based on
the performance of Executive.
(c) 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.
5. Reimbursement of Expenses.
-------------------------
During the Term of Employment, the Company shall reimburse Executive
for documented travel, entertainment and other expenses reasonably incurred by
Executive in connection with the performance of his duties hereunder and, in
each case, 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) established from time to time, by the Board of
Directors for executives of the Company.
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 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 which he may
possess or control. Executive agrees that all Confidential
-6-
<PAGE>
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 five
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 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
-7-
<PAGE>
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.
Also during the Restricted Period, Executive will not disparage or
make public statements that damage Parent, the Company and their
respective business. 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) 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, or (b) any similar or incidental business conducted, or engaged
in, by the Company prior to the date hereof or at any time during the Term of
Employment.
"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
-8-
<PAGE>
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 Lawrence Jaro 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 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):
-9-
<PAGE>
If to Executive: Lawrence Jaro
100 E. Huron, #3605
Chicago, Illinois 60611
with a copy to:
Freeborn & Peters
950 Seventeenth Street
Suite 2600
Denver, Colorado 80202
Attention: Ernest J. Panasci, Esq.
If to Company: 2215 Enterprise Drive
Suite 1502
Westchester, IL 60154
with a copy to:
Mayer, Brown & Platt
1675 Broadway
Suite 1900
New York, New York
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 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.
-10-
<PAGE>
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.
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.
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
-11-
<PAGE>
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.
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 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
-12-
<PAGE>
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.
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.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first written above.
EXECUTIVE:
--------------------------------------
Name: Lawrence Jaro
NATIONAL RESTAURANT ENTERPRISES, INC.
By
------------------------------------
Name:
Title:
-14-
RESTATED EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
--------------------------------------------------
This Restated Employment and Non-Interference Agreement (this
"Agreement") is dated as of June 1, 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. 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 his 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 $40,000,
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.
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) or by the Executive
pursuant to Section 3(c), 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:
-2-
<PAGE>
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company and as certified by a competent medical
physician, his duties hereunder for a continuous period of 180 days;
(iii) for Cause (as defined in Section 3(c));
(iv) for any other reason not referred to in clauses (i)
through (iii) or no reason, such that this Agreement, subject to the
provisions of Section 3(e), shall be construed as terminable at will
by the Company.
Executive acknowledges that no representations or promises have been
made concerning the grounds for termination or the future operation of the
Company's business, and that nothing contained herein or otherwise stated by
or on behalf of the Company modifies or amends the right of the Company to
terminate Executive at any time, with or without Cause. Termination shall
become effective upon the delivery by the Company to the Executive of notice
specifying such termination and the reasons therefor.
(c) Subject to the payments contemplated by Section 3(e), the Term of
Employment may be terminated at any time by the Executive:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company, and as certified by a competent medical
physician, his duties hereunder for a continuous period of 180 days;
(iii) as a result of material reduction in Executive's
authority, perquisites, position or responsibilities (other than such
a reduction which affects all of the Company's senior executives on a
substantially equal or proportionate basis) or the Company's willful,
material violation of its obligations under this Agreement, in each
case, after 30 days' prior written notice to the Company and its
Board of Directors and the Company's failure thereafter to cure such
reduction or violation; or
(iv) voluntarily or for any reason or no reason not referred
to in clauses (i) through (iii) in each case, after 120 days' prior
written notice to the Company and its Board of Directors.
(d) For the purposes of this Section 3, "Cause" shall mean any of the
following:
-3-
<PAGE>
(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; (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, 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
disparages or makes other public statements that injure or damage
Parent, Company or their respective businesses.
(e) In the event Executive's employment is terminated pursuant to
(i) Section 3(b)(i) or (ii) or 3(c)(i) or (ii), 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)(iii) or 3(c)(iv) there will be no amounts
owing by the Company to Executive under this Agreement from and after
such termination, except
-4-
<PAGE>
for accrued, but unused vacation pay and sick pay which shall be
paid to the Executive in accordance with Company practices; and
(iii) Section 3(b)(iv) or 3(c)(iii), the Company will pay
the Executive the full amounts to which he would be entitled under
Section 4(a) for the period from effectiveness of termination through
September 1, 1999, payable in two installments, half payable upon the
effectiveness of termination and half payable upon the last day of
such period.
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:
(a) As base compensation for his services hereunder, in bimonthly
installments, a base salary at a rate of $225,000 per annum.
(b) A bonus of $______ payable upon the date of this Agreement as a
bonus in respect of 1996 through the date of this Agreement.
(c) 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.
(d) 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, 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 or incurred by Executive for any
-5-
<PAGE>
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) established from time to time, by the Board of
Directors for executives of the Company.
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 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 which 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
----------------
-6-
<PAGE>
(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 five
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 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.
Also during the Restricted Period, Executive will not disparage or
make public statements that damage Parent, the Company and their
respective business. Notwithstanding the foregoing, nothing herein
shall prevent the
-7-
<PAGE>
Executive from providing a letter of recommendation to an employee
with respect to a future employment opportunity.
(iii) 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, or (b) any similar or incidental business conducted, or engaged
in, by the Company prior to the date hereof or at any time during the Term of
Employment.
"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
-8-
<PAGE>
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 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:
--------------------
--------------------
--------------------
--------------------
-9-
<PAGE>
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 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.
-10-
<PAGE>
(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.
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.
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.
-11-
<PAGE>
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.
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 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.
-12-
<PAGE>
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.
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.
-13-
<PAGE>
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:
Title:
-14-
EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
-----------------------------------------
This Employment and Non-Interference Agreement (this "Agreement") is
dated as of _______, 1996, by and between Gary Hubert (the "Executive") and
National Restaurant Enterprises, Inc., a Delaware corporation (the "Company")
and a wholly-owned subsidiary of AmeriKing, Inc., a Delaware corporation
("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 of 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;
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 Chief Operating Officer, responsible for
operations of the Company to undertake such duties and responsibilities as may
be reasonably assigned to Executive from time to time by the Chairman, Chief
Executive Officer or the Board of Directors of the Company or the Parent.
<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
principal executive offices of the Company, under the direction of the
Chairman, Chief Executive Officer 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 all 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),
consistent with past practices and norms in similar positions.
(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. 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 his employment, the Executive shall live in
the Chicago area and generally perform his duties under this Agreement from
the Company's offices in the Chicago area.
3. Term of Employment; Termination
-------------------------------
(a) The "Term of Employment" shall commence on the date hereof and
shall continue for a term of five years. Should the Executive's employment by
the Company be earlier terminated pursuant to Section 3(b) or by the Executive
pursuant to Section 3(c), 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;
-2-
<PAGE>
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company and as certified by a competent medical
physician, his duties hereunder for a continuous period of 180 days;
(iii) for Cause (as defined in Section 3(c));
(iv) for any other reason not referred to in clauses (i)
through (iii) or no reason, such that this Agreement, subject to the
provisions of Section 3(e), shall be construed as terminable at will
by the Company.
Executive acknowledges that no representations or promises have been
made concerning the grounds for termination or the future operation of the
Company's business, and that nothing contained herein or otherwise stated by
or on behalf of the Company modifies or amends the right of the Company to
terminate Executive at any time, with or without Cause. Termination shall
become effective upon the delivery by the Company to the Executive of notice
specifying such termination and the reasons therefor.
(c) Subject to the payments contemplated by Section 3(e), the Term of
Employment may be terminated at any time by the Executive:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company, and as certified by a competent medical
physician, his duties hereunder for a continuous period of 180 days;
(iii) as a result of material reduction in Executive's
authority, perquisites, position or responsibilities (other than such
a reduction which affects all of the Company's senior executives on a
substantially equal or proportionate basis) or the Company's willful,
material violation of its obligations under this Agreement, in each
case, after 30 days' prior written notice to the Company and its
Board of Directors and the Company's failure thereafter to cure such
reduction or violation; or
(iv) voluntarily or for any reason or no reason not referred
to in clauses (i) through (iii) in each case, after 120 days' prior
written notice to the Company and its Board of Directors.
(d) 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
-3-
<PAGE>
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; (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, Purchase the Certificate
of Incorporation or By-Laws of the Company, each as amended to date,
provided, that the Executive has been given notice and 90 days from
such notice fails to cure the violation; or (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.
(e) In the event Executive's employment is terminated pursuant to
(i) Section 3(b)(i) or (ii) or 3(c)(i) or (ii), 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)(iii) or 3(c)(iv) 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
-4-
<PAGE>
(iii) Section 3(b)(iv) or 3(c)(iii), the Company will pay
the Executive the full amounts to which he would be entitled under
Section 4(a) for the period from effectiveness of termination through
the fifth anniversary of this Agreement, payable in two installments,
half payable upon the effectiveness of termination and half payable
upon the last day of such period.
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).
(f) Upon the conclusion of the original five year term of this
Agreement ("Original Term") and upon each succeeding anniversary of this
Agreement, the Executive's Term of Employment will be automatically renewed
for another year; provided that neither the Company nor the Executive
terminates this Agreement pursuant to Section 3 during the Original Term; and
provided further that after such Original Term neither the Company nor the
Executive provides notice of termination to the other at least 120 days before
the anniversary of this Agreement. Pursuant to such termination notice, this
Agreement will terminate upon the succeeding anniversary.
4. Compensation. During the Term of Employment, the Company shall pay
compensation to Executive as follows:
(a) As base compensation for his services hereunder, in bimonthly
installments, a base salary at a rate of $225,000 per annum, as increased, on
an annual basis to reflect the increase in the United States Government cost
of living index for the Chicago, Illinois area. Notwithstanding the minimum
increase set forth above, the Board of Directors in their sole discretion, may
establish a higher compensation level.
(b) An annual bonus compensation of up to 60% of his annual base
compensation based on Executive's performance as determined and approved by
the Board of Directors, in its sole discretion. Such bonus will be at the full
discretion of the Board of Directors, and may not be paid at all. Executive
acknowledges that no such bonuses have been agreed upon or promised. If the
Board of Directors decides to pay a bonus, it is to be paid within thirty days
after the issuance of audited financial statements for the Company. The Board
of Directors in their sole discretion may establish a higher bonus level based
on the performance of Executive.
-5-
<PAGE>
(c) 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.
5. Reimbursement of Expenses
-------------------------
During the Term of Employment, the Company shall reimburse Executive
for documented travel, entertainment and other expenses reasonably incurred by
Executive in connection with the performance of his duties hereunder and, in
each case, 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) established from time to time, by the Board of
Directors for executives of the Company.
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 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 which 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
-6-
<PAGE>
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 five
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 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,
-7-
<PAGE>
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. Also during the Restricted Period, Executive will not
disparage or make public statements that damage Parent, the Company
and their respective business. 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) 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, or (b) any similar or incidental business conducted, or engaged
in, by the Company prior to the date hereof or at any time during the Term of
Employment.
"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
-8-
<PAGE>
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 Gary Hubert 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 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: Gary Hubert
940 Burnham Court
Aurora, Illinois 60504
with a copy to:
Freeborn & Peters
950 Seventeenth Street
Suite 2600
Denver, Colorado 80202
Attention: Ernest J. Panasci, Esq.
-9-
<PAGE>
If to Company: 2215 Enterprise Drive
Suite 1502
Westchester, IL 60154
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 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 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.
-10-
<PAGE>
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.
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
-11-
<PAGE>
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.
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 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
-12-
<PAGE>
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.
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.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first written above.
EXECUTIVE:
--------------------------------------
Name: Gary Hubert
NATIONAL RESTAURANT ENTERPRISES, INC.
By
------------------------------------
Name:
Title:
-14-
EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
-----------------------------------------
This Employment and Non-Interference Agreement (this "Agreement") is
dated as of ______, 1996, by and between Joel Aaseby (the "Executive") and
National Restaurant Enterprises, Inc., a Delaware corporation (the "Company")
and a wholly-owned subsidiary of AmeriKing, Inc., a Delaware corporation
("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 of 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;
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)), (a) as Chief Financial Officer of Parent and the
Company and to undertake such duties and responsibilities as may be reasonably
assigned to Executive from time to time by the Chairman, Chief Executive
Officer or the Board of Directors of the Company or the Parent.
<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
principal executive offices of the Company, under the direction of the
Chairman, Chief Executive Officer 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 all 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),
consistent with past practices and norms in similar positions.
(c) Nothing contained herein shall require Executive to follow any
directive or to perform any act which would violate any of 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. 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 his employment, the Executive shall live in
the Chicago area and generally perform his duties under this Agreement from
the Company's offices in the Chicago area.
3. Term of Employment; Termination
-------------------------------
(a) The "Term of Employment" shall commence on the date hereof and
shall continue for a term of five years. Should the Executive's employment by
the Company be earlier terminated pursuant to Section 3(b) or by the Executive
pursuant to Section 3(c), 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) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company and as certified
-2-
<PAGE>
by a competent medical physician, his duties hereunder for a
continuous period of 180 days;
(iii) for Cause (as defined in Section 3(c));
(iv) for any other reason not referred to in clauses (i)
through (iii) or no reason, such that this Agreement, subject to the
provisions of Section 3(e), shall be construed as terminable at will
by the Company.
Executive acknowledges that no representations or promises have been
made concerning the grounds for termination or the future operation of the
Company's business, and that nothing contained herein or otherwise stated by
or on behalf of the Company modifies or amends the right of the Company to
terminate Executive at any time, with or without Cause. Termination shall
become effective upon the delivery by the Company to the Executive of notice
specifying such termination and the reasons therefor.
(c) Subject to the payments contemplated by Section 3(e), the Term of
Employment may be terminated at any time by the Executive:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company, and as certified by a competent medical
physician, his duties hereunder for a continuous period of 180 days;
(iii) as a result of material reduction in Executive's
authority, perquisites, position or responsibilities (other than such
a reduction which affects all of the Company's senior executives on a
substantially equal or proportionate basis) or the Company's willful,
material violation of its obligations under this Agreement, in each
case, after 30 days' prior written notice to the Company and its
Board of Directors and the Company's failure thereafter to cure such
reduction or violation; or
(iv) voluntarily or for any reason or no reason not referred
to in clauses (i) through (iii) in each case, after 120 days' prior
written notice to the Company and its Board of Directors.
(d) 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
-3-
<PAGE>
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; (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 Certificate of Incorporation
or By-Laws of the Company, each as amended to date, provided, that
the Executive has been given notice and 90 days from such notice
fails to cure the violation; or (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.
(e) In the event Executive's employment is terminated pursuant to
(i) Section 3(b)(i) or (ii) or 3(c)(i) or (ii), 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)(iii) or 3(c)(iv) 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
(iii) Section 3(b)(iv) or 3(c)(iii), the Company will pay
the Executive the full amounts to which he would be entitled under
Section 4(a) for the period from effectiveness of termination through
the fifth anniversary of this Agreement, payable in two installments,
half payable upon the effectiveness of termination and half payable
upon the last day of such period.
-4-
<PAGE>
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).
(f) Upon the conclusion of the original five year term of this
Agreement ("Original Term") and upon each succeeding anniversary of this
Agreement, the Executive's Term of Employment will be automatically renewed
for another year; provided that neither the Company nor the Executive
terminates this Agreement pursuant to Section 3 during the Original Term; and
provided further that after such Original Term neither the Company nor the
Executive provides notice of termination to the other at least 120 days before
the anniversary of this Agreement. Pursuant to such termination notice, this
Agreement will terminate upon the succeeding anniversary.
4. Compensation. During the Term of Employment, the Company shall
pay compensation to Executive as follows:
(a) As base compensation for his services hereunder, in bimonthly
installments, a base salary at a rate of $150,000 per annum, as increased, on
an annual basis to reflect the increase in the United States Government cost
of living index for the Chicago, Illinois area. Notwithstanding the minimum
increase set forth above, the Board of Directors in their sole discretion, may
establish a higher compensation level.
(b) An annual bonus compensation of up to 50% of his annual base
compensation based on Executive's performance as determined and approved by
the Board of Directors, in its sole discretion. Such bonus will be at the full
discretion of the Board of Directors, and may not be paid at all. Executive
acknowledges that no such bonuses have been agreed upon or promised. If the
Board of Directors decides to pay a bonus, it is to be paid within thirty days
after the issuance of audited financial statements for the Company. The Board
of Directors in their sole discretion may establish a higher bonus level based
on the performance of Executive.
(c) During the Term of Employment the Executive shall receive an
automobile allowance of $500 per month and reimbursements for automobile
insurance, repairs, maintenance and business-related fuel not to exceed $6,000
per annum.
5. Reimbursement of Expenses
-------------------------
During the Term of Employment, the Company shall reimburse Executive
for documented travel, entertainment and other expenses reasonably incurred by
Executive in
-5-
<PAGE>
connection with the performance of his duties hereunder and, in each case, 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) established from time to time, by the Board of
Directors for executives of the Company.
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 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 which 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.
-6-
<PAGE>
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 five
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 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.
Also during the Restricted Period, Executive will not disparage or
make public statements that damage Parent, the Company and their
respective business. Notwithstanding the foregoing, nothing herein
shall prevent the
-7-
<PAGE>
Executive from providing a letter of recommendation to an employee
with respect to a future employment opportunity.
(iii) 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. In addition, should Executive purchase the
Restaurant, then his ownership, operation and management of the
Restaurant will not be considered a violation of this Section 7 or
Section 8.
(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, or (b) any similar or incidental business conducted, or engaged
in, by the Company prior to the date hereof or at any time during the Term of
Employment.
"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
-8-
<PAGE>
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 Joel Aaseby 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 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: Joel Aaseby
706 Spring Road
Elmhurst, Illinois 60126
with a copy to:
Freeborn & Peters
950 Seventeenth Street
Suite 2600
Denver, Colorado 80202
Attention: Ernest J. Panasci, Esq.
-9-
<PAGE>
If to Company: 2215 Enterprise Drive
Suite 1502
Westchester, IL 60154
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 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 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.
-10-
<PAGE>
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.
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.
-11-
<PAGE>
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.
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 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
-12-
<PAGE>
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.
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: Joel Aaseby
NATIONAL RESTAURANT ENTERPRISES, INC.
By
------------------------------------
Name:
Title:
-13-
EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
-----------------------------------------
This Employment and Non-Interference Agreement (this "Agreement") is
dated as of _______, 1996, by and between Scott Vasatka (the "Executive") and
National Restaurant Enterprises, Inc., a Delaware corporation (the "Company")
and a wholly-owned subsidiary of AmeriKing, Inc., a Delaware corporation
("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 of September 1, 1994 (the "Prior
Employment Agreement");
WHEREAS, Executive and the Company wish to terminate the Prior
Employment Agreement in it entirety simultaneously with the execution of this
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)), (a) as Vice President--Human
Resources/Administration of Parent and the Company and to undertake such
duties and responsibilities as may be reasonably assigned to Executive from
time to time by the Chairman, Chief Executive Officer and the Board of
Directors of the Company or the Parent.
<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
principal executive offices of the Company, under the direction of the
Chairman, Chief Executive Officer 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 all 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),
consistent with past practices and norms in similar positions.
(c) Nothing contained herein shall require Executive to follow any
directive or to perform any act which would violate any of 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. 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 his employment, the Executive shall live in
the Chicago area and generally perform his duties under this Agreement from
the Company's offices in the Chicago area.
3. Term of Employment; Termination
-------------------------------
(a) The "Term of Employment" shall commence on the date hereof and
shall continue for a term of five years. Should the Executive's employment by
the Company be earlier terminated pursuant to Section 3(b) or by the Executive
pursuant to Section 3(c), 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;
-2-
<PAGE>
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company and as certified by a competent medical
physician, his duties hereunder for a continuous period of 180 days;
(iii) for Cause (as defined in Section 3(c));
(iv) for any other reason not referred to in clauses (i)
through (iii) or no reason, such that this Agreement, subject to the
provisions of Section 3(e), shall be construed as terminable at will
by the Company.
Executive acknowledges that no representations or promises have been
made concerning the grounds for termination or the future operation of the
Company's business, and that nothing contained herein or otherwise stated by
or on behalf of the Company modifies or amends the right of the Company to
terminate Executive at any time, with or without Cause. Termination shall
become effective upon the delivery by the Company to the Executive of notice
specifying such termination and the reasons therefor.
(c) Subject to the payments contemplated by Section 3(e), the Term of
Employment may be terminated at any time by the Executive:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company, and as certified by a competent medical
physician, his duties hereunder for a continuous period of 180 days;
(iii) as a result of material reduction in Executive's
authority, perquisites, position or responsibilities (other than such
a reduction which affects all of the Company's senior executives on a
substantially equal or proportionate basis) or the Company's willful,
material violation of its obligations under this Agreement, in each
case, after 30 days' prior written notice to the Company and its
Board of Directors and the Company's failure thereafter to cure such
reduction or violation; or
(iv) voluntarily or for any reason or no reason not referred
to in clauses (i) through (iii) in each case, after 120 days' prior
written notice to the Company and its Board of Directors.
(d) 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
-3-
<PAGE>
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; (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, each as amended to date,
provided, that the Executive has been given notice and 90 days from
such notice fails to cure the violation; or (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.
(e) In the event Executive's employment is terminated pursuant to
(i) Section 3(b)(i) or (ii) or 3(c)(i) or (ii), 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)(iii) or 3(c)(iv) 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
-4-
<PAGE>
(iii) Section 3(b)(iv) or 3(c)(iii), the Company will pay
the Executive the full amounts to which he would be entitled under
Section 4(a) for the period from effectiveness of termination through
the fifth anniversary of this Agreement, payable in two installments,
half payable upon the effectiveness of termination and half payable
upon the last day of such period.
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).
(f) Upon the conclusion of the original five year term of this
Agreement ("Original Term") and upon each succeeding anniversary of this
Agreement, the Executive's Term of Employment will be automatically renewed
for another year; provided that neither the Company nor the Executive
terminates this Agreement pursuant to Section 3 during the Original Term; and
provided further that after such Original Term neither the Company nor the
Executive provides notice of termination to the other at least 120 days before
the anniversary of this Agreement. Pursuant to such termination notice, this
Agreement will terminate upon the succeeding anniversary.
4. Compensation. During the Term of Employment, the Company shall pay
compensation to Executive as follows:
(a) As base compensation for his services hereunder, in bimonthly
installments, a base salary at a rate of $125,000 per annum, as increased, on
an annual basis to reflect the increase in the United States Government cost
of living index for the Chicago, Illinois area. Notwithstanding the minimum
increase set forth above, the Board of Directors in their sole discretion, may
establish a higher compensation level.
(b) An annual bonus compensation of up to 50% of his annual base
compensation based on Executive's performance as determined and approved by
the Board of Directors, in its sole discretion. Such bonus will be at the full
discretion of the Board of Directors, and may not be paid at all. Executive
acknowledges that no such bonuses have been agreed upon or promised. If the
Board of Directors decides to pay a bonus, it is to be paid within thirty days
after the issuance of audited financial statements for the Company.
(c) During the Term of Employment the Executive shall receive an
automobile allowance of $500 per month and reimbursements for automobile
insurance, maintenance, and business fuel not to exceed $6,000 per annum.
-5-
<PAGE>
5. Reimbursement of Expenses.
-------------------------
During the Term of Employment, the Company shall reimburse Executive
for documented travel, entertainment and other expenses reasonably incurred by
Executive in connection with the performance of his duties hereunder and, in
each case, 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) established from time to time, by the Board of
Directors for executives of the Company.
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 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 which 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.
-6-
<PAGE>
(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 five
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 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
-7-
<PAGE>
or the Competitive Business employs or seeks to employ such person)
employed or retained by the Company. Also during the Restricted
Period, Executive will not disparage or make public statements that
damage Parent, the Company and their respective business.
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) 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, or (b) any similar or incidental business conducted, or engaged
in, by the Company prior to the date hereof or at any time during the Term of
Employment.
"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
-8-
<PAGE>
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 Scott Vasatka 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 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: Scott Vasatka
139 Oakton Drive
Lombard, Illinois 60148
with a copy to:
Freeborn & Peters
950 Seventeenth Street
Suite 2600
Denver, Colorado 80202
Attention: Ernest J. Panasci, Esq.
-9-
<PAGE>
If to Company: 2215 Enterprise Drive
Suite 1502
Westchester, IL 60154
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 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.
-10-
<PAGE>
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.
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,
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
-11-
<PAGE>
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.
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 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
-12-
<PAGE>
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.
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.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first written above.
EXECUTIVE:
--------------------------------------
Name: Scott Vasatka
NATIONAL RESTAURANT ENTERPRISES, INC.
By
------------------------------------
Name:
Title:
-14-
<PAGE>
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 March 12,
1996, October 10, 1995, and May 18, 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
July 9, 1996
Chicago, Illinois
