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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1996
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 333-04261
AMERIKING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3970707
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
2215 ENTERPRISE DRIVE, SUITE 1502 60154
WESTCHESTER, ILLINOIS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 708-947-2150
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE
OF
EACH NAME OF EACH EXCHANGE ON
CLASS WHICH REGISTERED
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
(TITLE OF CLASS)
(TITLE OF CLASS)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K: [X]
The aggregate market value of the voting stock held by non-affiliates (as
defined in Rule 405) of the registrant as of March 15, 1997 was approximately
$47,454.
The number of shares outstanding of each of the registrant's classes of
common stock as of March 15, 1997 was 893,290 of common stock, $.01 par value
per Share (the "Common Stock").
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document have been incorporated by reference into
this Annual Report on Form 10-K.
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PART OF FORM 10-K
DOCUMENT WHERE INCORPORATED
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AmeriKing's Inc. Part IV
Registration Statement (Reg. No. 333-04261)
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TABLE OF CONTENTS
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PART I
ITEM 1. BUSINESS................................................... 1
ITEM 2. PROPERTIES................................................. 9
ITEM 3. LEGAL PROCEEDINGS.......................................... 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........ 10
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS....................................... 10
ITEM 6. SELECTED FINANCIAL DATA.................................... 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................ 18
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.................................. 35
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT......... 35
ITEM 11. EXECUTIVE COMPENSATION..................................... 37
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 40
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............. 41
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.................... 43
Financial Statements Included in Item 6.................... 43
Schedules Omitted as Not Required and Inapplicable......... 43
Exhibits................................................... 43
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PART I
Certain statements in this Form 10-K may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors which may cause the actual results,
performance, or achievements of AmeriKing, Inc. ("AmeriKing" or the "Company")
to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions; competition; success of operating initiatives; development and
operating costs; advertising and promotional efforts; brand awareness; adverse
publicity; acceptance of new product offerings; availability, locations, and
terms of sites for store development; changes in business strategy or
development plans; quality of management; availability, terms, and deployment
of capital; business abilities and judgment of personnel; availability of
qualified personnel; food, labor, and employee benefit costs; changes in, or
the failure to comply with, governmental regulations; regional weather
conditions; construction schedules; and other factors referenced in this Form
10-K.
ITEM 1. BUSINESS
RECENT DEVELOPMENTS
On March 20, 1997, the Company entered into a contract to sell to a third
party franchisee, 10 restaurants in the south Chicago suburban area, as
required by the acquisition of the Franchise restaurants, for $8.2 million in
cash. For fiscal 1996, the restaurants to be sold accounted for approximately
$11.4 million and $700,000 of the Company's revenues and restaurant
contribution, respectively. The closing of the sale of the restaurants is
expected to occur in the second quarter of fiscal 1997, at which time the
Company will recognize a gain on sale of the stores in the amount of
approximately $1.9 million.
GENERAL DEVELOPMENT
AmeriKing is the second largest independent Burger King franchisee in the
United States with 184 restaurants located primarily in eleven Midwestern and
Southern states. The Company was formed in 1994 by a group consisting of
independent Burger King franchisees, former Burger King Corporation ("BKC")
executives and The Jordan Company. Since inception, the Company has acquired
175 Burger King restaurants and developed nine new Burger King restaurants.
AmeriKing, Inc. and its wholly owned subsidiary, National Restaurant
Enterprises, Inc. were organized as Delaware corporations and incorporated on
August 17, 1994. AmeriKing's principal executive offices are located at 2215
Enterprise Drive, Suite 1502, Westchester, Illinois, 60154. Its telephone
number is (708) 947-2150.
BURGER KING CORPORATION
Overview. According to information publicly filed by Grand Metropolitan,
PLC, the parent corporation of BKC, BKC is the second largest restaurant
franchisor in the world, with system-wide restaurant sales of $9.0 billion for
its fiscal year ended September 30, 1996. There are more than 8,000 Burger
King restaurants worldwide, of which over 90% are operated by approximately
1,500 independent franchise groups. Burger King's share of the quick-service
hamburger restaurant market grew from 18% in 1995 to 19.2% in 1996. As is the
case for all Burger King franchisees, the Company is required to comply with
BKC guidelines as to menu and operations, restaurant configurations and
marketing and promotion.
Menu and Operations. The Burger King system philosophy is characterized by
its "Have It Your Way" service, flame-broiling, generous portions and
competitive prices. Each of the Company's Burger King restaurants offers a
standard menu containing a variety of traditional and innovative food items.
Burger King restaurants feature flame-broiled hamburgers, the most popular of
which is The Whopper(R) sandwich. The
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Whopper is a large, flame-broiled hamburger on a toasted bun garnished with
combinations of lettuce, onions, pickles, tomatoes and mayonnaise. At present,
the standard menu of all Burger King restaurants consists primarily of
hamburgers, cheeseburgers, chicken sandwiches, fish sandwiches, breakfast
items, french fried potatoes, salads, shakes, desserts, soft drinks, milk and
coffee. In addition, promotional menu items are introduced periodically for
limited times.
The Company's Burger King restaurants are typically open seven days per week
with minimum operating hours from 7:00 AM to 11:00 PM. Burger King restaurants
are of distinctive design and are generally located in high-traffic areas
throughout the United States. The Company believes that convenience of
location, speed of service, quality of food and price/value of food served are
the primary competitive advantages of Burger King restaurants. The Company
believes that it will continue to realize significant benefits from its
affiliation with BKC as a result of the widespread recognition of the Burger
King brand, the effectiveness of BKC's national marketing programs and the
overall management of the Burger King system, including product development,
quality assurance and strategic planning.
The Company participates in a variety of Burger King programs designed to
increase restaurant revenues and profitability. In October 1993, BKC
implemented the first stages of a nationwide Value Menu Program. The program
consisted of discounted combination meals and menu items designed to give the
consumer greater value while increasing customer traffic and profitability.
BKC has also focused its efforts on a back-to-basics marketing strategy by
eliminating over 30 items from its menu and emphasizing its core hamburgers,
french fries and soft drinks. In addition, as part of its "Bigger, Better
Burgers" campaign, BKC increased its standard hamburger patty size to 2.8
ounces, which is 75% larger than McDonald's current standard size of 1.6
ounces.
Restaurant Configurations. The Company's Burger King restaurants consist of
one of several building types with various layouts, seating capacities and
engineering specifications. BKC's traditional restaurant contains
approximately 2,500 square feet, seats 86 customers and offers interior design
flexibility. BKC also features alternative restaurant formats ranging in size
from 500 to 4,000 square feet and seating capacities ranging up to over 100
customers. BKC has developed a number of standard and non-traditional
restaurant formats which enable maximum seating capacities from available
square footage in such facilities as airports, hospitals, college campuses,
gas stations and retail shopping centers. Substantially all of the Company's
restaurants are traditional free-standing restaurants with seating capacities
of at least 50 and which contain drive-thru windows. According to BKC, over
50% of all restaurant sales in the Burger King system are generated from
drive-thru windows.
National Marketing and Promotion. The Burger King brand has been in
existence for over 40 years. BKC currently has an annual advertising and
promotional budget of over $240 million to heighten brand awareness. BKC's
advertising campaigns are generally carried on television, radio and in mass
circulation print media (national and regional newspapers and magazines). BKC
franchisees are required to contribute 4.0% of monthly gross sales from
restaurant operations to a BKC advertising fund, which contributions are
generally utilized by BKC for its advertising and promotional programs and
public relations activities. BKC has also entered into selective partnership
arrangements to help promote its products.
COMPANY OPERATIONS
Management Structure. All executive management, finance, marketing and
operations support functions are conducted centrally at the Company's
Westchester, Illinois headquarters. In each of its six regions (Chicago,
Virginia, Colorado, Texas, Tennessee and Cincinnati), the Company has a
regional managing director who is responsible for the operations of all
Company Burger King restaurants within the assigned region. Each of these
managing directors must be approved by BKC. Supporting the managing director
in Chicago are two directors of operations (who each oversee an average of 58
restaurants), who supervise 17 district managers (who directly supervise five
to nine restaurants each). The five other managing directors are also
supported by district
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managers. The district managers are responsible for direct oversight of the
day-to-day operations of the Company's Burger King restaurants. Typically,
district managers have previously served as restaurant managers within the
Burger King system. A typical Company restaurant is staffed with a full-time
manager, one to three assistant managers and full-and part-time hourly
employees.
Management Incentives and Retention. Managing directors, directors of
operations, district managers and most restaurant managers are compensated
with a fixed salary plus a bonus based upon the performance of the restaurants
under their supervision. Evaluation criteria include compliance with Burger
King's restaurant operating guidelines and restaurant profitability. Senior
management believes that the Company's larger size and regional focus provide
significant professional development opportunities for the Company's
management and operating personnel not available to smaller franchisees. The
Company believes that its compensation structure and professional development
opportunities are significant advantages in attracting and retaining qualified
management personnel.
Training. The Company maintains a comprehensive training and development
program for all of its personnel. This program emphasizes the Burger King
system-wide operating procedures, food preparation methods and customer
service standards. The management training program features an intensive five
week hands-on restaurant training period, followed by two weeks of classroom
instruction (one week of simulated restaurant management activities and one
week of food sanitation). Special emphasis is placed on quality food
preparation, service standards and total customer satisfaction. Upon
certification, new managers work closely with experienced managers to solidify
their skills and expertise. The Company's existing restaurant managers
regularly participate in the Company's ongoing training efforts, including
classroom programs and in-restaurant programs. In addition, BKC's training and
development programs are also available to the Company.
Management Information System. The Company's customized management
information system, REMACs, provides daily tracking and reporting of customer
traffic counts, sales, average check values, menu item sales, inventory
variances, key labor measures and other detailed information in comparative
form, by individual restaurant and for the Company as a whole. The Company's
integrated management information system, typically installed in its
restaurants within 60 to 90 days of acquisition, transmits data on a daily
basis to Company headquarters. This information is available by 6:00 AM the
following day and can be accessed by district managers on a remote basis using
a laptop computer. The Company's sophisticated management information system,
typically not affordable by smaller Burger King franchisees and other smaller
quick-service restaurant chains, provides management with the ability to
identify and quickly capitalize on restaurant sales enhancement and profit
opportunities. The Company utilizes its management information system to: (i)
minimize shrinkage and control labor costs; (ii) monitor point-of-sale order
taking; (iii) effectively manage inventory; and (iv) quickly integrate
accounting systems following acquisitions. Customized exception reporting is
used to focus operations on high priority issues and opportunities. The
Company also utilizes the system to increase sales revenues by assisting
restaurant managers in optimally scheduling the restaurant work force during
any particular shift at the restaurant work stations for which they are best
qualified. In addition, the system enables the Company to analyze various
promotional programs using product mix information.
FRANCHISE AGREEMENTS
The Company operates Burger King restaurants through its wholly owned
subsidiaries, each of which is a party to a BKC franchise agreement. The BKC
franchise agreements do not grant any franchisee exclusive rights to a defined
territory; however, the Company, based upon its review of BKC's Uniform
Franchise Offering Circular and its experience with BKC, believes that BKC
generally seeks to ensure that newly granted franchises do not materially
affect the operations of existing Burger King restaurants. Acceptance as a
franchisee is based upon several factors, including management experience,
qualifications, financial status and net worth. The franchise agreements
require, among other things, that all restaurants be of standardized design
and operated in a prescribed manner, including utilization of the standard
Burger King menu. Most franchise agreements provide for a term of 20 years,
and, at the option of the franchisee and BKC, a renewal (successor) franchise
agreement may be granted by BKC provided that the restaurant meets BKC's
operating standards applicable at that time
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and the franchisee is not in default under the relevant franchise agreement.
The BKC franchise agreements are noncancelable except for failure to abide by
the terms thereof and in certain other limited circumstances.
BKC franchise agreements generally are renewable for an additional term
based upon the form of franchise agreement applicable at that time, provided
that the franchisee (i) pays a successor franchise fee equal to the franchise
fee applicable at that time, (ii) has demonstrated an ability to operate the
business consistent with the standards set forth in the franchise agreement,
(iii) agrees to make capital improvements to the subject restaurant to bring
the restaurant up to BKC's image standards applicable at that time and (iv) is
not then currently in default with respect to any other obligations to BKC,
including pursuant to other franchise agreements. The Company, through its
district managers, closely supervises the operation of all of its restaurants
to ensure that operating policies are followed and that the requirements of
the franchise agreements are met. The amount of capital expenditures that may
be required to bring a restaurant up to BKC's current standards at any given
time varies widely depending upon the magnitude of the required changes and
the degree to which the franchisee has made interim changes to the restaurant.
Within five years of December 30, 1996, 30 of the Company's subsidiaries'
current 184 franchise agreements with BKC, which contributed $30.7 million in
restaurant sales in fiscal 1996, are scheduled to expire.
The Company intends to expand its operations of Burger King restaurants
through both new restaurant development and acquisitions. Pursuant to current
BKC policies and procedures applicable to the Company, BKC's approval is
required for the development of new Burger King restaurants by the Company and
the acquisition of Burger King restaurants by the Company from other Burger
King franchisees. BKC's consent to such renewals, acquisitions or development
may be withheld in BKC's sole discretion.
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. 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 the BKC franchise agreements, BKC may terminate all the
franchise agreements with the Company's subsidiary franchisees or the
applicable subsidiary franchisee if, as applicable, any person serving on the
board of directors of the Company or the applicable subsidiary franchisee is
(i) an employee of BKC, (ii) an owner (subject to certain exceptions), board
member or principal or employee of any business that is then approved by BKC
as a supplier to the Burger King system or (iii) an owner (subject to certain
exceptions), board member or principal or employee of any hamburger restaurant
business other than the Burger King restaurant business.
OBLIGATIONS TO BURGER KING CORPORATION
BKC franchise agreements provide for a one-time franchise fee (currently
$40,000), a monthly royalty fee of 3.5% of each restaurant's gross sales and a
monthly advertising contribution of 4.0% of gross sales. During fiscal 1996,
the Company paid BKC an aggregate of $6.9 million in royalty fees and $9.2
million in advertising contributions.
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BKC is the lessor on approximately 60% of the Company's currently leased
properties, primarily as a result of the Company's initial acquisition of
Burger King restaurants from BKC. The Company guarantees all of the
obligations of its subsidiaries under these leases. Under certain lease
agreements with BKC affiliates, the Company's subsidiaries made rent payments
aggregating $10.1 million during fiscal 1996. In connection with the execution
of the lease agreements, the Company guaranteed the payment and performance
obligations of each of its subsidiaries. In addition, the Company has agreed
to guarantee the payment and performance obligations under each of the
franchise agreements between BKC and its subsidiary franchisees.
As required by BKC regulations, the Company's obligations under the Senior
Notes (as defined), the Senior Preferred Stock (as defined) and, if issued,
the Exchange Debentures (as defined) will be subject to an intercreditor
agreement pursuant to which the Company's obligations in respect of such
securities are subject to the prior payment in full of all indebtedness,
liabilities and other obligations of the Company and its subsidiaries to BKC
under the BKC franchise agreements, BKC leases and any other indebtedness of
the Company and its subsidiaries to BKC.
The Company has committed to BKC that, without BKC's prior written consent,
(i) it will not pay cash dividends on the Senior Preferred Stock on or prior
to December 1, 2001 and (ii) it will not pay cash dividends to holders of
Common Stock until the Senior Notes are repaid in full and the Senior
Preferred Stock is redeemed or otherwise retired. In addition, the Company has
committed to BKC that it will make capital expenditures at its AmeriKing
Tennessee Corporation I restaurants of approximately $1.5 million on or before
September 7, 1997, of which approximately half had been made as of December
30, 1996. The Company has further committed to BKC that for the foreseeable
future (i) it will make capital expenditures on its existing restaurants equal
to 1% of its gross sales and (ii) it will spend an amount equal to 1% of its
gross sales on local advertising. The Company has also committed to BKC that
it will develop 17 restaurants in fiscal 1997. In the event the Company fails
to develop at least 14 restaurants in fiscal 1997, the Company will pay BKC
$150,000. In addition, to the extent the Company develops 13 or fewer
restaurants in fiscal 1997, the Company will be obligated to pay BKC $75,000
for each restaurant less than 14 it fails to develop.
ADVERTISING AND PROMOTION
The Company supplements BKC's current $240 million annual advertising budget
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 1996, the Company spent approximately $834,000
on supplemental local advertising and promotions, and plans to continue its
local advertising and promotional programs at comparable levels in the future.
SUPPLIES AND DISTRIBUTION
The Company is a member of a national purchasing cooperative created by and
for the Burger King system known as Restaurant Services, Inc. ("RSI"). RSI is
an independent, member-owned, non-profit cooperative which provides services
on behalf of, and for the benefit of, Burger King restaurant operators. RSI
negotiates the lowest cost for the Burger King system while improving quality,
enhancing competitiveness and ensuring the best possible value. RSI has the
sole and exclusive responsibility for negotiating purchasing arrangements for
the Burger King system with respect to certain paper goods, restaurant
supplies, food and drink products, certain equipment and many other items
mutually agreed to by Burger King franchisees for use in the Burger King
system. The Company uses its purchasing power to negotiate directly with
certain other vendors, as well as each of its distributors, to obtain
favorable pricing and terms for the distribution of its products. Currently,
the Company's primary distributor of foodstuffs and supplies is ProSource
Distribution Services, Inc. ("ProSource").
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All BKC-approved suppliers are required by BKC to purchase all foodstuffs
and supplies from BKC-approved manufacturers and purveyors. BKC is responsible
for quality control and supervision of these manufacturers and purveyors, and
BKC monitors all BKC-approved manufacturers and purveyors of its foodstuffs.
BKC regularly visits these manufacturers and purveyors to observe the
preparation of the foodstuffs and conducts various tests to ensure that only
high quality foodstuffs are sold to BKC-approved suppliers, distributors and
franchisees. In addition, BKC coordinates and supervises audits of approved
suppliers and distributors to determine continuing product specification
compliance and to ensure that manufacturing plant and distribution center
standards are met.
The Company believes that reliable alternative sources for virtually all
restaurant supplies are readily available at competitive prices should the
arrangements with ProSource or any other existing supplier or distributor
change.
QUALITY ASSURANCE
The Company's operations are focused on achieving a high level of customer
satisfaction, with speed, accuracy and quality of service closely monitored.
The Company's senior management and restaurant management staff are
principally responsible for ensuring compliance with the Company's and BKC's
operating procedures. The Company and BKC have uniform operating standards and
specifications relating to the quality, preparation and selection of menu
items, maintenance and cleanliness of the premises and employee conduct.
Detailed reports from the Company's own management information system and
surveys conducted by the Company or BKC are tabulated and distributed to
management on a regular basis to help maintain compliance. In addition to
customer satisfaction, these reports track comparable sales and customer
counts, labor and food costs, inventory levels, waste losses and cash
balances.
All Burger King franchisees operate subject to a comprehensive regimen of
quality assurance standards set by BKC, as well as standards set by Federal,
state and local governmental laws and regulations. These standards include
food preparation rules regarding, among other things, minimum cooking times
and temperatures, sanitation and cleanliness. In addition, BKC has set maximum
time standards for holding unsold prepared food. For example, sandwiches and
french fries are required to be discarded after ten minutes and seven minutes
following preparation, respectively. The "conveyor belt" cooking system
utilized in all Burger King restaurants, which is calibrated to carry
hamburgers through the flame broiler at regulated speeds, is one of the safest
cooking systems among major quick-service restaurants and helps to ensure that
the standardized minimum times and temperatures for cooking are met.
The Company closely supervises the operation of all of its restaurants to
help ensure that standards and policies are followed and that product quality,
customer service and cleanliness of the restaurants are maintained. In
addition, BKC may conduct unscheduled inspections of Burger King restaurants
throughout the nationwide system.
BUSINESS STRATEGY
AmeriKing's business strategy is to continue to increase revenues,
restaurant contribution and earnings before interest, taxes, depreciation and
amortization. The Company's strategy is based on the following elements:
Develop New Burger King Restaurants in Existing Markets. The Company seeks
to develop new Burger King restaurants in existing markets where it has
established a significant presence, enabling the Company to enhance its
operating leverage and increase overall margins and profitability. Management
believes that the underpenetration of the Burger King system relative to other
quick-service hamburger concepts provides the Company with significant new
development opportunities. Furthermore, management believes the Company's new
restaurant development risk is substantially reduced due to: (i) the proven
success of the Burger King concept; (ii) the predictability of development
costs and restaurant profitability compared to that of newer restaurant
concepts; and (iii) management's extensive experience within the Burger King
system. The Company currently leases all but one of its properties, minimizing
its cost to develop new restaurants.
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To date, the Company has developed nine new restaurants. Prior to developing
a new restaurant, the Company's senior management conducts an extensive site
selection process with significant input from BKC's development field
personnel, including an analysis of projected development costs and
anticipated profitability on a per location basis. The Company also uses
regional and local developers, as well as former Burger King restaurant owners
with significant knowledge of local markets, to assist in site selection and
in reviewing zoning requirements and other regulatory matters related to the
construction of new Burger King restaurants.
Pursue Strategic Acquisitions of Burger King Restaurants. The Company
intends to selectively pursue strategic acquisitions in the highly fragmented,
growing Burger King system. Since 1994, the Company has successfully completed
175 restaurant acquisitions for an aggregate purchase price of approximately
$138 million. The Company evaluates each prospective acquisition using a set
of stringent criteria, including the potential for future fill-in acquisitions
and new restaurant development in targeted markets and the overall
attractiveness of market demographics. The Company seeks to enter new
geographic markets through acquisitions that provide the critical mass
necessary to realize operating efficiencies. Six of the Company's nine
acquisitions to date have been of large, regional operations, each consisting
of more than 10 restaurants. AmeriKing seeks to augment new market
acquisitions with fill-in acquisitions, which enable the Company to:
(i) achieve greater restaurant penetration within existing markets; (ii)
capitalize on its significant operating leverage; and (iii) increase operating
margins and profitability. The Company continually engages in discussions with
Burger King franchisees, including with respect to the potential acquisition
of the business or assets of such franchisees.
The Company's key criteria when evaluating new market acquisitions are the
future opportunities for fill-in acquisitions, potential for new restaurant
development in the area, the overall attractiveness of the market from a
demographic perspective and the acquisition price relative to historical and
expected financial performance of these restaurants. Typically, key operating
personnel of acquired restaurants are retained to oversee the operation with
the added benefit of the Company's sophisticated management information
systems and other corporate resources.
The Company's fill-in acquisitions typically involve smaller, local
operations in areas in, or contiguous to, the Company's existing operations.
An example of a typical fill-in acquisition is the Company's acquisition in
September 1995 of five additional restaurants in Denver, Colorado. An example
of a larger fill-in acquisition is the Company's acquisition in November 1994
of 39 additional restaurants in the Chicago market.
The table below summarizes each of the Company's acquisitions, representing
175 restaurants, since its inception.
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ACQUISITION RESTAURANTS TYPE OF
DATE STATE ACQUIRED SELLER
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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
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Achieve Operating Efficiencies. The Company's large number of restaurants,
centralized management structure and advanced management information systems
enable the Company to: (i) tightly control restaurant and corporate level
costs; (ii) capture economies of scale by leveraging its existing corporate
overhead structure; and (iii) continuously monitor point-of-sale data to more
efficiently manage its restaurant operations. The Company has experienced both
restaurant-level and corporate-level savings as a result of its size and
related
7
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bargaining power, particularly with respect to food and paper purchasing and
distribution, restaurant maintenance services and general liability insurance.
Capitalize on Strong Support from Burger King Corporation. The Company
believes that it realizes significant benefits from its affiliation with BKC
as a result of: (i) the widespread recognition of the Burger King name and
products; (ii) BKC's management of the proven, successful Burger King concept,
including new product development, quality assurance and strategic planning;
(iii) the size and market penetration of BKC's approximate $240 million annual
media budget; and (iv) the expected continued growth of the Burger King
system. During BKC's fiscal year ended September 30, 1996, a record number of
836 new restaurants were added to the Burger King system.
Leverage Sophisticated Management Information System. The Company's
customized integrated management information system, REMACs, typically not
affordable by smaller Burger King franchisees and other smaller quick-service
restaurant chains, provides management with the ability to identify and
quickly capitalize on restaurant sales enhancement and profit opportunities.
The Company utilizes its management information system to: (i) minimize
shrinkage and control labor costs; (ii) efficiently schedule labor;
(iii) effectively manage inventory; (iv) analyze product mix and various
promotional programs using point-of-sale information; and (v) quickly
integrate accounting systems following acquisitions.
Consistently Provide High Quality Products and Superior Customer Service. As
the number of restaurants that the Company owns in a particular market
increases, the Company has a greater ability to (i) ensure overall customer
satisfaction in that market through consistency in food quality, service and
restaurant appearance and (ii) coordinate and influence local Burger King
advertising and promotional programs and pricing policies. In addition, the
large number of restaurants that the Company owns and the corresponding
professional development opportunities permit the Company to attract and
retain strong regional, district and individual restaurant management. Most of
these managers receive significant incentive compensation based on compliance
with Burger King's restaurant operating guidelines and restaurant
profitability.
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, 1996, the McDonald's
system comprised 21,022 restaurants and total system-wide revenues for
McDonald's for the year ended December 31, 1996 were $31.8 billion. The
Company believes that product quality and taste, name recognition, convenience
of location, speed of service, menu variety, price, and ambiance are the most
important competitive factors in the quick-service restaurant industry and
that its Burger King restaurants effectively compete in each category.
The Company faces competition in its expansion plans. Potential Burger King
development and acquisition competitors include BKC, which has exercised its
right of first refusal with respect to previously proposed restaurant sales,
controls the areas in which new Burger King restaurant sites can be developed
and may impose, as a condition to its consent to any proposed acquisition or
development opportunity, conditions, limitations or other restrictions on the
Company and its activities. Other potential competitors in acquiring and
developing Burger King restaurants include other investors and existing Burger
King franchisees. The Company also competes with other quick-service
restaurant operators and developers for the most desirable site locations.
8
<PAGE>
GOVERNMENT REGULATION
The Company is subject to various Federal, state and local laws affecting
its business, including various health, sanitation, fire and safety standards.
Newly constructed or remodeled restaurants are subject to state and local
building code and zoning requirements. In connection with the remodeling and
alteration of the Company's Burger King restaurants, the Company may be
required to expend funds to meet certain Federal, state and local regulations,
including regulations requiring that remodeled or altered restaurants be
accessible to persons with disabilities. The Company is also subject to
Federal and state environmental regulations, although such regulations have
not had a material effect on the Company's operations taken as a whole.
Difficulties or failures in obtaining the required licenses or approvals could
delay or prevent the opening of a new restaurant in a particular area.
The Company is also subject to the Fair Labor Standards Act and various
state laws governing such matters as minimum wage requirements, overtime and
other working conditions and citizenship requirements. A significant number of
the Company's food service personnel are paid at rates related to the Federal
minimum wage and increases in the minimum wage, including those recently
enacted by the U.S. Government, would increase the Company's labor costs.
The Company is also subject to various local, state and Federal laws
regulating the discharge of pollutants into the environment. The Company
believes that it conducts its operations in substantial compliance with
applicable environmental laws and regulations. In an effort to prevent and, if
necessary, to correct environment problems, the Company conducts environmental
audits of proposed restaurant sites in order to determine whether there is any
evidence of contamination prior to purchasing or entering into a lease with
respect to such restaurant.
The Company believes that it conducts its operations in substantial
compliance with applicable laws and regulations governing its operations.
EMPLOYEES
As of December 30, 1996, the Company employed 738 full-time salaried
employees and approximately 5,515 full-time and part-time hourly employees. Of
the Company's full-time employees, 35 are involved in overseeing restaurant
operations, 474 are involved in the management of individual restaurants, and
the remainder are responsible for corporate administration. None of the
Company's employees are covered by a collective bargaining agreement. The
Company believes that the dedication of its employees is critical to its
success, and that its relations with its employees are good.
ITEM 2. PROPERTIES
The Company currently operates all but one 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.
Within five years of December 30, 1996, 30 of the Company's 184 current
restaurant leases are due to expire. The Company believes that it will
generally be able to renew leases at commercially reasonable rates as they
expire. During fiscal 1996, the Company renewed each of its two 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.
9
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders of the Company
during the period December 3, 1996, when the Company filed its registration
statement pursuant to Rule 424(b) of the Securities Act of 1933, to
December 30, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established trading market for the Company's common equity.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
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"). Prior to their acquisition by the Company on September 2,
1994, the BKC Restaurants and the Management Restaurants were not under common
control or management. In addition, restaurant contribution for the BKC
Restaurants and the Management Restaurants, which reflects restaurant sales
net of restaurant operating expenses, does not reflect all costs of operating
the BKC Restaurants and Management Restaurants. Accordingly, restaurant sales,
restaurant operating expenses and restaurant contribution may not be
comparable to or indicative of post-acquisition results. The data presented
for the Company as of December 31, 1994 and for the period from September 2,
1994 through December 31, 1994, and for the 1995 and 1996 fiscal years are
derived from the Company's audited financial statements appearing elsewhere
herein. The Selected Consolidated Financial Information should be read in
conjunction with (i) Item 7--Management's Discussion and Analysis of Financial
Condition and Results of Operations and (ii) Item 8--the audited Consolidated
Financial Statements of the Company and the notes thereto.
<TABLE>
<CAPTION>
THE INITIAL
ACQUISITIONS(1)(2) THE COMPANY
----------------------- ------------------------------------
JANUARY 1, 1994
THROUGH SEPTEMBER 2, 1994
FISCAL SEPTEMBER 1, THROUGH DECEMBER FISCAL FISCAL
1993 1994 31, 1994(3) 1995 1996
------- --------------- ----------------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Restaurant sales........ $82,895 $56,720 $33,931 $139,572 $203,753
Restaurant operating
expenses:
Cost of sales.......... 25,832 18,602 10,807 44,798 66,071
Restaurant labor and
related costs......... 21,998 15,529 8,647 34,526 50,838
Depreciation and
amortization.......... 2,062 1,366 1,193 4,927 7,386
Occupancy and other
operating expenses.... 26,405 17,854 9,229 38,930 57,011
------- ------- ------- -------- --------
Total restaurant
operating expenses.. 76,297 53,351 29,876 123,181 181,306
------- -------
Restaurant
contribution........... $ 6,598 $ 3,369
======= =======
General and
administrative
expenses............... 1,374 6,039 10,067
------- -------- --------
Operating income........ 2,681 10,352 12,380
Other income (expense):
Interest expense....... (1,925) (8,323) (11,983)
Other income
(expense), net........ (324) (302) (4,895)
------- -------- --------
Total other income
(expense)........... (2,249) (8,625) (16,878)
------- -------- --------
Income (loss) before
extraordinary item and
provision (benefit) for
income taxes........... 432 1,727 (4,498)
Provision (benefit) for
income taxes........... 191 825 (1,556)
------- -------- --------
Income (loss) before
extraordinary item..... 241 902 (2,942)
Extraordinary item--loss
from early
extinguishment of
debt................... (5,055)
------- -------- --------
Net income (loss)....... $ 241 $ 902 $ (7,997)
======= ======== ========
Preferred stock
dividends(4)........... $ 122 $ 450 $ 753
Weighted average number
of common shares
outstanding (in
thousands)(5).......... 970 970 866
Net income per common
share (before
extraordinary
item)(6)............... $ 0.12 $ 0.47 $ (4.28)
Extraordinary item(6)... (5.84)
------- -------- --------
Net income per common
share(6)............... $ 0.12 $ 0.47 $ (10.12)
======= ======== ========
OTHER DATA:
EBITDA(7)............... $ 4,021 $ 16,142 $ 23,597
======= ======== ========
Capital expenditures:
Existing restaurants... $ 239 $ 1,416 $ 2,424
New restaurant
development........... 696 3,219
Other.................. 358 1,609 2,655
------- -------- --------
Total capital
expenditures........ $ 597 $ 3,721 $ 8,298
======= ======== ========
SELECTED OPERATING DATA:
Ratio of earnings to
fixed charges(8)....... 1.1x
Ratio of earnings to
fixed charges and
preferred stock
dividends(8)........... 1.1
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
THE INITIAL ACQUISITIONS
----------------------------
JANUARY 1, 1994
FISCAL THROUGH
1993 SEPTEMBER 1, 1994
---------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
SUPPLEMENTAL OPERATING 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
======== ========
<CAPTION>
THE COMPANY
----------------------------
JANUARY 1,
1996 DECEMBER 30, 1996
---------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 1,887 $ 5,259
Total assets....................................... 107,236 155,037
Total debt and capitalized leases.................. 90,110 108,465
Senior Preferred Stock............................. 30,303
Total stockholders' equity......................... 8,743 433
</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) As of December 30, 1996, no dividends have been declared by the Company
on either its Class A1 Preferred Stock, Class A2 Preferred Stock or Class
B Preferred Stock (collectively the "Preferred Stock") or its 13% Senior
Exchangeable Preferred Stock, due 2008 (the "Senior Preferred Stock"). In
addition, no cash dividends have been declared by the Company on its
Common Stock.
(5) The weighted average number of common shares outstanding assumes the
following changes to the historical number of common shares outstanding:
(i) the 863.281-for-1 stock split of the shares of Common
12
<PAGE>
Stock pursuant to the Recapitalization, (as defined) and (ii) for all
periods in which there is positive earnings available for the holders of
Common Stock, the conversion of immediately exercisable warrants and
options to purchase 106,700 shares of Common Stock and Non-Voting Common
Stock (as defined).
(6) Net income per common share was computed by deducting in all periods
dividends payable (whether or not declared) to the holders of Preferred
Stock and Senior Preferred Stock and using the weighted average number of
shares of Common Stock outstanding.
(7) EBITDA (as defined) represents operating income plus depreciation and
amortization (including losses on disposal of fixed assets and provisions
for disposition of restaurants and equipment included in occupancy and
other operating expenses and other income (expense), net) and management
and director's fees (included in other income (expense), net). For fiscal
1996, $152,000 of amortization relative to new restaurant development
start up costs was included in other operating expenses. EBITDA is
included because the Cash Flow Coverage Ratio (each as defined in the
Indenture and the Exchange Debenture Indenture), is calculated on a
similar basis. See the Consolidated Statements of Operations of the
Company and the related notes to the Consolidated Financial Statements
thereto included herein.
(8) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings before income taxes, plus fixed charges.
Fixed charges consist of interest expense on all indebtedness and
capitalized interest, amortization of deferred financing costs and rental
expense on operating leases, representing that portion of rental expense
deemed by the Company to be attributable to interest. For fiscal 1996,
earnings were insufficient to cover fixed charges by approximately $4.5
million. For fiscal 1996, earnings were insufficient to cover fixed
charges and preferred stock dividends by approximately $4.5 million.
(9) Sets forth for the Initial Acquisitions the components constituting
aggregate restaurant sales, restaurant operating expenses and restaurant
contributions for the indicated periods.
(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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company operates Burger King restaurants through its wholly owned
subsidiaries, each of which is a party to a BKC franchise agreement. BKC
franchise agreements require a one-time franchise fee (currently $40,000), a
monthly royalty fee of 3.5% of each restaurant's gross sales and a monthly
advertising contribution of 4.0% of gross sales. Most franchise agreements
provide for a term of 20 years, and, at the option of the franchise and BKC, a
renewal franchise agreement may be granted by BKC upon payment of the then
current franchise fee provided that the restaurant meets BKC's operating
standards applicable at that time and the franchisee is not in default under
the relevant franchise agreement. In addition, the Company has reached a
separate agreement with BKC in which the Company has committed to spend 1% of
gross sales on local advertising to supplement BKC's national advertising
activities.
As the Company acquires additional Burger King restaurants, it capitalizes
the value of franchise agreements based on the number of years remaining on
the terms of the agreement and the franchise fee in effect at the time of
acquisition (currently, $40,000 over a 20 year term or $2,000 per year) and it
capitalizes excess cost over fair value of the other net assets acquired and
amortizes goodwill expense for financial statement purposes 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 3.0% to restaurant sales. Promotional products, which account for
the majority of merchandise sales, are generally sold at or near the Company's
costs.
13
<PAGE>
EBITDA represents operating income plus depreciation and amortization
(including losses on disposal of fixed assets and provisions for disposition of
restaurants and equipment) and management and director's fees. While EBITDA
should not be construed as a substitute for operating income or a better
indicator of liquidity than cash flow from operating activities, which are
determined in accordance with generally accepted accounting principles, EBITDA
is included to provide additional information with respect to the ability of
the Company to meet its future debt service, capital expenditure and working
capital requirements. In addition, management believes that certain investors
find EBITDA to be a useful tool for measuring the ability of the Company to
service its debt. EBITDA is not necessarily a measure of the Company's ability
to fund its cash needs. See the Consolidated Statements of Cash Flows of the
Company and the related notes to the Consolidated Financial Statements included
herein.
The Company includes in the comparable restaurant sales analysis discussed
below only those restaurants that have been in operation for a minimum of
thirteen months. For a restaurant not operating for the entire prior annual
period, the sales for the interim period in the prior year are compared to that
for the comparable interim period in the indicated year.
On August 1, 1995, the Company converted its fiscal year to a 52/53 week
fiscal year. Due to the conversion, the 1996 and 1995 fiscal years included 364
and 366 days of operating activity, respectively.
The discussion below of the Company's operating performance for the fiscal
years 1996, 1995 and 1994 should be read in conjunction with Item 6--Selected
Financial Data contained herein.
FISCAL 1996 COMPARED TO FISCAL 1995
Restaurant Sales. Total sales increased $64.2 million or 46.0% during fiscal
1996, to $203.8 million from $139.6 million in fiscal 1995, due primarily to
the inclusion of the 18 restaurants acquired in 1995 and the 36 restaurants
acquired in 1996. In addition, the Company developed 1 new restaurant in 1995
and 8 new restaurants in 1996. In fiscal 1996, newly acquired and newly
developed restaurants accounted for $55.3 million and $6.1 million,
respectively, of the total increase in restaurant sales. Sales at the 121
comparable restaurants owned by the Company at the end of the fiscal 1996
increased 2.0% primarily due to increases in customer traffic. Restaurant menu
prices remained stable during the period.
Restaurant Operating Expenses. Total restaurant operating expenses increased
$58.1 million, or 47.2% during fiscal 1996, to $181.3 million from $123.2
million in fiscal 1995, due primarily to the inclusion of newly acquired
restaurants. As a percentage of sales, restaurant operating expenses increased
0.6% to 88.9% in fiscal 1996 from 88.3% in fiscal 1995 due to increases in
lower margin non-food sales, labor costs and local advertising costs.
Cost of sales increased $21.3 million during fiscal 1996, and increased 0.3%
as a percentage of sales to 32.4% in fiscal 1996 from 32.1% in fiscal 1995. The
percentage increase in cost of sales was due to a 0.5% increase in the cost of
non-food sales offset by a 0.2% decrease on the cost of food sales. Several
restaurants acquired in 1996 included co-branded units that included
significant non-food sales.
Restaurant labor and related expenses increased $16.3 million during fiscal
1996, and increased 0.3% as a percentage of restaurant sales to 25.0% in fiscal
1996 from 24.7% in fiscal 1995. The percentage increase in restaurant labor was
due to an increase in the federal minimum wage, effective October 1, 1996.
Depreciation and amortization increased $2.5 million during fiscal 1996, to
$7.4 million in fiscal 1996 from $4.9 million in fiscal 1995. As a percentage
of sales, depreciation and amortization expense remained constant at 3.6% for
fiscal 1996 and fiscal 1995. The $2.5 million increase was due primarily to the
increase in goodwill amortization resulting from the purchase method of
accounting for the newly acquired restaurants.
14
<PAGE>
Occupancy and other expenses increased $18.1 million during fiscal 1996, but
remained constant as a percentage of sales at 27.9% for fiscal 1996 and fiscal
1995. Occupancy expense increased $6.0 million, but decreased 0.6% as a
percentage of sales to 10.5% in fiscal 1996 from 11.1% in fiscal 1995, due
primarily to lower effective rental rates and lower property taxes as a
percentage of sales at the Company's newly acquired restaurants. Rental rates,
as a percentage of sales, declined due to higher customer traffic at the
Company's restaurants in fiscal 1996. Other operating expenses increased $12.1
million during fiscal 1996, and increased 0.6% as a percentage of sales to
17.4% in fiscal 1996 from 16.8% for fiscal 1995. This increase is primarily due
to the accrual of an equipment disposition reserve and a 0.4% increase in local
advertising expense.
EBITDA. Earnings before interest, taxes, depreciation, and amortization
("EBITDA") increased $7.5 million or 46.2% to $23.6 million for fiscal 1996
from $16.1 million for fiscal 1995. As a percentage of restaurant sales, EBITDA
remained constant at 11.6% in fiscal 1996 and in fiscal 1995.
Operating Income. Operating income increased $2.0 million or 19.6% to $12.4
million for fiscal 1996 from $10.4 million for fiscal 1995. As a percentage of
sales, operating income decreased 1.2%, to 6.2% in fiscal 1996 from 7.4% for
fiscal 1995. This decrease was primarily due to the accrual for dispositions of
restaurants and restaurant equipment.
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 39 Burger King restaurants acquired in December 1994, five
Burger King restaurants acquired in September 1995, two Burger King restaurants
acquired in October 1995 and 11 Burger King restaurants acquired in November
1995. Combined, the newly acquired restaurants accounted for $46.4 million of
the total increase in restaurant sales. In addition, the Company developed one
new restaurant in August 1995. Sales at comparable restaurants for all 139
restaurants owned by the Company at the end of fiscal 1995 declined 0.1%,
primarily as a result of the discontinuation of extensive promotional couponing
at the 39 restaurants acquired in December 1994. Sales at the 82 restaurants
owned by the Company since its inception increased $2.5 million or 1.7%
primarily due to increases in customer traffic. 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, due primarily to the inclusion of the 39 restaurants acquired
in December 1994, and the 18 restaurants acquired in fiscal 1995. As a
percentage of restaurant sales, restaurant operating expenses declined 3.5% to
88.3% in fiscal 1995 from 91.8% in fiscal 1994, due primarily to decreases in
food and paper costs, insurance costs and rents.
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 remained constant as a percentage of restaurant sales at 26.7% in
fiscal 1995 and fiscal 1994. Increases in restaurant labor and related expenses
in the early part of fiscal 1995 were offset by improvements in group insurance
costs being applied over the larger restaurant base and, the successful
application of the Company's information systems technology within the
restaurant base. These improvements 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.
15
<PAGE>
Occupancy and other expenses increased $11.8 million during fiscal 1995, but
decreased 2.0% as a percentage of restaurant sales to 27.9% in fiscal 1995 from
29.9% in fiscal 1994. Occupancy expense increased $4.5 million, but decreased
1.0% as a percentage of sales to 11.1% in fiscal 1995 from 12.1% in fiscal
1994, due primarily to the negotiation of more favorable lease terms under the
Company's existing lease agreements. Other operating expenses increased $7.3
million during fiscal 1995, but decreased 1.0% as a percentage of restaurant
sales to 16.8% in fiscal 1995 from 17.8% in fiscal 1994, due primarily to the
result of more favorable terms negotiated for general liability insurance
policies covering the Company's larger restaurant base.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements following its concurrent offerings
(together, the "Offerings") of $100.0 million of 10 3/4% Senior Notes due 2006
(the "Senior Notes") and $30.0 million of units (the "Units") consisting of 1.2
million shares of Senior Preferred Stock and 30,000 shares of Common Stock will
be used to finance additional acquisitions, capital expenditures in connection
with the development of new restaurants, upgrades of acquired and existing
restaurants and general working capital needs. The Company has budgeted
approximately $355,000 for the development of each of its new restaurants. The
Company anticipates it will spend approximately an additional $3.0 to $5.0
million annually for other capital expenditures. In connection with certain of
its previous acquisitions of Burger King restaurants, the Company committed to
expend up to $2.3 million by September 1, 1997 to upgrade the initial 68 Burger
King restaurants it acquired. The Company has met this commitment. In addition,
the Company has committed to BKC that it will make capital expenditures at its
AmeriKing Tennessee Corporation I restaurants of approximately $1.5 million on
or before September 7, 1997, of which approximately half had been made as of
December 30, 1996. The Company has further committed to BKC that for the
foreseeable future (i) it will make capital expenditures on its existing
restaurants equal to 1% of its gross sales and (ii) it will spend an amount
equal to 1% of its gross sales on local advertising. The Company has also
committed to BKC that it will develop 17 restaurants in fiscal 1997. In the
event the Company fails to develop at least 14 restaurants in fiscal 1997, the
Company will pay BKC $150,000. In addition to the extent the Company develops
13 or fewer restaurants in fiscal 1997, the Company will be obligated to pay
BKC $75,000 for each restaurant less than 14 it fails to develop. 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.
The Company is structured as a holding company with no independent
operations, as the Company's operations are conducted exclusively through its
wholly owned subsidiaries. The Company's only significant assets are the
capital stock of its subsidiaries. As a holding company, the Company's cash
flow, its ability to meet its debt service requirements and its ability to pay
cash dividends on the Senior Preferred Stock are dependent upon the earnings of
its subsidiaries and their ability to declare dividends or make other
intercompany transfers to the Company. Under the terms of the indenture
pursuant to which the Senior Notes were offered (the "Indenture"), the
Company's subsidiaries may incur certain indebtedness pursuant to agreements
that may restrict the ability of such subsidiaries to make such dividends or
other intercompany transfers necessary to service the Company's obligations,
including its obligations under the Senior Notes, the Senior Preferred Stock
and any 13% Subordinated Exchange Debentures due 2008 (the "Exchange
Debentures") the Company may exchange pursuant to the Indenture. The Indenture
restricts, among other things, the Company's and its Restricted Subsidiaries'
(as defined in the Indenture) ability to pay dividends or make certain other
restricted payments, including the payment of cash dividends on or the
redemption of the Senior Preferred Stock, to incur additional indebtedness, to
encumber or sell assets, to enter into transactions with affiliates, to enter
into certain guarantees of indebtedness, to make restricted investments, to
merge or consolidate with any other entity and to transfer or lease all or
substantially all of their assets. In addition, (i) the Company's Amended and
Restated Credit Agreement (as defined) with the First National Bank of Boston
and other lenders thereto contains other and more restrictive covenants and
prohibits the Company's subsidiaries from declaring dividends or making other
intercompany transfers to the Company in certain circumstances and (ii)
agreements reached with BKC contain restrictions with respect to dividend
payments and intercompany loans.
16
<PAGE>
The Company believes that the proceeds from its Offerings, together with its
available credit of $15.0 million under its Amended and Restated Credit
Agreement and the Company's cash on hand, will be sufficient to cover its
working capital, capital expenditures, planned development and debt service
requirements for fiscal 1997. The Company expects that additional financing
will be required in connection with any significant acquisitions in the future.
INCOME TAXES
The Company completed fiscal 1996 with a net operating loss carry-forward for
tax purposes of approximately $25.8 million. Substantially all of the Company's
acquisitions completed to date have been structured as asset purchases. As a
result, the Company is able to deduct goodwill amortization expense for income
tax purposes over a 15 year period. The Company has not been a cash taxpayer
since its inception.
EXTRAORDINARY LOSS
In connection with the prepayment of its subordinated debt and repayment of
borrowings under its credit agreement, the Company recorded an extraordinary
loss of approximately $5.1 million, net of taxes, reflecting a prepayment
penalty, as well as the write-off of deferred financing costs.
17
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AMERIKING, INC. AND
SUBSIDIARY
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................. 19
Consolidated Balance Sheets as of December 30, 1996 and January 1, 1996... 20
Consolidated Statements of Operations for the fiscal years ended December
30, 1996 and January 1, 1996 and the period August 17, 1994 (Date of
Incorporation) to December 31, 1994...................................... 21
Consolidated Statements of Stockholders' Equity for the fiscal years ended
December 30, 1996 and January 1, 1996 and the period August 17, 1994
(Date of Incorporation) to December 31, 1994............................. 22
Consolidated Statements of Cash Flows for the fiscal years ended December
30, 1996 and January 1, 1996 and the period August 17, 1994 (Date of
Incorporation) to December 31, 1994...................................... 23
Notes to Consolidated Financial Statements................................ 24
</TABLE>
18
<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. and subsidiary as of December 30, 1996 and January 1, 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the fiscal years ended December 30, 1996 and 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 December 30, 1996 and January 1, 1996, and the results of
their operations and their cash flows for the fiscal years ended December 30,
1996 and 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
Chicago, Illinois
February 26, 1997 (March 20,
1997 as to Note 15)
19
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 30, 1996 AND JANUARY 1, 1996
<TABLE>
<CAPTION>
DECEMBER 30, JANUARY 1,
1996 1996
------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......... $ 5,259,000 $ 1,887,000
Accounts receivable............... 828,000 1,118,000
Inventories....................... 1,667,000 1,009,000
Prepaid expenses.................. 1,338,000 1,218,000
Current portion of deferred income
taxes (Note 9)................... 438,000
------------ ------------
Total current assets............ 9,530,000 5,232,000
PROPERTY AND EQUIPMENT (Note 4)..... 36,765,000 28,457,000
GOODWILL............................ 94,324,000 66,847,000
DEFERRED INCOME TAXES (Note 9)...... 3,426,000
OTHER ASSETS:
Deferred financing costs.......... 6,577,000 3,096,000
Deferred organization costs....... 170,000 220,000
Franchise agreements.............. 4,245,000 3,384,000
------------ ------------
Total other assets.............. 10,992,000 6,700,000
------------ ------------
TOTAL............................... $155,037,000 $107,236,000
============ ============
LIABILITIES, SENIOR PREFERRED STOCK
AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued
expenses......................... $ 10,333,000 $ 5,399,000
Accrued payroll................... 3,571,000 802,000
Accrued sales tax payable......... 1,021,000 1,047,000
Accrued interest payable.......... 911,000 346,000
Current portion of long-term debt
(Note 5)......................... 525,000 10,741,000
Current portion of capital leases
(Note 7)......................... 110,000 99,000
------------ ------------
Total current liabilities....... 16,471,000 18,434,000
LONG-TERM DEBT--Less current portion
(Note 5)........................... 107,167,000 63,094,000
LONG-TERM DEBT--Related parties
(Note 5)........................... 600,000 16,000,000
OTHER LONG-TERM LIABILITIES (Note
7)................................. 63,000 176,000
DEFERRED INCOME TAXES (Note 9)...... 789,000
------------ ------------
Total liabilities............... 124,301,000 98,493,000
------------ ------------
SENIOR PREFERRED STOCK (Note 6)..... 30,303,000
STOCKHOLDERS' EQUITY:
Preferred stock................... 75 75
Common stock...................... 8,933 10
Additional paid-in capital........ 7,277,992 7,599,915
Retained earnings (deficit)....... (6,854,000) 1,143,000
------------ ------------
Total stockholders' equity...... 433,000 8,743,000
------------ ------------
TOTAL............................... $155,037,000 $107,236,000
============ ============
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL YEARS ENDED DECEMBER 30, 1996 AND JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
AUGUST 17,
1994 TO
FISCAL % OF FISCAL % OF DECEMBER 31, % OF
1996 SALES 1995 SALES 1994 SALES
------------ ----- ------------ ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
SALES
Restaurant food sales.. $197,931,000 97.1% $136,461,000 97.8% $33,088,000 97.5%
Non-food sales......... 5,822,000 2.9 3,111,000 2.2 843,000 2.5
------------ ----- ------------ ----- ----------- -----
Total sales............ 203,753,000 100.0 139,572,000 100.0 33,931,000 100.0
RESTAURANT OPERATING
EXPENSES:
Cost of food sales..... 60,576,000 29.7 41,671,000 29.9 10,016,000 29.5
Cost of non-food
sales................. 5,495,000 2.7 3,127,000 2.2 791,000 2.3
Restaurant labor and
related costs......... 50,838,000 25.0 34,526,000 24.7 8,647,000 25.5
Occupancy.............. 21,488,000 10.5 15,454,000 11.1 3,768,000 11.1
Depreciation and
amortization of
goodwill and franchise
agreements............ 7,386,000 3.6 4,927,000 3.6 1,193,000 3.5
Advertising............ 10,072,000 4.9 6,330,000 4.5 1,449,000 4.3
Royalties.............. 6,943,000 3.4 4,788,000 3.4 1,162,000 3.4
Provision for
disposition of
equipment (Note 12)... 943,000 0.5
Other operating
expenses.............. 17,565,000 8.6 12,358,000 8.9 2,850,000 8.4
------------ ----- ------------ ----- ----------- -----
Total restaurant
operating expenses.... 181,306,000 88.9 123,181,000 88.3 29,876,000 88.0
GENERAL AND
ADMINISTRATIVE
EXPENSES............... 7,331,000 3.6 5,176,000 3.7 1,227,000 3.6
OTHER OPERATING
EXPENSES:
Depreciation expense--
office................ 444,000 0.2 199,000 0.1 15,000 0.1
Provision for
disposition of
restaurants (Note
12)................... 1,287,000 0.6 135,000 0.1
Loss on disposal of
fixed assets.......... 341,000 0.2
Management and
directors' fees....... 664,000 0.3 529,000 0.4 132,000 0.4
------------ ----- ------------ ----- ----------- -----
Total other operating
expenses.............. 2,736,000 1.3 863,000 0.6 147,000 0.5
------------ ----- ------------ ----- ----------- -----
OPERATING INCOME........ 12,380,000 6.2 10,352,000 7.4 2,681,000 7.9
OTHER INCOME (EXPENSE):
Interest expense....... (10,139,000) (5.0) (6,296,000) (4.4) (1,256,000) (3.7)
Interest expense--
related party......... (1,844,000) (0.9) (2,027,000) (1.5) (669,000) (2.0)
Amortization of
deferred costs........ (943,000) (0.5) (511,000) (0.4) (104,000) (0.3)
Other income
(expense)--net (Note
12)................... (3,952,000) (2.0) 209,000 0.1 (220,000) (0.6)
------------ ----- ------------ ----- ----------- -----
Total other expense.... (16,878,000) (8.4) (8,625,000) (6.2) (2,249,000) (6.6)
------------ ----- ------------ ----- ----------- -----
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM AND
PROVISION FOR INCOME
TAXES.................. (4,498,000) (2.2) 1,727,000 1.2 432,000 1.3
PROVISION (BENEFIT) FOR
INCOME TAXES........... (1,556,000) (0.8) 825,000 0.6 191,000 0.6
------------ ----- ------------ ----- ----------- -----
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM..... (2,942,000) (1.4) 902,000 0.6 241,000 0.7
EXTRAORDINARY ITEM--LOSS
FROM EARLY
EXTINGUISHMENT OF DEBT
(Net of taxes of
$3,301,000) (Note 13).. (5,055,000) (2.6)
------------ ----- ------------ ----- ----------- -----
NET INCOME (LOSS)....... $ (7,997,000) (4.0)% $ 902,000 0.6% $ 241,000 0.8%
============ ===== ============ ===== =========== =====
PREFERRED STOCK
DIVIDENDS (cumulative,
undeclared)............ $ 753,000 $ 450,000 $ 122,000
============ ============ ===========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING.. 865,590 969,990 969,990
NET INCOME (LOSS) PER
COMMON SHARE (Note 8)
Income before
extraordinary item.... $ (4.28) $ 0.47 $ 0.12
Extraordinary item..... (5.84)
------------ ------------ -----------
NET INCOME (LOSS) PER
COMMON SHARE........... $ (10.12) $ 0.47 $ 0.12
============ ============ ===========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED DECEMBER 30, 1996 AND JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
PREFERRED COMMON PAID-IN EARNINGS
STOCK STOCK CAPITAL (DEFICIT) 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
Dividends on senior
preferred stock...... (303,000) (303,000)
Amortization of senior
preferred stock
issuance costs....... (10,000) (10,000)
Recapitalization of
common stock......... 8,923 (8,923)
Net loss.............. (7,997,000) (7,997,000)
--- ------ ---------- ----------- -----------
BALANCE--December 30,
1996................... $75 $8,933 $7,277,992 $(6,854,000) $ 433,000
=== ====== ========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
22
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED DECEMBER 30, 1996 AND JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
AUGUST 17, 1994 TO
FISCAL 1996 FISCAL 1995 DECEMBER 31, 1994
------------- ------------ ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss).............. $ (7,997,000) $ 902,000 $ 241,000
Adjustments to reconcile net
income (loss) to net cash
flows
from operating activities:
Depreciation and
amortization................. 8,773,000 5,637,000 1,311,000
Deferred income taxes......... (4,653,000) 535,000 171,000
Provision for disposition of
equipment.................... 943,000
Loss on disposition of
equipment.................... 341,000
Extraordinary loss on early
extinguishment of debt....... 8,356,000
Unrealized loss on property
and equipment................ 1,287,000 135,000
Changes in:
Accounts receivable.......... 290,000 (984,000) (134,000)
Inventories.................. (658,000) (8,000) (1,001,000)
Prepaid expenses............. (120,000) (443,000) (775,000)
Accounts payable and accrued
expenses.................... 8,241,000 (1,601,000) 7,845,000
------------- ------------ ------------
Net cash flows from
operating activities....... 14,803,000 4,173,000 7,658,000
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of restaurant
franchise agreements,
equipment and goodwill....... (39,245,000) (11,305,000) (81,671,000)
Proceeds from sale of
property..................... 817,000
Cash paid for organization
costs........................ (6,000) (290,000)
Cash paid for franchise
agreements................... (330,000) (60,000)
Cash paid for property and
equipment.................... (8,298,000) (3,721,000) (597,000)
------------- ------------ ------------
Net cash flows from
investing activities....... (47,056,000) (15,092,000) (82,558,000)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of senior preferred
stock........................ 30,000,000
Issuance of senior
subordinated notes........... 100,000,000
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......................... 26,300,000 1,865,000 68,500,000
Proceeds from subordinated
debt--related party.......... 15,000,000 11,600,000
Cash paid for financing
costs........................ (9,280,000) (135,000) (3,521,000)
Cash paid for penalties
related to early
extinguishment of debt....... (3,450,000)
Advances under line of
credit....................... 5,800,000 2,000,000 3,500,000
Payments on line of credit.... (5,800,000) (2,000,000) (3,500,000)
Payments on long-term debt.... (122,843,000) (3,450,000)
Payments on capital leases.... (102,000) (44,000)
------------- ------------ ------------
Net cash flows from
financing activities....... 35,625,000 5,156,000 82,550,000
------------- ------------ ------------
NET CHANGE IN CASH AND CASH
EQUIVALENTS................... 3,372,000 (5,763,000) 7,650,000
CASH AND CASH EQUIVALENTS--
Beginning of period........... 1,887,000 7,650,000
------------- ------------ ------------
CASH AND CASH EQUIVALENTS--End
of period..................... $ 5,259,000 $ 1,887,000 $ 7,650,000
============= ============ ============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period
for interest................. $ 9,283,000 $ 6,671,000 $ 884,000
Cash paid during the period
for interest-related party... 2,135,000 2,347,000
------------- ------------ ------------
Total cash paid during the
period for interest.......... $ 11,418,000 $ 9,018,000 $ 884,000
============= ============ ============
SUPPLEMENTAL DISCLOSURE OF
NONCASH INVESTING
AND FINANCING ACTIVITIES:
On September 1, 1994, in
connection with its initial
capitalization, the Company
received noncash consideration
from certain members of the
Company's management for its
issuance of:
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
Senior preferred stock
dividends (cumulative, non-
declared)..................... $ 303,000
New capital leases............. $ 319,000
------------- ------------ ------------
TOTAL......................... $ 303,000 $ 319,000 $ 6,029,000
============= ============ ============
On September 1, 1994, in
connection with the purchase
of restaurant franchises from
BKC, 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.
23
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED DECEMBER 30, 1996 AND JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994
1. DESCRIPTION OF BUSINESS
AmeriKing, Inc., and its wholly owned subsidiary, National Restaurant
Enterprises, Inc. d/b/a AmeriKing Corporation ("Enterprises" and collectively
with its parent, 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 and acquisition of
additional Burger King restaurants in these and other states.
Effective September 2, 1994, the Company acquired 68 Burger King restaurants
(the "BKC Restaurants") located in the Chicago metropolitan area from Burger
King Corporation ("BKC") for $41.5 million in cash (excluding transaction fees
and expenses) and 14 Burger King restaurants in Colorado and Texas from
certain members of the Company's management (the "Management Restaurants") for
$6.0 million of subordinated debt and preferred and common stock in the
Company and $2.0 million in cash.
Effective December 1, 1994, the Company acquired an additional 39 Burger
King restaurants in the Chicago metropolitan area from a third party
franchisee (the "Franchise Restaurants") for $37.0 million in cash.
During fiscal 1995, the Company, in a series of transactions, acquired 18
Burger King restaurants in Colorado, Texas, Tennessee and Georgia (the "1995
Acquisitions") for $10.8 million in cash and developed one Burger King
restaurant in Texas.
During fiscal 1996, the Company, in a series of transactions, acquired 36
Burger King restaurants in Virginia, North Carolina and the Cincinnati
metropolitan area (the "1996 Acquisitions") for $36.9 million in cash,
excluding transaction fees and expenses. In addition, the Company developed
eight Burger King restaurants in fiscal 1996, primarily in the Chicago
metropolitan area.
As a result of these acquisitions and developments, the Company is one of
the largest independent Burger King franchisees in the United States,
operating 184 Burger King restaurants as of December 30, 1996.
ORGANIZATIONAL STRUCTURE--At December 30, 1996, the Enterprises had five
wholly owned subsidiaries: AmeriKing Colorado Corporation I, AmeriKing
Illinois Corporation I, AmeriKing Tennessee Corporation I, 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 1996 fiscal year ended December 30,
1996 included 364 days of operating activity. The 1995 fiscal year ended
January 1, 1996 and the period August 17, 1994 (date of incorporation) to
December 31, 1994 included 366 and 136 days, respectively, 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, Inc. and each of Enterprises'
five wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
24
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
PROPERTY AND EQUIPMENT--Property and equipment are stated at cost. Normal
repairs and maintenance costs are charged to expense as incurred. Depreciation
is being recorded using the straight-line method over the following estimated
useful lives:
<TABLE>
<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
to pay a franchise fee for each new restaurant developed and for the renewal
of franchises that have expired. Franchisee fees are capitalized and amortized
using 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 December
30, 1996 and January 1, 1996 was approximately $663,000 and $309,000,
respectively.
GOODWILL--Goodwill represents the excess of cost over fair value of net
assets acquired in connection with the Company's acquisitions described in
Note 1. Goodwill is amortized over 35 years using the straight-line method.
Accumulated amortization of goodwill as of December 30, 1996 and January 1,
1996 was approximately $4,978,000 and $2,203,000, respectively.
DEFERRED COSTS--Costs associated with the organization of the Company are
being amortized on a straight-line basis over five years. Costs incurred by
the Company in obtaining its financing for its acquisitions are being
amortized on a straight-line basis over the term of the related financing.
Accumulated amortization as of December 30, 1996 and January 1, 1996 was
approximately $136,000 and $76,000, respectively, for deferred organization
costs and approximately $8,000 and $569,000, respectively, for deferred
financing costs.
NET INCOME (LOSS) PER COMMON SHARE--Net income per share was computed by
deducting from the Company's net income dividends payable to the holders of
Class A1, Class A2 and Class B Preferred Stock (collectively, the "Preferred
Stock") and 13% Senior Exchangeable Preferred Stock due 2008, (the "Senior
Preferred Stock"), and amortization of the issuance costs on the Senior
Preferred Stock and using the weighted average number of common stock of the
Company (the "Common Stock"), and common stock equivalent shares outstanding
on a post-split basis.
RECLASSIFICATIONS--Certain information in the consolidated financial
statements for fiscal 1996 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 fiscal years ended December 30, 1996 and January 1,
1996 as if the acquisitions by the Company described above had occurred on
January 1, 1995. 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>
FISCAL 1996 FISCAL 1995
----------- -----------
<S> <C> <C>
Net Sales............................................ $207,207 $195,692
Restaurant contribution.............................. 22,646 23,639
</TABLE>
25
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
NEW STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS--During 1996, the Company
adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of." (See Note 12 for a discussion of the
adoption of SFAS No. 121 relating to forced dispositions.)
3. FRANCHISE AGREEMENTS
In connection with the acquisition and development of Burger King
restaurants, the Company is obligated to enter into franchise agreements with
BKC. The franchise agreements set forth the terms under which the Company is
to operate its Burger King restaurants and obligates the Company 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>
DECEMBER 30, JANUARY 1,
1996 1996
------------ -----------
<S> <C> <C>
Restaurant equipment and furnishings............... $39,261,000 $28,020,000
Office furniture and equipment..................... 2,945,000 1,941,000
Leasehold improvements............................. 3,196,000 1,069,000
Land............................................... 330,000 423,000
Buildings.......................................... 756,000 850,000
----------- -----------
Total............................................ 46,488,000 32,303,000
Less accumulated depreciation...................... 9,723,000 3,846,000
----------- -----------
Property and equipment -- net.................... $36,765,000 $28,457,000
=========== ===========
</TABLE>
5. LONG-TERM DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 30, 1996 JANUARY 1, 1996
--------------------- -----------------------
CURRENT LONG-TERM CURRENT LONG-TERM
-------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Senior Notes, 10.75%, due 2006.. $100,000,000
Franchise Acceptance Corporation
Limited Note, 9.86%, due 2006.. $393,000 5,554,000
Franchise Acceptance Corporation
Limited Note,
at a variable interest rate,
8.17% at
December 30, 1996, due 2005.... 132,000 1,613,000 $ 121,000 $ 1,744,000
Term Loan A, at a variable
interest rate, 8.687%
at January 1, 1996, due 2001... 3,500,000 41,750,000
Term Loan B, at a variable
interest rate, 9.187%
at January 1, 1996, due 2002... 200,000 19,600,000
Burger King Corporation Note,
9.75%, due 1996................ 6,920,000
-------- ------------ ----------- -----------
Total......................... $525,000 $107,167,000 $10,741,000 $63,094,000
======== ============ =========== ===========
</TABLE>
26
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Debt to related parties consists of the following:
<TABLE>
<CAPTION>
DECEMBER 30, 1996 JANUARY 1, 1996
-------------------- -------------------
CURRENT LONG-TERM CURRENT LONG-TERM
-------------------- ------- -----------
<S> <C> <C> <C> <C>
Subordinated Notes, 12.75%, due
2005................................ $11,000,000
Seller Notes, 12.75%, due 2005....... 4,400,000
Junior Subordinated Notes, 6.00%, due
2005................................ $ 600,000 600,000
----------- -----------
Total.............................. $ 600,000 $16,000,000
=========== ===========
</TABLE>
On September 1, 1994, the Company entered into a revolving credit and loan
agreement (the "Credit Agreement") with The First National Bank of Boston
("FNBB"). Under the Credit Agreement, FNBB and the other lenders committed to
lend the Company up to $35.0 million under two credit facilities: a term loan
of $29.0 million and a revolving credit facility of $6.0 million. $35.0
million was borrowed under the Credit Agreement to finance the acquisition of
the BKC Restaurants and the Management Restaurants.
In addition, on September 1, 1994, the Company issued subordinated notes in
the aggregate principal amount of $11.0 million (the "Subordinated Notes") to
MCIT PLC and subordinated notes in the aggregate principal amount of $4.4
million (the "Seller Notes") to certain members of the Company's management.
The Subordinated Notes were used to finance the acquisition of BKC Restaurants
and the Seller Notes were used to finance the acquisition of the Management
Restaurants.
On November 30, 1994, the Credit Agreement was amended and restated (the
"Amended Credit Agreement") to provide for three credit facilities: a term
loan of $48.5 million ("Term Loan A"), a term loan of $20.0 million ("Term
Loan B" and collectively, with Term Loan A, the "Term Loans") and a $6.0
million revolving credit facility (the "Revolver"). $74.5 million was borrowed
under the Amended Credit Agreement to refinance borrowings under the Credit
Agreement and to finance the acquisition of the Franchise Restaurants.
In connection with the Credit Agreement and the Amended Credit Agreement,
the Company entered into a three year interest rate cap agreement with FNBB
under which the interest rate with respect to $40.0 million of the outstanding
principal of the Term Loans is capped at 9.0% per annum. The agreement expired
December 3, 1996 with the prepayment of the Term Loans, and the Company wrote
off the unamortized balance of fees paid to FNBB. (See Note 13.)
On November 30, 1994, the Company issued junior subordinated notes (the
"Junior Subordinated Notes") in the aggregate principal amount of $600,000 to
an affiliate of FNBB. The Junior Subordinated Notes were used to finance the
acquisition of the Franchise Restaurants.
On November 21, 1995, AmeriKing Tennessee Corporation I ("ATCI"), a wholly
owned subsidiary of Enterprises, issued a $6.9 million note to BKC (the "BKC
Note") to finance the acquisition of 11 Burger King restaurants in Tennessee
and Georgia. In July 1996, the BKC Note was refinanced on a long-term basis by
Franchise Acceptance Corporation Limited ("FAC"), an affiliate of BKC.
On November 29, 1995, AmeriKing Colorado Corporation I ("ACCI"), a wholly
owned subsidiary of Enterprises, issued a $1.9 million note (the "FAC Note")
to FAC to finance the acquisition of five Burger King restaurants in Colorado.
The FAC Note bears interest at 2.75% above FAC's program rate, has mandatory
monthly principal payments of $50,083, is secured by certain assets of ACCI
and matures December 2005.
On February 7, 1996, the Company amended and restated its Amended Credit
Agreement (the "Amended and Restated Credit Agreement") to provide for
increased net commitments under its Term Loans and Revolver. Under the Amended
and Restated Credit Agreement, FNBB and the other lenders thereto committed to
lend
27
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$45.0 million under Term Loan A, $40.0 million under Term Loan B and $15.0
million under the Revolver. Pursuant to the terms of the Amended and Restated
Credit Agreement, the interest rate, amortization schedule and maturity of
each of the Term Loans and the Revolver were revised. On February 7, 1996,
$88.0 million was borrowed to refinance borrowings under the Amended Credit
Agreement and to finance the 1996 Acquisitions. As of December 30, 1996, there
were no amounts outstanding under the Revolver.
On February 7, 1996, the Company issued senior subordinated notes in the
aggregate principal amount of $15.0 million (the "Senior Subordinated Notes")
to PMI Mezzanine Fund, L.P. ("PMI") and its nominee. The Senior Subordinated
Notes were used to finance the 1996 Acquisitions.
On July 18, 1996, ATCI issued a note in the principal amount of $6.1 million
(the "TN Note") to FAC in connection with the refinancing of its BKC Note. The
TN Note bears interest at a fixed rate of 9.86% and is secured by certain
assets of ACTI. Principal installments of the note are due monthly. In
connection with the purchase of the TN Note from ATCI, FAC committed to lend
ATCI up to $900,000 under a separate credit facility (the "FAC Credit
Facility") for capital expenditures. Borrowings under the FAC Credit Facility
will bear interest at a variable rate with principal payments due monthly
based on a seven-year amortization schedule. No amounts were outstanding under
the FAC Credit Facility at December 30, 1996.
On December 3, 1996, the Company issued 10 3/4% senior notes (the "Senior
Notes") due 2006 in the aggregate principal amount of $100.0 million to the
investing public. Proceeds from the Senior Notes were used to prepay the
Subordinated Notes, Seller Notes, Senior Subordinated Notes (collectively, the
Subordinated Notes, Seller Notes, and the Senior Subordinated Notes, are
herein referred to as the "Subordinated Debt") and the Term Loans under the
Amended and Restated Credit Agreement as well as pay a prepayment penalty in
connection with the prepayment of the Senior Subordinated Notes.
Interest on the Senior Notes is payable semi-annually in cash in arrears on
June 1 and December 1, commencing June 1, 1997. The Senior Notes mature on
December 1, 2006 and are redeemable, in whole or in part, at the option of the
Company at any time on or after December 1, 2001 at the redemption prices
listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001........................................................... 106.500%
2002........................................................... 104.333
2003........................................................... 102.167
2004 and thereafter............................................ 100.000
</TABLE>
At any time prior to December 1, 1999, the Company may redeem up to 35% of
the original aggregate principal amount of the Senior Notes with the net
proceeds of one or more equity offerings at a redemption price equal to 110%
of the principal amount plus any accrued and unpaid interest to the date of
redemption. Upon the occurrence of a change of control, the Company will be
required, subject to certain conditions, to make an offer to purchase the
Senior Notes at a price equal to 101% of the principal amount plus accrued and
unpaid interest to the date of purchase.
The Senior Notes are senior unsecured obligations of the Company and
pursuant to the terms of the Senior Notes indenture rank pari passu in right
of payment with other senior indebtedness of the Company and senior to
subordinated indebtedness of the Company, and effectively rank junior to
secured indebtedness of the Company and to indebtedness of the Company's
subsidiaries, including borrowings under the Amended and Restated Credit
Agreement.
At December 30, 1996, the Senior Notes had a fair value that approximates
their carrying value.
28
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Senior Notes Indenture includes covenants that, among other things,
limit payments of dividends and other restricted payments and the incurrence
of additional indebtedness. As of December 30, 1996, the Company was in
compliance with all such covenants.
Aggregate maturities of the Company's long-term debt as of December 30, 1996
are as follows:
<TABLE>
<S> <C>
1997......................................................... $ 525,000
1998......................................................... 577,000
1999......................................................... 636,000
2000......................................................... 700,000
2001......................................................... 770,000
Thereafter................................................... 105,084,000
------------
Total...................................................... $108,292,000
============
</TABLE>
6. SENIOR PREFERRED STOCK
Concurrent with the Senior Notes offering, the Company offered $30.0 million
of units (the "Units"), consisting of 1.2 million shares of Senior Preferred
Stock and 30,000 shares of Common Stock. The Senior Preferred Stock is
exchangeable, at the option of the Company, into the Company's 13%
Subordinated Exchange Debentures due 2008, subject to the ability of the
Company to incur such indebtedness under the Amended and Resated Credit
Agreement and the Indenture. The Company incurred issuance costs in the amount
of $1.2 million related to the issuance of the Senior Preferred Stock.
Each share of Senior Preferred Stock has a liquidation preference of $25 per
share. Unless declared, dividends on the Senior Preferred Stock will accrue in
each period ending on March 1, June 1, September 1 and December 1 of each year
at a rate of 13% per annum of the liquidation preference. On or before
December 1, 2001, the Company may, at its option, pay dividends in cash or in
additional fully paid and nonassessable shares of Senior Preferred Stock
having an aggregate liquidation preference equal to the amount of such
dividends, subject to certain restrictions under its existing credit agreement
and the Indenture. Thereafter, dividends may be paid in cash only.
The Senior Preferred Stock may be redeemed at any time on or after December
1, 2001, in whole or in part, at the option of the Company, at the redemption
prices set forth below plus an amount in cash equal to all accumulated and
unpaid dividends (including an amount in cash equal to a prorated dividend for
the period from the dividend payment date immediately prior to the redemption
date to the redemption date), if redeemed during the 12-month period beginning
December 1 of each of the years set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001................................... 106.500%
2002................................... 104.333%
2003................................... 102.167%
2004 and thereafter.................... 100.000%
</TABLE>
On December 1, 2008, the Company will be required to redeem, subject to
contractual and other restrictions and to the legal availability of funds, all
outstanding shares of Senior Preferred Stock at a price equal to the then
effective liquidation preference, plus an amount in cash equal to all
accumulated and unpaid dividends, including an amount in cash equal to a
prorated dividend for the period from the dividend payment date immediately
prior to the redemption date to the redemption date.
29
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. LEASES
The Company leases restaurant space under noncancelable operating leases
with remaining lease terms of one to twenty years. In many cases, the leases
provide for rent escalations and for one or more five-year renewal options.
The leases generally require the Company to pay property taxes, insurance,
maintenance and other operating costs of the properties, as well as contingent
rentals based upon a percentage (generally 8.5%) of net sales. In addition,
the Company leases office space, office equipment, restaurant equipment and
vehicles under noncancelable operating leases.
Rent expense amounted to:
<TABLE>
<CAPTION>
AUGUST 17,
1994 TO
FISCAL FISCAL DECEMBER 31,
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
Minimum rentals under operating
leases.............................. $15,647,000 $11,072,000 $2,691,000
Contingent rentals................... 2,083,000 958,000 253,000
----------- ----------- ----------
Total.............................. $17,730,000 $12,030,000 $2,944,000
=========== =========== ==========
</TABLE>
Future minimum lease payments under noncancelable operating leases are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ------------
<S> <C>
1997......................................................... $ 16,738,000
1998......................................................... 16,681,000
1999......................................................... 16,303,000
2000......................................................... 15,624,000
2001......................................................... 14,635,000
Thereafter................................................... 132,542,000
------------
Total...................................................... $212,523,000
============
</TABLE>
Future minimum lease payments under noncancelable capital leases are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- --------
<S> <C>
1997............................................................ $129,000
1998............................................................ 66,000
--------
Total minimum lease payments.................................. 195,000
Less amount representing interest............................... 22,000
--------
Present value of the minimum lease obligation................. $173,000
========
</TABLE>
Payments on capital leases for fiscal 1996 and 1995 were $129,000 and
$63,000, respectively. No payments were made in the period August 17, 1994 to
December 31, 1994.
30
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. CAPITAL STOCK
At December 30, 1996, the Company's authorized capital stock was as follows:
<TABLE>
<CAPTION>
NUMBER
NUMBER OF OF SHARES VOTING
PAR VALUE SHARES ISSUED AND RIGHTS
PER SHARE AUTHORIZED OUTSTANDING PER SHARE
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Common Stock..................... $0.01 4,000,000 893,290 1
Non-Voting Common Stock.......... 0.01 300,000 0 0
--------- -------
Total common stock............. 4,300,000 893,290
========= =======
Class A1 Preferred Stock......... 0.01 4,425 4,425 0
Class A2 Preferred Stock......... 0.01 1,200 1,200 0
Class B Preferred Stock.......... 0.01 1,875 1,875 0
--------- -------
Total preferred stock.......... 7,500 7,500
========= =======
Senior Preferred Stock........... 0.01 2,600,000 30,000 0
========= =======
</TABLE>
Class A1, Class A2 and Class B preferred stock pay dividends at 6% per
annum, payable quarterly. To the extent not declared and paid, such dividends
accumulate. Class A1 preferred stock dividends are payable in cash or
additional shares of Class A1 Preferred Stock; Class A2 and Class B Preferred
Stock dividends are payable in cash only.
In connection with entering into the Credit Agreement, the Company issued
warrants to an affiliate of FNBB to purchase 96,998 shares of a separate class
of non-voting Common Stock (the "Non-Voting Common Stock") at an exercise
price of $0.01 per share. The warrants are exercisable at any time and expire
the earlier of the date such warrants are exercised in full or November 30,
2002.
During 1994, the Company granted stock options to purchase 9,702 shares of
Common Stock at $.12 per share in connection with employment agreements with
certain members of the Company's management. All of these options vested
ratably over a two-year period ending September 1, 1996 at which time all
became fully exercisable. The options expire at the earlier of 90 to 180 days
after separation of the employee from the Company or December 31, 2004. At
December 30, 1996 and January 1, 1996, all of these options remained
outstanding. The Company has not issued any additional stock options or
warrants as of December 30, 1996.
In connection with the offering of its Senior Notes, the Company undertook a
recapitalization (the "Recapitalization"). Under the Recapitalization, the
Company converted all of its authorized, issued and outstanding Class A Common
Stock, Class C Common Stock and Class D Common Stock into an equal number of
shares of Common Stock, converted all of its authorized shares of Class B
Common Stock into an equal number of Non-Voting Common Stock and split all of
its shares of Common and Non-Voting Common Stock on a 863.281-for-1 basis. All
applicable share and per share data have been restated to give effect to the
stock split.
31
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. INCOME TAXES
The provision (benefit) for income taxes, exclusive of amounts related to
the extraordinary item in 1996, was comprised of the following:
<TABLE>
<CAPTION>
AUGUST 17,
1994 TO
DECEMBER 30,
FISCAL 1996 FISCAL 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
Federal:
Current................................ $(3,357,000)
Deferred............................... 1,512,000 $535,000 $171,000
State:
Deferred............................... 289,000 290,000 20,000
----------- -------- --------
Net provision (benefit) for income
taxes............................... $(1,556,000) $825,000 $191,000
=========== ======== ========
</TABLE>
The difference between the recorded income tax provision (benefit) and the
"expected" tax provision (benefit) based on the statutory federal income tax
rate is as follows:
<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1995
----------- -----------
<S> <C> <C>
Computed federal income tax provision (benefit)
at statutory rate............................... $(1,460,000) $605,000
State income taxes (net of federal income tax
effect)......................................... (188,000) 78,000
Non-deductible expenses.......................... 29,000
Goodwill amortization............................ 63,000 16,000
Rate change...................................... 126,000
----------- --------
Net provision (benefit) for income taxes....... $(1,556,000) $825,000
=========== ========
</TABLE>
As of December 30, 1996 the Company had a net operating loss carry-forward
for income tax purposes of approximately $25.8 million to offset against
future taxable income. The net operating loss is expected to be utilized
beginning in fiscal 1999 and will begin to expire in 2009.
Total deferred tax liabilities and deferred tax assets as of December 30,
1996 and January 1, 1996, and the sources of the differences between financial
accounting and tax bases of the Company's assets and liabilities which give
rise to the deferred tax liabilities and deferred tax assets and the effects
of each, are as follows:
<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1995
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Depreciation...................................... $ 7,558,000 $4,411,000
Other............................................. 161,000 21,000
----------- ----------
7,719,000 4,432,000
Deferred tax assets:
Operating loss carry-forwards..................... 10,198,000 3,451,000
Asset reserve..................................... 934,000
Other............................................. 451,000 192,000
----------- ----------
11,583,000 3,643,000
----------- ----------
Total........................................... $ 3,864,000 $ (789,000)
=========== ==========
</TABLE>
32
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. EMPLOYEE BENEFIT PLANS
During fiscal 1996, the Company offered all of its employees the option to
participate in a 401(k) plan, upon fulfillment of certain requirements. The
Company has the option, but not the obligation, to match contributions made by
its employees under the 401(k) plan. In addition, the Company provides
disability insurance to certain key executives. The insurance covers all
salary payments to the executives during the period of disability. For fiscal
1996, the Company contributed approximately $23,000 to the Plan.
11. RELATED PARTIES
During fiscal 1996 and 1995, and the period from August 17, 1994 to December
31, 1994, the Company recorded interest expense on the Subordinated Notes and
the Seller Notes totaling $1,880,000, $1,982,000 and $669,000, respectively.
The Company leases two restaurants under noncancelable operating leases from
an entity which is owned by a member of the Company's management. The leases
expire in March 2006 and January 2007, respectively, and require total monthly
rental payments of $20,600. During fiscal 1996 and 1995, and the period from
August 17, 1994 to December 31, 1994, the Company recorded rent expense of
$247,000, $248,000 and $82,000, respectively, under these leases.
The Company has entered into a management consulting agreement (the "TJC
Consulting Agreement") with an affiliate of The Jordan Company. Under the
terms of the TJC Consulting Agreement, the Company was required to pay the
affiliate an annual management fee equal to the higher of (1) $300,000, or (2)
0.35% of food sales. During fiscal 1995, the Company recorded expenses of
$479,000 under the TJC Consulting Agreement. On February 7, 1996, the Company
amended the TJC Consulting Agreement to provide for, among other things, an
annual management fee equal to the higher of $600,000 or 2.5% of the Company's
cash flow, as determined in the TJC Consulting Agreement. During fiscal 1996,
the Company recorded expenses of $600,000 under the amended TJC Consulting
Agreement.
12. NONRECURRING ITEMS
In the fourth quarter of fiscal 1996, the Company recorded a loss of
$943,000 on property and equipment due to a vendor no longer servicing such
equipment as of January 1, 1997. The equipment is scheduled to be replaced in
fiscal 1997.
The Company included in the fourth quarter of fiscal 1996 an unrealized,
non-cash, pre-tax loss on property and equipment of $1,287,000 due to the
forced disposition of five Company-owned restaurants. Such loss represents the
difference between the salvage value and the carrying value of equipment,
decor, landscaping, signage and related goodwill of the restaurants at the
expected date of disposition. All dispositions are expected to take place in
1997.
Finally, during the fourth quarter of fiscal 1996, the Company included in
other income (expense)--net certain transaction expenses in the amount of
$2,397,000 associated with its attempted initial public offering.
13. EXTRAORDINARY ITEM
In 1996, the Company recognized an extraordinary loss in the amount of
$8,356,000 ($5,055,000 on an after-tax basis) consisting of a write-off of
$4,906,000 ($2,968,000 on an after-tax basis) of deferred financing costs and
interest rate protection related to the repayment of Subordinated Debt and
indebtedness under the Credit Agreement and a prepayment penalty of $3,450,000
($2,087,000 on an after-tax basis) incurred in connection with the prepayment
of the Senior Subordinated Notes (See Note 5).
33
<PAGE>
AMERIKING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. LEGAL PROCEEDINGS
Various legal proceedings are pending against the Company, many involving
routine litigation incidental to the businesses.
The consequences of these matters are not presently determinable but, in the
opinion of the management of the Company after consulting with legal counsel,
the ultimate liability is not expected to have a material effect on the
results of operations, financial position, liquidity or capital resources of
the Company.
15. SUBSEQUENT EVENT
On March 20, 1997, the Company entered into a contract to sell to a third
party franchisee, 10 restaurants in the south Chicago suburban area, as
required by the acquisition of the Franchise Restaurants, for $8.2 million in
cash. For fiscal 1996, the restaurants to be sold accounted for approximately
$11.4 million and $700,000 of the Company's revenues and restaurant
contribution, respectively. The closing of the sale of the restaurants is
expected to occur in the second quarter of fiscal 1997, at which time the
Company will recognize a gain on sale of the stores in the amount of
approximately $1.9 million.
34
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in accountants during fiscal 1996 or 1995, nor
has there been any disagreement on any matter of accounting principles or
practices or financial disclosure which in either case is required to be
reported pursuant to this Item 9.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICES OF THE REGISTRANT
The following sets forth the names and ages of the Company's directors and
executive officers and the positions they held at December 31, 1996:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ---- --- ---------------------
<S> <C> <C>
Lawrence E. Jaro........................ 53 Managing Owner, Chairman and Chief
Executive Officer
William C. Osborn....................... 48 Vice Chairman and Director
Gary W. Hubert.......................... 44 Chief Operating Officer and Director
Joel D. Aaseby.......................... 38 Chief Financial Officer and Corporate
Secretary
Scott E. Vasatka........................ 43 Vice President-Human Resources
A. Richard Caputo, Jr. ................. 31 Vice President and Director
Thomas H. Quinn......................... 49 Director
John W. Jordan, II...................... 49 Director
David W. Zalaznick...................... 43 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,
35
<PAGE>
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 GFSI, Inc.,
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.
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, GFSI, Inc., Jackson Products,
Inc., Carmike Cinemas, Inc., Welcome Home, Inc. and Apparel Ventures, Inc. as
well as other privately held companies.
MR. ZALAZNICK has served as a Director of the Company since its inception.
Since 1982, Mr. Zalaznick has been a managing partner of The Jordan Company.
Mr. Zalaznick is also a director of Jordan Industries, Inc., Carmike Cinemas,
Inc., American Safety Razor Company, GFSI, Inc., Jackson Products, Inc.,
Marisa Christina, Inc. and Apparel Ventures, Inc. as well as other privately
held companies.
Each of the Company's directors was nominated to the Board of Directors
pursuant to the Stockholders Agreement, which required the stockholders named
therein to vote for such nominees.
BOARD OF DIRECTORS
Liability Limitation. The Company's Certificate of Incorporation (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 Company's 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 entered into indemnification
agreements. The indemnification agreements 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 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
36
<PAGE>
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. Directors who are not employees of the Company
receive $12,500 per year for serving as a director of the Company. In
addition, the Company reimburses directors for their travel and other expenses
incurred in connection with attending meetings of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
The Board of Directors does not maintain a Compensation Committee. During
fiscal 1996, however, Messrs. Caputo, Jaro, Jordan and Quinn participated in
deliberations of the Board of Directors concerning executive officer
compensation.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of certain information regarding
compensation paid or accrued by the Company during the last three fiscal years
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").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------
OTHER
FISCAL ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) COMPENSATION
- --------------------------- ------ -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Lawrence E. Jaro........ 1996 $215,000 $64,500
Managing Owner and 1995 215,000 64,500
Chief Executive Officer
William C. Osborn....... 1996 $215,000 $64,500 $10,000(3)
Vice Chairman 1995 215,000 64,500 10,000(3)
Gary W. Hubert.......... 1996 $215,000 $64,500
Chief Operating Officer 1995 215,000 64,500
and
Senior Vice President
Joel D. Aaseby.......... 1996 $110,000 $30,000
Chief Financial Officer 1995 110,000 32,000
and
Corporate Secretary
Scott E. Vasatka........ 1996 $105,000 $21,000
Vice President--Human 1995 105,000 31,000
Resources
</TABLE>
- --------
(1) The Company provides bonus compensation based on an individual's
achievement of certain specified objectives, including achieving the
Company's stated EBITDA target and amortization. Employees are eligible to
receive from 10% to 60% of their annual compensation as a bonus.
(2) No executive named in the table above received any Other Annual
Compensation in an amount in excess of either $50,000 or 10% of salary and
bonus reported for him in the two preceding columns.
(3) Represents the amount of life insurance premiums paid by the Company on
the life of Mr. Osborn with death benefits designated by Mr. Osborn.
Option Exercises in Fiscal 1996 and Fiscal Year-end Values
The following table shows stock options exercised by each of the Named
Executives during fiscal 1996, including the aggregate value of gains on the
date of exercise. In addition, this table includes the number of
37
<PAGE>
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 VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 30, 1996 AT DECEMBER 30, 1996(1)
------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Scott E. Vasatka............ 4,851 $ 0
</TABLE>
- --------
(1) Based upon the difference between the estimated fair market value of the
Company's Common Stock on December 30, 1996 (as determined by the Board of
Directors) of $0.12 per share and the option exercise price of $0.12 per
share. The above valuation may not reflect the actual value of unexercised
options as the value of unexercised options will fluctuate over time.
RETIREMENT AND 401(K) PLANS
The Company offers all of its employees the option to participate in a
401(k) plan, upon fulfillment of certain requirements. The Company has the
option, but not the obligation, to match contributions made by its employees
under the 401(k) plan. In addition, the Company provides disability insurance
to certain key executives. The insurance covers all salary payments to the
executives during the entire period of disability.
EMPLOYMENT AGREEMENTS
Effective September 1, 1994, Enterprises entered into an employment
agreement with Lawrence E. Jaro (the "Jaro Employment Agreement"). Pursuant to
the terms of the Jaro Employment Agreement, Mr. Jaro agreed to serve as Chief
Executive Officer and Co-Managing Owner of the Company and Enterprises for a
five-year period ending on August 31, 1999 with automatic one-year renewals
thereafter, provided that neither Mr. Jaro nor Enterprises has provided the
other with a notice of termination 120 days prior to the expiration date of
the Jaro Employment Agreement. Mr. Jaro also agreed not to compete against
Enterprises throughout the term of his employment and for one year thereafter,
and not to disclose any confidential information during and after the term of
his employment. In exchange for his services and covenants, Enterprises agreed
to compensate Mr. Jaro with a base salary of $215,000 per annum (subject to an
annual cost of living adjustment), an automobile allowance of $800 per month
and reimbursement of up to $6,000 per annum for automobile-related costs. In
the event Mr. Jaro no longer provides services to Enterprises due to (i) his
death or physical or mental disability or (ii) his dismissal without Cause (as
defined in the Jaro Employment Agreement) or as a result of a material
reduction in his authority, then Mr. Jaro is entitled to receive his base
compensation from the date of his termination through the first anniversary of
such termination or through the remaining term of his employment agreement,
respectively.
Effective September 1, 1994, Enterprises entered into an employment
agreement with William C. Osborn (the "Osborn Employment Agreement"). Pursuant
to the terms of the Osborn Employment Agreement, Mr. Osborn agreed to serve as
President and Co-Managing Owner of the Company and Enterprises for a five-year
period ending on August 31, 1999. 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
38
<PAGE>
mental disability or (ii) his dismissal without Cause (as defined in the Osborn
Employment Agreement) or as a result of a material reduction in his authority,
then Mr. Osborn is entitled to receive his base compensation from the date of
his termination through the first anniversary of such termination or through
the remaining term of his employment agreement, respectively. Effective May 10,
1996, the Company and Mr. Osborn agreed that Mr. Osborn would resign as
President to become Vice Chairman of the Company.
Effective September 1, 1994, Enterprises entered into an employment agreement
with Gary W. Hubert (the "Hubert Employment Agreement"). Pursuant to the terms
of the Hubert Employment Agreement, Mr. Hubert agreed to serve as Senior Vice
President and Managing Director of the Company and Enterprises for a five-year
period ending on August 31, 1999 with automatic one-year renewals thereafter,
provided that neither Mr. Hubert nor Enterprises has provided the other with
notice of termination 120 days prior to the expiration of the Hubert Employment
Agreement. Mr. Hubert also agreed not to compete against Enterprises throughout
the term of his employment and for one year thereafter, and not to disclose any
confidential information during and after the term of his employment. In
exchange for his services and covenants, Enterprises agreed to compensate Mr.
Hubert with a base salary of $215,000 per annum (subject to an annual cost of
living adjustment), an automobile allowance of $800 per month and reimbursement
of up to $6,000 per annum for automobile-related costs. In the event Mr. Hubert
no longer provides services to Enterprises due to (i) his death or physical or
mental disability or (ii) his dismissal without Cause (as defined in the Hubert
Employment Agreement) or as a 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
39
<PAGE>
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
entered into a new employment agreement with Mr. Osborn (the "New Osborn
Employment Agreement"). Pursuant to the terms of the New Osborn Employment
Agreement, Mr. Osborn will (i) continue to serve as Vice Chairman of the
Company, (ii) be entitled to annual compensation of $225,000 and (iii) be
subject to non-competition and confidentiality provisions similar to Mr.
Osborn's existing employment agreement. The term of the New Osborn Employment
Agreement will expire on September 1, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth as of December 30, 1996, certain information
regarding beneficial ownership of Common Stock held by (i) each director and
each of the Named Executives who own shares of the Company's equity
securities, (ii) all directors and executive officers of the Company as a
group, and (iii) each person known by the Company to own beneficially more
than 5% of the Company's Common Stock. Each individual or entity named has
sole investment and voting power with respect to shares of Common Stock
indicated as beneficially owned by them, except where otherwise noted.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED (1)
--------------------------
NUMBER PERCENTAGE
------------ -------------
<S> <C> <C>
Executive Officers and Directors:
Lawrence E. Jaro(2)................................ 196,051 21.9%
William C. Osborn(3)............................... 81,105 9.1
Gary W. Hubert..................................... 29,101 3.3
Joel D. Aaseby..................................... 9,703 1.1
Thomas H. Quinn(4)................................. 29,096 3.3
John W. Jordan, II(5).............................. 38,285 4.3
A. Richard Caputo, Jr.(6).......................... 12,609 1.4
David W. Zalaznick(7).............................. 38,285 4.3
Scott E. Vasatka................................... 4,851 0.5
All executive officers and directors as a group
(9 persons)(8).................................... 439,086 48.9
Other Principal Stockholders:
MCIT PLC ("MCIT")(9)............................... 246,302 27.6%
Leucadia Investors, Inc.(10)....................... 61,575 6.9
BancBoston Investments Inc. ("BancBoston")(11)..... 96,998 9.8
</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
December 30, 1996, the Company had 863,290 shares of Common Stock issued
and outstanding. The table gives effect to an 863.281-for-one stock split
and the issuance of 30,000 shares of Common Stock, representing 3% of the
fully diluted outstanding shares of Common Stock of the Company, in
connection with the Company's Units Offering.
(2) Includes 166,950 shares of Common Stock beneficially owned by various
affiliates of Mr. Jaro. Mr. Jaro and his affiliates also own 915 shares
of Class A2 Preferred Stock and 305 shares of Class B Preferred Stock.
Mr. Jaro's address is c/o the Company, 2215 Enterprise Drive, Suite 1502,
Westchester, Illinois 60154.
(3) Includes 52,004 shares of Common Stock beneficially owned by various
affiliates of Mr. Osborn. Mr. Osborn and his affiliates also own 285
shares of Class A2 Preferred Stock and 95 shares of Class B
40
<PAGE>
Preferred Stock. Mr. Osborn's address is c/o the Company, 2215 Enterprise
Drive, Suite 1502, Westchester, Illinois 60154.
(4) Mr. Quinn is President and Chief Operating Officer of Jordan Industries,
Inc., a company affiliated with The Jordan Company, an entity with which
Messrs. Caputo, Jordan and Zalaznick are also affiliated.
(5) Includes 38,285 shares of Common Stock held by John W. Jordan II
Revocable Trust, of which Mr. Jordan is trustee. Mr. Jordan also owns
96.25 shares of Class B Preferred Stock. Mr. Jordan's address is c/o The
Jordan Company, 9 West 57th Street, New York, New York 10019.
(6) Mr. Caputo is a partner of The Jordan Company, an entity with which
Messrs. Jordan and Zalaznick are also affiliated.
(7) Mr. Zalaznick also owns 96.25 shares of Class B Preferred Stock. Mr.
Zalaznick's address is c/o The Jordan Company, 9 West 57th Street, New
York, New York 10019.
(8) Includes all shares owned directly or beneficially by directors and
executive officers, including shares beneficially owned by affiliates of
Messrs. Jaro and Osborn.
(9) MCIT also owns 3,000 shares of Class A1 Preferred Stock and 500 shares of
Class B Preferred Stock. The principal address of MCIT is c/o The Jordan
Company, 9 West 57th Street, New York, New York 10019.
(10) Leucadia also owns 125 shares of Class B Preferred Stock. The principal
address of Leucadia is 315 Park Avenue South, New York, New York 10010.
See "Description of Capital Stock--Preferred Stock."
(11) Represents immediately exercisable warrants to purchase 96,998 shares of
Non-Voting Common Stock. BancBoston also owns 1,425 shares of Class A1
Preferred Stock and 475 shares of Class B Preferred Stock. The principal
address of BancBoston is 100 Federal Street, Boston, Massachusetts 02110.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Subordinated Debt Holders. PMI, MCIT, affiliates of Messrs. Jaro and Osborn,
and BancBoston were the holders of Senior Subordinated Notes, Subordinated
Notes, Seller Notes and the Junior Subordinated Notes, respectively. In fiscal
1996, the Company paid approximately $1.6 million of interest expense to PMI
under the Senior Subordinated Notes, and during fiscal 1995, the Company paid
to MCIT, the holders of the Seller Notes and BancBoston approximately $1.4
million, $560,000 and $36,000 as interest expense under the Subordinated
Notes, the Seller Notes and the Junior Subordinated Notes, respectively.
Simultaneously with the consummation of the offerings of its Senior Notes and
Units, the Company used approximately $33.9 million from the net proceeds of
the offerings to prepay the principal amount under each of the Senior
Subordinated Notes, the Subordinated Notes and the Seller Notes (including the
prepayment penalty of approximately $3.4 million to PMI). In connection with
the prepayment of the Senior Subordinated Notes, the Company cancelled the
warrants held by PMI. The FAC Notes to ATCI and ACCI and the Junior
Subordinated Notes remain outstanding following the offerings. 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.
The Jordan Company. On September 1, 1994, the Company and Enterprises
entered into the TJC Consulting Agreement agreement with an affiliate of The
Jordan Company. The TJC Consulting Agreement was subsequently amended on
February 7, 1996. Under the TJC Consulting Agreement, the Company retained an
affiliate of The Jordan Company to render consulting services to it regarding
the Company and its subsidiaries, their financial and business affairs and
their relationships with their lenders and stockholders, and the operation and
expansion of their business. The TJC Consulting Agreement expires on September
1, 2004, but is automatically renewed for successive one-year terms, unless
either party provides written notice of termination 60 days prior to the
scheduled renewal date. The TJC Consulting Agreement provides for an annual
consulting fee payable on a quarterly basis equal to the higher of (i)
$600,000 or (ii) 2.5% of the Company's cash flow (as determined in the TJC
Consulting Agreement). In addition, the TJC Consulting Agreement provides for
payment to the affiliate of The Jordan Company of (i) an investment banking
and sponsorship fee of up to 2% of the purchase price of certain acquisitions
or sales involving the Company, Enterprises or any of their subsidiaries and
(ii) a financial consulting fee of up to 1.0% of any debt, equity or other
financing arranged by the Company with the assistance of TJC. During fiscal
1996 and 1995, the Company paid consulting fees to the affiliate of
41
<PAGE>
The Jordan Company of approximately $600,000 and $479,000, 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 totaling $300,000 to certain members of the Company's senior
management. Concurrent with the Offerings and related financings are
consummated by the Company, the Company paid to the affiliate of The Jordan
Company an investment banking fee of $1.3 million pursuant to the terms of the
TJC Consulting Agreement. The Company believes that the terms of the TJC
Consulting Agreement are comparable to the terms that it would obtain from
disinterested third parties for comparable services. Messrs. Jordan, Zalaznick
and Caputo are partners of The Jordan Company.
Burger King Corporation. In connection with certain of its previous
acquisitions of Burger King restaurants, the Company and its subsidiaries have
entered into certain agreements with BKC as a precondition to receiving BKC
approval of the acquisition. As part of its purchase agreement with BKC, dated
September 1, 1994, Enterprises committed to expend up to $2.3 million by
September 1, 1997 to upgrade the 68 Burger King restaurants it acquired. As
part of its November 21, 1995 acquisition of 11 Burger King restaurants, the
Company and ATCI agreed to (i) renew the Company's commitment, initially made
in connection with its November 30, 1994 acquisition, to sell up to 10 Burger
King restaurants to a franchisee to be designated by BKC and (ii) expend
approximately $1.5 million by November 21, 1997 to upgrade certain of the 11
Burger King restaurants so acquired. The commitment by ATCI to upgrade the
restaurants is subject to certain capital expenditures to be made by BKC. As
part of its acquisitions of 36 Burger King restaurants on February 7, 1996,
the Company and ATCI (i) renewed 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 has committed to BKC that,
without BKC's prior written consent, (i) it will not pay cash dividends on the
Senior Preferred Stock on or prior to December 1, 2001 and (ii) it will not
pay cash dividends to holders of Common Stock until the Senior Notes are
repaid in full and the Senior Preferred Stock is redeemed or otherwise
retired. The Company has further committed to BKC that for the foreseeable
future (i) it will make capital expenditures on its existing restaurants equal
to 1% of its gross sales and (ii) it will spend an amount equal to 1% of its
gross sales on local advertising. The Company has also committed to BKC that
it will develop 17 restaurants in fiscal 1997. In the event the Company fails
to develop at least 14 restaurants in fiscal 1997, the Company will pay BKC
$150,000. In addition, to the extent the Company develops 13 or fewer
restaurants in fiscal 1997, the Company will be obligated to pay BKC $75,000
for each restaurant less than 14 it fails to develop.
In connection with the Offerings, the Company is also 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 fiscal years ended December 30, 1996 and January 1, 1996, the Company
recorded rent expense of $247,000 and $248,000, respectively, under these
leases. The Company believes that the terms of these leases are comparable to
the terms it would obtain from disinterested third parties for comparable
sites.
Pursuant to the provisions of BKC's franchise agreements, Messrs. Jaro,
Osborn and Hubert, as managing owners and owners, have guaranteed the
obligations of the Company and its subsidiaries under each franchise agreement
and each lease agreement in which BKC is the lessor.
42
<PAGE>
In connection with the September 1994 purchase of the Management Restaurants,
the Company (i) entered into a $700,000 revolving loan agreement with Mr. Jaro
whereby the Company loaned funds to Mr. Jaro and (ii) deferred payment in full
of the purchase price for one of the Management Restaurants sold to the Company
by a corporation controlled by Mr. Jaro. In September 1996, the Company
canceled the outstanding balance of the revolving loan to Mr. Jaro in exchange
for Mr. Jaro's cancellation of the outstanding balance of the deferred purchase
price for the restaurant.
The Company has adopted a policy to provide that future transactions between
the Company and its officers, directors and other affiliates must (i) be
approved by a majority of the members of the Board of Directors and by a
majority of the disinterested members of the Board of Directors and (ii) be on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS INCLUDED IN ITEM 8
See "Index to Financial Statements of AmeriKing, Inc. and Subsidiary" set
forth in Item 8, "Financial Statements and Supplementary Data."
SCHEDULES OMITTED AS NOT REQUIRED OR INAPPLICABLE
Schedule I--Condensed financial information of registrant
Schedule II--Valuation and qualifying accounts
Schedule III--Real estate and accumulated depreciation
Schedule IV--Mortgage loans on real estate
Schedule V--Supplemental Information Concerning Property--Casualty Insurance
Operations
EXHIBITS
A list of exhibits included as part of this Form 10-K or incorporated by
reference is set forth in the Index to Exhibits. Included in the Index to
Exhibits are the following exhibits which constitute management contracts or
compensatory plans or arrangements.
1. TJC Consulting Agreement
2. Jaro Employment Agreement
3. Osborn Employment Agreement
4. Hubert Employment Agreement
5. Aaseby Employment Agreement
6. Vasatka Employment Agreement
7. New Osborn Employment Agreement
REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K in fiscal 1996.
43
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
WESTCHESTER, STATE OF ILLINOIS, ON MARCH , 1997.
Ameriking, Inc.
*
By: _________________________________
LAWRENCE E. JARO MANAGING OWNER,
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, THIS AMENDED REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED ON THE DAY OF MARCH, 1997.
SIGNATURE TITLE
* Managing Owner, Chairman and
- ------------------------------------- Chief Executive Officer
LAWRENCE E. JARO (Principal Executive Officer)
* Vice Chairman
- -------------------------------------
WILLIAM C. OSBORN
* Director and Chief Operating
- ------------------------------------- Officer
GARY W. HUBERT
* Chief Financial Officer and
- ------------------------------------- Corporate Secretary (Principal
JOEL ASAEBY Financial and Accounting
Officer)
* Director and Vice President
- -------------------------------------
A. RICHARD CAPUTO, JR.
* Director
- -------------------------------------
THOMAS H. QUINN
* Director
- -------------------------------------
JOHN W. JORDAN II
* Director
- -------------------------------------
DAVID W. ZALANICK
/s/ A. Richard Caputo, Jr.
By: _________________________________
As Attorney-in-Fact
No copies of any annual report or proxy with respect to any meeting of
security-holders have been sent to the Company's security-holders.
44
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
1.1 FORM OF UNDERWRITING AGREEMENT FOR NOTES OFFERING..... *
1.2 FORM OF UNDERWRITING AGREEMENT FOR UNITS OFFERING..... *
2.1++ PURCHASE AND SALE AGREEMENT, DATED SEPTEMBER 1, 1994,
BETWEEN BURGER KING CORPORATION ("BKC") AND NATIONAL
RESTAURANT ENTERPRISES, INC. ("ENTERPRISES") (Filed as
exhibit 2.1 to AmeriKing's Registration Statement (No.
333-04261) and incorporated herein by reference)...... *
2.2++ PURCHASE AND SALE AGREEMENT, DATED SEPTEMBER 1, 1994,
BETWEEN JARO ENTERPRISES, INC. AND AMERIKING, INC.
(FORMERLY KNOWN AS NRE HOLDINGS, INC.) ("AMERIKING")
(Filed as exhibit 2.2 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference)............................................ *
2.3++ PURCHASE AND SALE AGREEMENT, DATED SEPTEMBER 1, 1994,
BETWEEN JARO RESTAURANTS, INC. AND AMERIKING (Filed as
exhibit 2.3 to AmeriKing's Registration Statement (No.
333-04261) and incorporated herein by reference)...... *
2.4++ PURCHASE AND SALE AGREEMENT, DATED SEPTEMBER 1, 1994,
BETWEEN TABOR RESTAURANTS ASSOCIATES, INC. AND
AMERIKING (Filed as exhibit 2.4 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
2.5++ PURCHASE AND SALE AGREEMENT, DATED SEPTEMBER, 1, 1994,
BETWEEN JB RESTAURANTS, INC. AND AMERIKING (Filed as
exhibit 2.5 to AmeriKing's Registration Statement (No.
333-04261) and incorporated herein by reference)...... *
2.6++ PURCHASE AND SALE AGREEMENT, DATED SEPTEMBER 1, 1994,
BETWEEN CASTLEKING, INC. AND AMERIKING (Filed as
exhibit 2.6 to AmeriKing's Registration Statement (No.
333-04261) and incorporated herein by reference)...... *
2.7++ PURCHASE AND SALE AGREEMENT, DATED SEPTEMBER 1, 1994,
BETWEEN OSBURGER, INC. AND AMERIKING (Filed as exhibit
2.7 to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference).......... *
2.8++ PURCHASE AND SALE AGREEMENT, DATED SEPTEMBER 1, 1994,
BETWEEN WHITE-OSBORN RESTAURANTS, INC. AND AMERIKING
(Filed as exhibit 2.8 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference)............................................ *
2.9++ PURCHASE AND SALE AGREEMENT, DATED NOVEMBER 30, 1994,
BY AND AMONG SHELDON T. FRIEDMAN, BNB LAND VENTURE,
INC. AND ENTERPRISES (Filed as exhibit 2.9 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
2.10++ ASSET PURCHASE AGREEMENT, DATED JULY 5, 1995, BY AND
AMONG DMW, INC., DANIEL L. WHITE AND AMERIKING
COLORADO CORPORATION I (Filed as exhibit 2.10 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
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
(Filed as exhibit 2.11 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference)............................................ *
2.12++ PURCHASE AGREEMENT, DATED NOVEMBER 21, 1995, BY AND
AMONG QSC, INC., THE SHAREHOLDERS OF QSC, INC. AND
AMERIKING TENNESSEE CORPORATION I (Filed as exhibit
2.12 to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference).......... *
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 (Filed as
exhibit 2.13 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference)............................................ *
2.14++ PURCHASE AND SALE AGREEMENT, DATED NOVEMBER 30, 1995,
BY AND AMONG C&N DINING, INC. AND AFFILIATES AND
AMERIKING VIRGINIA CORPORATION I (Filed as exhibit
2.14 to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference).......... *
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 (Filed
as exhibit 2.15 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference)............................................ *
2.16++ ASSET PURCHASE AGREEMENT, DATED FEBRUARY 7, 1996,
BETWEEN THIRTY-FORTY, INC. AND AMERIKING CINCINNATI
CORPORATION I (Filed as exhibit 2.16 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
2.17++ ASSET PURCHASE AGREEMENT, DATED FEBRUARY 7, 1996,
BETWEEN HOUSTON, INC. AND AMERIKING CINCINNATI
CORPORATION I (Filed as exhibit 2.17 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
2.18++ ASSET PURCHASE AGREEMENT, DATED FEBRUARY 7, 1996,
BETWEEN FIFTH & RACE, INC. AND AMERIKING CINCINNATI
CORPORATION I (Filed as exhibit 2.18 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference) *
3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
AMERIKING (Filed as exhibit 3.1 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
3.2 AMENDED AND RESTATED BYLAWS OF AMERIKING (Filed as
exhibit 3.2 to AmeriKing's Registration Statement (No.
333-04261) and incorporated herein by reference)...... *
4.1 STOCKHOLDERS AGREEMENT, DATED SEPTEMBER 1, 1994, BY
AND AMONG AMERIKING AND THE STOCKHOLDERS APPEARING ON
THE SIGNATURE PAGES THERETO (Filed as exhibit 4.1 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
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
(Filed as exhibit 4.2 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference)............................................. *
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
(Filed as exhibit 4.3 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference)............................................. *
4.4++++ AMENDED AND RESTATED STOCKHOLDERS AGREEMENT BY AND
AMONG AMERIKING AND THE STOCKHOLDERS APPEARING ON THE
SIGNATURE PAGES THERETO................................
4.5 MANAGEMENT SUBSCRIPTION AGREEMENT, DATED SEPTEMBER 1,
1994, BY AND AMONG AMERIKING, TABOR RESTAURANT
ASSOCIATES, INC., JARO ENTERPRISES, INC., JARO
RESTAURANTS, INC., JB RESTAURANTS, INC., CASTLEKING,
INC., WHITE-OSBORN RESTAURANTS, INC., OSBURGER, INC.,
LAWRENCE JARO, WILLIAM OSBORN, GARY HUBERT, JOEL
AASEBY, DONALD STAHURSKI AND SCOTT VASATKA (Filed as
exhibit 4.5 to AmeriKing's Registration Statement (No.
333-04261) and incorporated herein by reference)....... *
4.6 STOCK OPTION AGREEMENT, DATED SEPTEMBER 1, 1994,
BETWEEN AMERIKING AND SCOTT VASATKA (Filed as exhibit
4.6 to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference)........... *
4.7 STOCK OPTION AGREEMENT, DATED SEPTEMBER 1, 1994,
BETWEEN AMERIKING AND DONALD STAHURSKI (Filed as
exhibit 4.7 to AmeriKing's Registration Statement (No.
333-04261) and incorporated herein by reference)....... *
4.8 WARRANT AGREEMENT, DATED SEPTEMBER 1, 1994, BETWEEN
AMERIKING AND THE FIRST NATIONAL BANK OF BOSTON (Filed
as exhibit 4.8 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by reference).. *
4.9 COMMON STOCK PURCHASE WARRANT, DATED SEPTEMBER 1, 1994,
BETWEEN AMERIKING AND BANCBOSTON INVESTMENTS INC.
(Filed as exhibit 4.9 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference)............................................. *
4.10 FIRST AMENDMENT TO COMMON STOCK PURCHASE WARRANT, DATED
NOVEMBER 30, 1994 (Filed as exhibit 4.10 to AmeriKing's
Registration Statement (No. 333-04261) and incorporated
herein by reference)................................... *
4.11 SECOND AMENDMENT TO COMMON STOCK PURCHASE WARRANT,
DATED FEBRUARY 7, 1996 (Filed as exhibit 4.11 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)...................... *
4.12 AMENDED AND RESTATED NOTE, DATED FEBRUARY 7, 1996, FROM
AMERIKING TO MCIT PLC IN THE AGGREGATE PRINCIPAL AMOUNT
OF $11,000,000 (Filed as exhibit 4.12 to AmeriKing's
Registration Statement (No. 333-04261) and incorporated
herein by reference)................................... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
4.13 AMENDED AND RESTATED DEFERRED LIMITED INTEREST
GUARANTY, DATED FEBRUARY 7, 1996, FROM ENTERPRISES TO
MCIT PLC (Filed as exhibit 4.13 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
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 (Filed as
exhibit 4.14 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference)............................................ *
4.15 AMENDED AND RESTATED NOTE, DATED FEBRUARY 7, 1996,
FROM AMERIKING TO JARO RESTAURANTS, INC. IN THE
AGGREGATE PRINCIPAL AMOUNT OF $112,000 (Filed as
exhibit 4.15 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference)............................................ *
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 (Filed as
exhibit 4.16 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference)............................................ *
4.17 AMENDED AND RESTATED NOTE, DATED FEBRUARY 7, 1996,
FROM AMERIKING TO CASTLEKING, INC. IN THE AGGREGATE
PRINCIPAL AMOUNT OF $385,769 (Filed as exhibit 4.17 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
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 (Filed as
exhibit 4.18 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference)............................................ *
4.19 SECURITIES PURCHASE AGREEMENT, DATED NOVEMBER 30,
1994, BETWEEN AMERIKING AND BANCBOSTON INVESTMENTS,
INC. (Filed as exhibit 4.19 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
4.20 COMMON STOCK PURCHASE WARRANT, DATED NOVEMBER 30,
1994, BETWEEN AMERIKING AND BANCBOSTON INVESTMENTS,
INC. (Filed as exhibit 4.20 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
4.21 JUNIOR SUBORDINATED NOTE, DATED NOVEMBER 30, 1994,
FROM AMERIKING TO BANCBOSTON INVESTMENTS, INC. IN THE
AGGREGATE PRINCIPAL AMOUNT OF $600,000 (Filed as
exhibit 4.21 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference)............................................ *
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 (Filed as
exhibit 4.22 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference)............................................ *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
4.23 AMENDMENT TO SECURED PROMISSORY NOTE, DATED MAY 21,
1996, FROM AMERIKING TENNESSEE CORPORATION I TO BKC IN
THE AGGREGATE PRINCIPAL AMOUNT OF $6,093,067 (Filed as
exhibit 4.23 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference)............................................ *
4.24 GUARANTY, DATED NOVEMBER 21, 1995, FROM LAWRENCE JARO
AND WILLIAM OSBORN TO BKC (Filed as exhibit 4.24 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
4.25 RATIFICATION OF GUARANTY, MAY 21, 1996, FROM LAWRENCE
JARO AND WILLIAM OSBORN TO BKC (Filed as exhibit 4.25
to AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................. *
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 (Filed as exhibit 4.26
to AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................. *
4.27 AMENDMENT TO PROMISSORY NOTE, DATED DECEMBER 14, 1995,
FROM AMERIKING COLORADO CORPORATION I TO FRANCHISE
ACCEPTANCE CORPORATION LIMITED (Filed as exhibit 4.27
to AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................. *
4.28 COMMON STOCK PURCHASE WARRANT, DATED FEBRUARY 7, 1996,
FROM AMERIKING TO PMI MEZZANINE FUND, L.P. (Filed as
exhibit 4.28 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference)............................................ *
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. (Filed as
exhibit 4.29 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference)............................................ *
4.30 SUBORDINATED GUARANTY, DATED FEBRUARY 7, 1996, FROM
AMERIKING VIRGINIA CORPORATION I AND AMERIKING
CINCINNATI CORPORATION I TO PMI MEZZANINE FUND, L.P.
(Filed as exhibit 4.30 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference)............................................ *
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 (Filed as
exhibit 4.31 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference)............................................ *
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 (Filed as
exhibit 4.32 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference)............................................ *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
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 (Filed as exhibit
4.33 to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference).......... *
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 (Filed as exhibit 4.34 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
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 (Filed as exhibit 4.35 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
4.36 UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE,
DATED FEBRUARY 7, 1996, FROM ENTERPRISES TO FFCA
ACQUISITION CORPORATION (Filed as exhibit 4.36 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
4.37 FORM OF AMENDMENT NO. 1 TO COMMON STOCK PURCHASE
WARRANT FROM AMERIKING TO PMI MEZZANINE FUND, L.P..... *
4.38 INDENTURE BETWEEN AMERIKING AND TRUSTEE WITH RESPECT
TO SENIOR NOTES (Filed as exhibit 4.38 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
4.39 FORM OF SENIOR NOTES (ATTACHED TO EXHIBIT 4.38).......
4.40 INDENTURE BETWEEN AMERIKING AND TRUSTEE WITH RESPECT
TO EXCHANGE DEBENTURES (Filed as exhibit 4.40 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
4.41 INTENTIONALLY OMITTED.................................
4.42 FORM OF EXCHANGE DEBENTURES (ATTACHED TO EXHIBIT
4.40).................................................
4.43 PROMISSORY NOTE, DATED JULY 18, 1996, FROM AMERIKING
TENNESSEE CORPORATION I TO FRANCHISE ACCEPTANCE
CORPORATION LIMITED IN THE AGGREGATE PRINCIPAL AMOUNT
OF $6,100,000 (Filed as exhibit 4.43 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
4.44 CERTIFICATE OF DESIGNATION RELATING TO THE SENIOR
PREFERRED STOCK (Filed as exhibit 4.44 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
4.45 PROMISSORY NOTE, DATED JULY 18, 1996, FROM AMERIKING
TENNESSEE CORPORATION I TO FRANCHISE ACCEPTANCE
CORPORATION LIMITED IN THE AGGREGATE PRINCIPAL AMOUNT
OF $900,000 (Filed as exhibit 4.45 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference).................... *
4.46++++ AMENDMENT NO. 1 TO STOCK OPTION AGREEMENT BY AND
AMONG AMERIKING, SCOTT VASATKA AND DONALD STAHURSKI..
4.47++++ AMENDMENT NO.1 TO MANAGEMENT SUBSCRIPTION AGREEMENT..
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. (Filed as exhibit 9.1 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................ *
9.2 OSBORN PROXY AGREEMENT, DATED SEPTEMBER 1, 1994, BY
AND AMONG WILLIAM OSBORN, CASTLEKING, INC., OSBURGER,
INC. AND WHITE-OSBORN, INC. (Filed as exhibit 9.2 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................ *
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 (Filed as exhibit 10.1 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................ *
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 (Filed as exhibit 10.2 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................ *
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 (Filed as exhibit 10.3 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................ *
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 (Filed as exhibit 10.4 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................ *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
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 (Filed as exhibit 10.5 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
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 (Filed as exhibit 10.6 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
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 (Filed as exhibit 10.7 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
10.8 AMENDED AND RESTATED PURCHASE AGREEMENT, DATED
FEBRUARY 7, 1996, BETWEEN AMERIKING AND MCIT PLC
(Filed as exhibit 10.8 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference)............................................ *
10.9 PLEDGE AGREEMENT, DATED SEPTEMBER 1, 1994, BETWEEN
AMERIKING AND MCIT PLC (Filed as exhibit 10.9 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
10.10 SUBORDINATION AGREEMENT, DATED SEPTEMBER 1, 1994, BY
AND AMONG BKC, MCIT PLC AND AMERIKING (Filed as
exhibit 10.10 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference)............................................ *
10.11 AMENDMENT AND CONSENT NO. 1 TO SECURITIES PURCHASE
AGREEMENT, DATED FEBRUARY 7, 1996, BETWEEN AMERIKING
AND BANCBOSTON INVESTMENTS, INC. (Filed as exhibit
10.11 to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference).......... *
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 (Filed as
exhibit 10.12 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference)............................................ *
10.13 STOCK PLEDGE AGREEMENT, DATED NOVEMBER 21, 1995,
BETWEEN ENTERPRISES AND BKC (Filed as exhibit 10.13 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
10.14 RATIFICATION OF STOCK PLEDGE AGREEMENT, DATED MAY 21,
1996, BETWEEN ENTERPRISES AND BKC (Filed as exhibit
10.14 to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference).......... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
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<C> <S> <C>
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 (Filed as exhibit 10.15 to AmeriKing's
Registration Statement (No. 333-04261) and incorporated
herein by reference)................................... *
10.16 NOTE PURCHASE AGREEMENT, DATED FEBRUARY 7, 1996, BY AND
AMONG AMERIKING, ENTERPRISES AND PMI MEZZANINE FUND,
L.P. (Filed as exhibit 10.16 to AmeriKing's
Registration Statement (No. 333-04261) and incorporated
herein by reference)................................... *
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 (Filed as exhibit 10.18 to AmeriKing's
Registration Statement (No. 333-04261) and incorporated
herein by reference)................................... *
10.19 SALE-LEASEBACK AGREEMENT, DATED FEBRUARY 7, 1996, BY
AND AMONG AMERIKING VIRGINIA CORPORATION I, AMERIKING
TENNESSEE CORPORATION I AND FFCA ACQUISITION
CORPORATION (Filed as exhibit 10.19 to AmeriKing's
Registration Statement (No. 333-04261) and incorporated
herein by reference)................................... *
10.20 LEASE, DATED FEBRUARY 7, 1996, BY AND AMONG AMERIKING
VIRGINIA CORPORATION I, AMERIKING TENNESSEE CORPORATION
I AND FFCA ACQUISITION CORPORATION (Filed as exhibit
10.20 to AmeriKing's Registration Statement (No. 333-
04261) and incorporated herein by reference)........... *
10.21 FORM OF FRANCHISE AGREEMENT BETWEEN BKC AND FRANCHISEE
(Filed as exhibit 10.21 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference)............................................. *
10.22 SCHEDULE OF AMERIKING FRANCHISE AGREEMENTS (Filed as
exhibit 10.22 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by reference).. *
10.23 FORM OF LEASE AGREEMENT BETWEEN BKC AND LESSEE (Filed
as exhibit 10.23 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by reference).. *
10.24 SCHEDULE OF AMERIKING LEASE AGREEMENTS (Filed as
exhibit 10.24 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by reference).. *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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NUMBER DESCRIPTION PAGE
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<C> <S> <C>
10.25 FORM OF GUARANTEE, INDEMNIFICATION AND ACKNOWLEDGMENT
OF BKC FRANCHISE AGREEMENT (Filed as exhibit 10.25 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
10.26 FORM OF GUARANTEE, INDEMNIFICATION AND ACKNOWLEDGMENT
OF BKC LEASE AGREEMENT (Filed as exhibit 10.26 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
10.27 CAPITAL EXPENDITURE AGREEMENT, DATED SEPTEMBER 1,
1994, BY AND AMONG AMERIKING, ENTERPRISES AND BKC
(Filed as exhibit 10.27 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference)............................................ *
10.28 CAPITAL EXPENDITURE AGREEMENT, DATED NOVEMBER 21,
1995, BY AND AMONG ENTERPRISES, AMERIKING TENNESSEE
CORPORATION I AND BKC (Filed as exhibit 10.28 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
10.29 LETTER AGREEMENT, DATED FEBRUARY 7, 1996, BETWEEN
ENTERPRISES AND BKC (Filed as exhibit 10.29 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
10.30 NAPARLO DEVELOPMENT AGREEMENT, DATED FEBRUARY 7, 1996,
BETWEEN AMERIKING VIRGINIA CORPORATION I AND JOSEPH J.
NAPARLO (Filed as exhibit 10.30 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
10.31 MANAGEMENT CONSULTING AGREEMENT, DATED SEPTEMBER 1,
1994, BY AND AMONG TJC MANAGEMENT CORPORATION,
AMERIKING AND ENTERPRISES (Filed as exhibit 10.31 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
10.32 INTENTIONALLY OMITTED.................................
10.33 INTERCOMPANY MANAGEMENT CONSULTING AGREEMENT, DATED
SEPTEMBER 1, 1994 BETWEEN ENTERPRISES AND AMERIKING
(Filed as exhibit 10.33 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference)............................................ *
10.34 AMENDED AND RESTATED TAX SHARING AGREEMENT, DATED
FEBRUARY 7, 1996, BETWEEN ENTERPRISES AND AMERIKING
(Filed as exhibit 10.34 to AmeriKing's Registration
Statement (No. 333-04261) and incorporated herein by
reference)............................................ *
10.35 EMPLOYMENT AND NON-INTERFERENCE AGREEMENT, DATED
SEPTEMBER 1, 1994, BETWEEN LAWRENCE JARO AND
ENTERPRISES (Filed as exhibit 10.35 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
10.36 EMPLOYMENT AND NON-INTERFERENCE AGREEMENT, DATED
SEPTEMBER 1, 1994, BETWEEN WILLIAM OSBORN AND
ENTERPRISES (Filed as exhibit 10.36 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
</TABLE>
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<TABLE>
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SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
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<C> <S> <C>
10.37 EMPLOYMENT AND NON-INTERFERENCE AGREEMENT, DATED
SEPTEMBER 1, 1994, BETWEEN GARY HUBERT AND
ENTERPRISES (Filed as exhibit 10.37 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)................... *
10.38 EMPLOYMENT AND NON-INTERFERENCE AGREEMENT, DATED
SEPTEMBER 1, 1994, BETWEEN JOEL AASEBY AND
ENTERPRISES (Filed as exhibit 10.38 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)................... *
10.39 EMPLOYMENT AND NON-INTERFERENCE AGREEMENT, DATED
SEPTEMBER 1, 1994, BETWEEN SCOTT VASATKA AND
ENTERPRISES (Filed as exhibit 10.39 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)................... *
10.40 INTENTIONALLY OMITTED...............................
10.41 FORM OF INDEMNIFICATION AGREEMENT BY AND AMONG
AMERIKING AND EACH OF THE SIGNATORIES TO THIS
REGISTRATION STATEMENT (Filed as exhibit 10.41 to
AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)............... *
10.42 INTENTIONALLY OMITTED...............................
10.43 INTENTIONALLY OMITTED...............................
10.44 LEASE AGREEMENT FOR WESTCHESTER, ILLINOIS
HEADQUARTERS (Filed as exhibit 10.44 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)................... *
10.45 LOAN AND SECURITY AGREEMENT, DATED NOVEMBER 29,
1995, BETWEEN AMERIKING COLORADO CORPORATION I AND
FRANCHISE ACCEPTANCE CORPORATION LIMITED (Filed as
exhibit 10.45 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
10.46 LOAN AND SECURITY AGREEMENT, DATED JULY 21, 1996,
BETWEEN AMERIKING TENNESSEE CORPORATION I AND
FRANCHISE ACCEPTANCE CORPORATION LIMITED (Filed as
exhibit 10.46 to AmeriKing's Registration Statement
(No. 333-04261) and incorporated herein by
reference).......................................... *
10.47 FORM OF INTERCREDITOR AGREEMENT BY AND AMONG BKC,
AMERIKING, AND THE TRUSTEE AS REPRESENTATIVE OF THE
HOLDERS OF SENIOR NOTES UNDER THE INDENTURE
(ATTACHED TO EXHIBIT 4.38).......................... *
10.48++++ RESTATED EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
BETWEEN WILLIAM OSBORN AND ENTERPRISES..............
10.49++++ RECAPITALIZATION AGREEMENT AMONG AMERIKING AND THE
STOCKHOLDERS APPEARING ON THE SIGNATURE PAGES
THERETO.............................................
10.50 MEMORANDUM OF UNDERSTANDING BETWEEN BKC AND THE
COMPANY (Filed as exhibit 10.50 to AmeriKing's
Registration Statement (No. 333-04261) and
incorporated herein by reference)................... *
</TABLE>
<PAGE>
<TABLE>
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10.51 AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING
CREDIT AND LOAN AGREEMENT, DATED MAY 14, 1996, BY AND
AMONG AMERIKING, ENTERPRISES, THE FIRST NATIONAL BANK
OF BOSTON, THE OTHER LENDING INSTITUTIONS LISTED ON
SCHEDULE I THERETO AND THE FIRST NATIONAL BANK OF
BOSTON, AS AGENT......................................
10.52 ASSIGNMENT AND ACCEPTANCE DATED MAY 14, 1996, BY AND
AMONG AMERIKING, ENTERPRISES, THE FIRST NATIONAL BANK
OF BOSTON AND THE OTHER LENDING INSTITUTIONS, LISTED
THERETO AND THE FIRST NATIONAL BANK OF BOSTON, AS
AGENT.................................................
10.53 FORM OF OPERATING AGREEMENT BY AND AMONG BKC,
AMERIKING ENTERPRISES, AMERIKING COLORADO CORPORATION
I, AMERIKING ILLINOIS CORPORATION I, AMERIKING
TENNESSEE CORPORATION I, AMERIKING VIRGINIA
CORPORATION I AND AMERIKING CINCINNATI CORPORATION I..
11++++ STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE.......
12++++ STATEMENTS RE: COMPUTATION OF RATIOS..................
21 SUBSIDIARIES OF AMERIKING (Filed as exhibit 10.21 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
23.1 CONSENT OF MAYER, BROWN & PLATT (Filed as exhibit 23.1
to AmeriKing's Registration Statement (No. 333-04261)
and incorporated herein by reference)................. *
23.2 CONSENT OF DELOITTE & TOUCHE (Filed as exhibit 23.2 to
AmeriKing's Registration Statement (No. 333-04261) and
incorporated herein by reference)..................... *
24++++ POWER OF ATTORNEY.....................................
25 T-1 FOR EXCHANGE DEBENTURE INDENTURE.................. *
26 T-1 FOR SENIOR NOTE INDENTURE......................... *
27++++ FINANCIAL DATA SCHEDULE...............................
</TABLE>
- --------
* Previously filed.
++ The schedules and exhibits to these agreements have not been filed
pursuant to Item 601(b)(2) of Regulation S-K. Such schedules and exhibits
will be filed supplementally upon the request of the Securities and
Exchange Commission.
++++Superseding exhibit.
<PAGE>
EXHIBIT 4.4
- --------------------------------------------------------------------------------
AMERIKING, INC.
-------------------------------
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
------------------------------
Dated as of December 3, 1996
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
Page
RECITALS.................................................................. 1
ARTICLE I
Certain Definitions
Affiliate...................................... 2
Agreement...................................... 2
Bank of Boston................................. 2
Board of Directors............................. 2
Burger King.................................... 2
Burger King Regulations........................ 2
By-Laws........................................ 3
Certificate of Incorporation................... 3
Class A Preferred Stock........................ 3
Class B Preferred Stock........................ 3
Closing Date................................... 3
Commission..................................... 3
Common Stock................................... 3
Company........................................ 3
Credit Agreement............................... 3
Enterprises.................................... 3
Exchange Act................................... 3
Executive and Advisors Subscription Agreement.. 4
First Offer Price.............................. 4
FNBB Affiliate................................. 4
Franchise Agreements........................... 4
GAAP........................................... 4
Initial Public Offering........................ 4
Institutional Lender........................... 4
Jaro Investors................................. 4
Jaro Proxy Agreement........................... 4
Jordan Investors............................... 4
Jordan Investors Subscription Agreement........ 4
Jordan Party................................... 5
JZCC........................................... 5
Letter Agreement............................... 5
Management Agreement........................... 5
Management Investors........................... 5
Management Stockholders........................ 5
Management Subscription Agreement.............. 5
Managing Underwriter........................... 5
MCIT........................................... 5
MCIT Purchase Agreement........................ 5
Non-Voting Common Stock........................ 5
<PAGE>
Notice of Exercise............................. 5
Notice of Intention............................ 5
Offered Shares................................. 6
Offerings...................................... 6
Osborn Investors............................... 6
Osborn Proxy Agreement......................... 6
Owner.......................................... 6
Owner Selling Stockholder...................... 6
Permitted Transferee........................... 6
Person......................................... 6
Preferred Stock................................ 6
Public Distribution............................ 6
Public Offering................................ 6
Purchase and Sale Agreement.................... 6
Registrable Securities......................... 7
Registration Expenses.......................... 7
Requesting Holder.............................. 8
Securities..................................... 8
Securities Act................................. 8
Securities Purchase Agreement.................. 8
Selling Investors.............................. 8
Selling Stockholder............................ 8
Senior Exchangeable Preferred Stock............ 8
Senior Preferred Stock......................... 8
Stock.......................................... 8
Stock Option Agreements........................ 9
Subsidiary..................................... 9
Transaction Documents.......................... 9
Underwritten Offering.......................... 9
Voting Stock................................... 9
Voting Stockholder............................. 9
Warrant Stock.................................. 9
Warrants....................................... 9
ARTICLE II
Management
2.1 Conduct of Business........................... 10
2.2 Registration of Common Stock.................. 10
2.3 Certificate of Incorporation; No Conflict with
Agreement..................................... 11
ARTICLE III
Corporate Governance and Issuance of Senior Preferred Stock
3.1 Board of Directors............................ 11
3.2 Vacancies..................................... 11
-ii-
<PAGE>
3.3 Covenant to Vote......................................... 12
3.4 Issuance of Senior Preferred Stock....................... 12
ARTICLE IV
Transfers of Stock
4.1 Restrictions on Transfer................................. 13
4.2 Exceptions to Restrictions............................... 13
4.3 Burger King Authorization................................ 14
4.4 Endorsement of Certificates.............................. 15
4.5 Improper Transfer........................................ 16
ARTICLE V
Rights of First Offer;
New Securities; Tag Along Sales
5.1 Transfers by a Stockholder............................... 16
5.2 Transfer of Offered Shares to Third Parties.............. 18
5.3 Purchase of Offered Shares............................... 19
5.4 Waiting Period with Respect to Subsequent Transfers...... 19
5.5 Right of First Refusal for New Securities................ 19
5.6 Legally Binding Obligation; Power of Attorney; Personal
Rights................................................... 21
5.7 Right to Join in Sale.................................... 21
5.8 Retention and Sale of Control............................ 23
5.9 Take Along............................................... 23
ARTICLE VI
Registration Rights
6.2 Piggyback Registrations.................................. 27
6.3 Registration Procedures.................................. 29
6.4 Indemnification.......................................... 33
6.5 Contribution............................................. 36
6.6 Rule 144................................................. 37
ARTICLE VII
Termination
7.1 Certain Terminations..................................... 37
ARTICLE VIII
Miscellaneous
-iii-
<PAGE>
8.1 Other Covenants.......................................... 38
8.2 Financial Information; List of Stockholders.............. 39
8.3 Covenants of the Jaro and Osborn Investors............... 41
8.4 RIGHT OF SETOFF.......................................... 41
8.5 Successors and Assigns................................... 42
8.6 Amendment and Modification; Waiver of Compliance;
Conflicts................................................ 43
8.7 Notices.................................................. 43
8.8 Entire Agreement......................................... 44
8.9 Injunctive Relief........................................ 44
8.10 Inspection............................................... 44
8.11 Headings................................................. 45
8.12 Recapitalizations, Exchanges, Etc., Affecting the
Common Stock; New Issuances.............................. 45
8.13 Ratification of Prior Acts of Board of Directors of
Company; Right to Negotiate............................. 45
8.14 LITIGATION............................................... 45
8.15 ARBITRATION.............................................. 46
8.16 No Strict Construction................................... 46
8.17 Counterparts............................................. 46
8.18 Obligations Under the MCIT Purchase Agreement............ 47
-iv-
<PAGE>
STOCKHOLDERS AGREEMENT
----------------------
STOCKHOLDERS AGREEMENT, dated as of December 3, 1996, is made by and among
AmeriKing, Inc., a Delaware corporation (the "Company"), BancBoston Investments
Inc., MCIT PLC, a corporation organized under the laws of England, the Jordan
Investors, the Management Stockholders, the Jaro Investors and the Osborn
Investors (each as defined in the Stockholders Agreement, dated as of September
1, 1994, as amended by the Consent and Amendment No. 1 to Stockholders
Agreement, dated as of November 30, 1994 and Waiver and Amendment No. 2 to
Stockholders Agreement, dated as of February 7, 1996 (as so amended, the
"Original Stockholders Agreement"), between the Company and certain of the
parties hereto.
W I T N E S S E T H:
-------------------
WHEREAS, concurrent with the date hereof, the Company is consummating
concurrent public offerings (the "Offerings") of 10.75% Senior Notes due 2006 in
the aggregate principal amount of $100 million and Units consisting of Senior
Exchangeable Preferred Stock due 2008 with an aggregate liquidation preference
of $30 million and Common Stock; and
WHEREAS, the parties to the Original Stockholders Agreement desire to make
certain amendments to the Original Stockholders Agreement, as set forth below.
WHEREAS, as of the date hereof and after giving effect to the transactions
contemplated hereby, the Stockholders will beneficially own the shares of Stock
as set forth in the Stockholder Schedule ("Stockholder Schedule") attached
hereto and the FNBB Affiliate or its designee will own Warrants immediately
exercisable to purchase the number of shares of Non-Voting Common Stock set
forth on the Stockholders Schedule; and
WHEREAS, the parties hereto also desire to restrict the sale, assignment,
transfer, encumbrance or other disposition of the shares of capital stock of the
Company, including issued and outstanding shares of Common Stock, Class A
Preferred Stock and Class B Preferred Stock that may be issued hereafter, and
to provide for certain rights and obligations in respect thereto as hereinafter
provided;
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE I
Certain Definitions
-------------------
As used in this Agreement, the following terms shall have the
following respective meanings:
Affiliate shall mean with respect to any Person, (a) any Person which
---------
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, or (b) any Person
who is a director or executive officer (i) of such Person, (ii) of any
Subsidiary of such Person, or (iii) of any Person described in clause (a) above,
or with respect to any Stockholder, the Company; provided, that any Affiliate of
a corporation shall be deemed an Affiliate of such corporation's stockholders.
For purposes of this definition, "control" of a Person shall mean the power,
direct or indirect, (i) to vote or direct the voting of more than 5% of the
outstanding shares of Voting Stock of such Person, or (ii) to direct or cause
the direction of the management and policies of such Person, whether by contract
or otherwise.
Agreement shall mean this Agreement as in effect on the date hereof
---------
and as hereafter from time to time amended, modified or supplemented in
accordance with the terms hereof.
Bank of Boston shall mean The First National Bank of Boston, a
--------------
national banking association.
Board of Directors shall mean the Board of Directors of the Company,
------------------
as duly constituted in accordance with this Agreement, or any committee thereof
duly constituted in accordance with this Agreement, the By-laws and applicable
law and duly authorized to make the relevant determination or take the relevant
action. To the extent that the Board of Directors is required under this
Agreement to authorize or approve, or make a determination in respect of a
transaction between the Company, on the one hand, and a Stockholder, and/or a
Stockholder's Affiliates, on the other hand, the Board of Directors shall be
deemed to exclude such Stockholder, any of its Affiliates, and any of the
directors, officers, employees, agents or representatives of such Stockholder
and/or its Affiliates, who are members of the Board of Directors.
Burger King means The Burger King Corporation, a Florida
-----------
corporation.
Burger King Regulations means the rules, regulations and requirements,
-----------------------
policies and procedures of Burger King as in effect from time to time, relating
to the Company and its subsidiaries, including but not limited to those set
forth in the Franchise
-2-
<PAGE>
Agreements, the Burger King Franchise Offering Circular (October 1995) or other
agreements between the Company and/or its subsidiaries, on the one hand, and
Burger King, on the other hand.
By-Laws shall mean the By-Laws of the Company as amended and in effect
-------
on the date hereof and as hereafter further amended or restated in accordance
with the terms hereof and pursuant to applicable law.
Certificate of Incorporation shall mean the Amended and Restated
----------------------------
Certificate of Incorporation of the Company as in effect on the date hereof and
as hereafter from time to time amended, restated, modified or supplemented in
accordance with the terms hereof and pursuant to applicable law.
Class A Preferred Stock shall mean the Class A Preferred Stock, par
-----------------------
value $0.01 per share, consisting of two tranches, the Class A\\1\\ Preferred
Stock and the Class A\\2\\ Preferred Stock, ranking pari passu with each other,
of the Company.
Class B Preferred Stock shall mean the Class B Preferred Stock, par
-----------------------
value $0.01 per share, of the Company.
Closing Date shall mean the date on which the Offerings shall be
------------
consummated.
Commission shall mean the Securities and Exchange Commission and any
----------
successor commission or agency having similar powers.
Common Stock shall mean the Common Stock, the Non-Voting Common Stock
------------
and shall include unless otherwise noted, the Warrant Stock.
Company shall have the meaning set forth in the preamble to this
-------
Agreement.
Credit Agreement shall mean the Second Amended and Restated Revolving
----------------
Credit and Term Loan Agreement, dated February 7, 1996, by and among
Enterprises, the Company, the lenders thereto and Bank of Boston, as agent as
amended or otherwise modified from time to time.
Enterprises shall mean National Restaurant Enterprises, Inc., a
-----------
Delaware corporation.
Exchange Act shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar Federal statute then in effect, and a reference to a
particular section thereof shall include a reference to the comparable section,
if any, of such similar Federal statute.
-3-
<PAGE>
Executive and Advisors Subscription Agreement shall mean the Executive
---------------------------------------------
and Advisors Subscription Agreement, dated as of September 1, 1994, by and among
the investors listed on the signature pages thereto and the Company, as amended
from time to time.
First Offer Price shall have the meaning specified in Section 5.1(a).
-----------------
FNBB Affiliate shall mean BancBoston Investments Inc. and Permitted
--------------
Transferees.
Franchise Agreements shall mean the franchise agreements in effect
--------------------
from time to time between Enterprises and its subsidiaries on the one hand, and
Burger King on the other hand.
GAAP shall mean generally accepted accounting principles in the United
----
States of America in effect from time to time, applied on a consistent basis
both as to classification of items and amounts.
Initial Public Offering shall mean the public offer and sale of Common
-----------------------
Stock of the Company for net proceeds to the Company from the sale of Common
Stock of at least $30 million, pursuant to a firm commitment underwritten offer
registered under the Securities Act.
Institutional Lender shall mean any bank, savings and loan
--------------------
association, insurance company, or other institutional lender.
Jaro Investors shall mean Lawrence Jaro, the Persons so listed on the
--------------
Stockholder Schedule and any Permitted Transferee of any of them who becomes a
Stockholder in accordance with the terms hereof.
Jaro Proxy Agreement shall mean the Jaro Proxy Agreement, dated
--------------------
September 1, 1994, between Lawrence Jaro and the signatories listed therein.
Jordan Investors shall mean JZCC, MCIT and the Persons listed on the
----------------
Schedule of Jordan Investors including the signatories to the Jordan Investors
Subscription Agreement, the Executive and Advisors Subscription Agreement and
any Permitted Transferee of any of them who becomes a Stockholder in accordance
with the terms hereof.
Jordan Investors Subscription Agreement shall mean the Jordan
---------------------------------------
Investors Subscription Agreement, dated September 1, 1994, between certain
Jordan Investors and the Company, as amended from time to time.
-4-
<PAGE>
Jordan Party shall have the meaning given to it in the MCIT Purchase
------------
Agreement.
JZCC shall mean the Jordan/Zalaznick Capital Company, a New York
----
general partnership.
Letter Agreement shall mean the letter agreement, dated September 1,
----------------
1994, by and among MCIT and the Jordan Investors and attached as Exhibit I to
the MCIT Purchase Agreement.
Management Agreement shall mean the Management Consulting Agreement,
--------------------
dated September 1, 1994, between TJC Management Corporation and the Company, as
amended by Amendment No. 1 to the Management Consulting Agreement, dated
February 7, 1996, and as such agreement may from time to time hereafter be
further amended, modified or supplemented in accordance with the terms hereof
and thereof.
Management Investors shall mean any officer or managerial employee of
--------------------
the Company or any of its Subsidiaries or his or her Affiliates who holds any
shares of Common Stock from the Company in accordance with the Management
Subscription Agreement and this Agreement, and any Permitted Transferee of any
of such Persons who becomes a Stockholder in accordance with the terms hereof.
Management Stockholders shall mean Lawrence Jaro, William Osborn, Gary
-----------------------
Hubert, Joel Aaseby, Don Stahurski, Scott Vasatka.
Management Subscription Agreement shall mean the Management
---------------------------------
Subscription Agreement, dated September 1, 1994, between the Company and each
Management Investor as amended, modified or supplemented in accordance with the
terms hereof and thereof.
Managing Underwriter shall have the meaning specified in Section
--------------------
6.1(f).
MCIT shall mean MCIT PLC, a corporation organized under the laws of
----
the United Kingdom.
MCIT Purchase Agreement shall mean the Amended and Restated Purchase
-----------------------
Agreement, dated as of February 7, 1996, between the Company and MCIT, as
amended or supplemented from time to time.
Non-Voting Common Stock shall mean the Non-Voting Common Stock, par
-----------------------
value $.01 per share, of the Company.
Notice of Exercise shall have the meaning specified in Section 5.1(b).
------------------
Notice of Intention shall have the meaning specified in Section
-------------------
5.1(a).
-5-
<PAGE>
Offered Shares shall have the meaning specified in Section 5.1.
--------------
Offerings shall have the meaning specified in the recitals.
---------
Osborn Investors shall mean William Osborn, the Persons so listed on
----------------
the Stockholder Schedule and any Permitted Transferee of any of them who becomes
a Stockholder in accordance with the terms hereof.
Osborn Proxy Agreement shall mean the Osborn Proxy Agreement, dated
----------------------
September 1, 1994, between William Osborn and the signatories listed therein.
Owner shall refer to each of Lawrence Jaro, William Osborn and Gary
-----
Hubert and any other person who is designated an owner pursuant to applicable
Burger King Regulations.
Owner Selling Stockholder shall have the meaning specified in
-------------------------
Section 4.3.
Permitted Transferee shall mean, (i) any Jordan Investor, the FNBB
--------------------
Affiliate, or any Management Investor and (ii) those Persons to whom Transfers
of Common Stock and Preferred Stock are permitted to be made by them pursuant to
Section 4.2 and Article V hereof.
Person shall mean an individual or a corporation, association,
------
partnership, joint venture, organization, business, trust, or any other entity
or organization, including a government or any subdivision or agency thereof.
Preferred Stock shall mean the Class A Preferred Stock, Class B
---------------
Preferred Stock, Senior Exchangeable Preferred Stock and undesignated preferred
stock of the Company.
Public Distribution shall mean a Public Offering of Common Stock, at
-------------------
the conclusion of which the aggregate number of shares of Common Stock that have
been sold to the public pursuant to one or more effective registration
statements under the Securities Act equals at least 25% of the shares of Common
Stock then outstanding (on a fully diluted basis), including without limitation,
the Warrant Stock, after giving effect to such sale.
Public Offering shall mean a public offering and sale of equity
---------------
securities of the Company pursuant to an effective registration statement under
the Securities Act.
Purchase and Sale Agreement shall mean the Purchase and Sale
---------------------------
Agreement, dated September 1, 1994, by and among the Company, Enterprises and
Burger King.
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Registrable Securities shall mean:
----------------------
(a) all shares of Common Stock and Non-Voting Common Stock
outstanding on the date hereof but prior to the consummation of the Offerings,
and all shares of Common Stock issued or issuable upon (x) the conversion or
exchange of outstanding shares of 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 Non-Voting Common
Stock shall be so exchanged or converted in connection with an effective
registration and sale under the Securities Act of such shares of Common Stock;
and, solely for purposes of Article VI of this Agreement, each holder of shares
of Non-Voting Common Stock and each holder of Warrants to purchase shares of
Non-Voting Common Stock that are to be converted into shares of Common Stock to
be sold in connection with such a registration shall be deemed to be the holder
of the shares of Common Stock into which such shares of Non-Voting Common Stock
shall be convertible; and
(b) any shares of capital stock issued or issuable by the Company in
respect of any shares of Common Stock referred to in the foregoing by way of a
stock dividend or stock split or in connection with a combination or subdivision
of shares, reclassification, recapitalization, merger, consolidation or other
reorganization of the Company.
As to any particular Registrable Securities that have been issued,
such securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of under such registration statement, (ii) they shall have been distributed to
the public pursuant to Rule 144, (iii) they shall have been otherwise
transferred or disposed of, and new certificates therefor not bearing a legend
restricting further transfer shall have been delivered by the Company, and
subsequent transfer or disposition of them shall not require their registration
or qualification under the Securities Act or any similar state law then in
force, or (iv) they shall have ceased to be outstanding.
Registration Expenses shall mean any and all out-of-pocket expenses
---------------------
incident to the Company's performance of or compliance with Article VI hereof,
including, without limitation, all Commission, stock exchange or National
Association of Securities Dealers, Inc. ("NASD") registration and filing fees,
all fees and expenses of complying with securities and blue sky laws (including
the reasonable fees and disbursements of underwriters'
-7-
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counsel in connection with blue sky qualifications and NASD filings), all fees
and expenses of the transfer agent and registrar for the Registrable Securities,
all printing expenses, the fees and disbursements of counsel for the Company and
of its independent public accountants, including the expenses of any special
audits and/or "cold comfort" letters required by or incident to such performance
and compliance, and one firm of counsel (other than house counsel) retained by
the FNBB Affiliate if holding Registrable Securities being registered and one
firm of counsel (other than house counsel) retained by the Jordan Investors
holding Registrable Securities being registered, but excluding underwriting
discounts and commissions and applicable transfer and documentary stamp taxes,
if any, which shall be borne by the seller of the securities in all cases.
Requesting Holder shall have the meaning specified in Section
-----------------
6.5.
Securities shall mean (i) any capital stock of the Company and (ii)
----------
any instrument evidencing indebtedness of the Company or Enterprises to the Jaro
Investors or the Osborn Investors.
Securities Act shall mean, as of any date, the Securities Act of 1933,
--------------
as amended, or any similar Federal statute then in effect, and in reference to a
particular section thereof shall include a reference to the comparable section,
if any, of any such similar Federal statute and the rules and regulations
thereunder.
Securities Purchase Agreement shall mean the Securities Purchase
-----------------------------
Agreement, dated as of November 30, 1994, between the Company and the FNBB
Affiliate.
Selling Investors shall have the meaning specified in Section
-----------------
5.9.
Selling Stockholder shall have the meaning specified in Section
-------------------
5.1(a).
Senior Exchangeable Preferred Stock shall mean the 13.0% Senior
-----------------------------------
Exchangeable Preferred Stock due 2008 issued by the Company in the Offerings.
Senior Preferred Stock shall mean any new class or series of Preferred
----------------------
Stock of the Company that is senior in right of payment of dividends or
preference in liquidation to the Class A Preferred Stock and Class B Preferred
Stock; provided, Senior Preferred Stock shall not include the Senior
--------
Exchangeable Preferred Stock.
Stock shall mean the Common Stock and the Preferred Stock.
-----
-8-
<PAGE>
Stockholder shall mean any of the Jordan Investors, MCIT, the FNBB
-----------
Affiliate, the Management Investors, the Jaro Investors, the Osborn Investors,
holders of the Company's capital stock issued pursuant to the Stock Option
Agreement to any Permitted Transferee of any such Person who becomes a party to
or bound by the provisions of this Agreement in accordance with the terms
hereof.
Stock Option Agreements shall mean the Stock Option Agreements, dated
-----------------------
September 1, 1994, as amended, between the Company and each of Scott Vasatka and
Donald Stahurski.
Subsidiary shall mean as to any Person a corporation of which
----------
outstanding shares of stock having ordinary voting power (other than stock
having such power only by reason of the happening of a contingency) to elect a
majority of the Board of Directors of such corporation are at the time owned,
directly or indirectly through one or more intermediaries, or both, by such
Person.
Transaction Documents shall mean this Agreement, the Recapitalization
---------------------
Agreement, each of the agreements that are exhibits hereto and thereto, and all
agreements, instruments and documents contemplated hereby and thereby.
Underwritten Offering shall have the meaning given to it in Section
---------------------
6.1(c).
Voting Stock shall mean capital stock of the Company of any class or
------------
classes, the holders of which are ordinarily, in the absence of contingencies,
entitled to vote for the election of corporate directors (or Persons performing
similar functions).
Voting Stockholder shall mean a Stockholder who holds Voting Stock or
------------------
retains, by proxy or otherwise, the power to vote Voting Stock.
Warrant Stock shall mean and include all shares of common stock issued
-------------
or issuable pursuant to the Warrants and the Stock Option Agreement and all
references in this Agreement to outstanding Common Stock shall be deemed to
include all Warrant Stock whether or not issued and outstanding.
Warrants shall mean (i) the Warrant, immediately exercisable to
--------
purchase 27,003.53 shares of Non-Voting Common Stock, issued to the FNBB
Affiliate or its designee pursuant to the Credit Agreement and (ii) the Warrant,
immediately exercisable to purchase 69,994.75 shares of Non-Voting Common Stock,
issued to the FNBB Affiliate, as such Warrants may from time to time be amended,
modified or supplemented in accordance with the terms hereof and thereof.
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<PAGE>
ARTICLE II
Management
----------
Section 2.1 Conduct of Business.
-------------------
(a) The parties hereto confirm that it is their intention that the
business and affairs of the Company shall be managed by its Board of Directors
in the best interests of the Company and its Subsidiaries taken as a whole. In
furtherance of the foregoing, the parties hereto agree that, after the date
hereof, except in the case of the transactions expressly contemplated by the
Transaction Documents, neither they, any of their Affiliates nor any Affiliates
of the Company will enter into any written or oral contract, agreement or other
arrangement to engage in business or enter into any transaction, or will engage
in business or enter into any transaction, with the Company or any of its
Subsidiaries unless the terms and provisions of such contract, agreement or
other arrangement or the terms on which such business or transaction is
conducted, as the case may be, are fair to the Company or such Subsidiary and
are substantially equivalent to terms that would have been obtained in an arm's-
length relationship other than as required in connection with the execution,
performance and delivery of the Transaction Documents. Notwithstanding any of
the above, the Company may pay to TJC Management Corporation or another
Affiliate of JZCC, investment banking fees in accordance with and subject to the
terms of the Management Agreement, and directors of the Company, directors fees
not to exceed in the aggregate an amount per year equal to $120,000 per year.
(b) Unless otherwise authorized by a vote of at least 60% of the
whole Board of Directors, whether or not there shall be any vacancies on the
Board of Directors, the parties hereto shall cause the Company to conduct its
business substantially as that business is conducted on the date hereof and
shall not conduct any other business.
(c) The parties hereto shall cause the Company to conduct its
business and affairs in all material respects in compliance with all Burger King
Regulations.
Section 2.2 Registration of Common Stock. In the event of a Public
----------------------------
Offering of the Company's Common Stock, each Voting Stockholder shall, at a
meeting convened for the purpose of amending the Certificate of Incorporation,
vote to increase the number of authorized shares of Common Stock and Non-Voting
Common Stock and, if necessary, increase the number of issued and outstanding
shares of Common Stock and Non-Voting Common Stock, whether by stock split,
stock dividend or otherwise, or change in
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<PAGE>
its par value, as recommended by a majority of the members of the Board of
Directors in order to facilitate such Public Offering.
Section 2.3 Certificate of Incorporation; No Conflict with Agreement.
--------------------------------------------------------
Each Voting Stockholder shall vote his shares of Voting Stock, and shall take
all actions necessary, to ensure that the Certificate of Incorporation and By-
Laws do not, at any time, conflict with the provisions of this Agreement.
ARTICLE III
Corporate Governance and Issuance of Senior Preferred Stock
-----------------------------------------------------------
Section 3.1 Board of Directors.
------------------
(a) The Stockholders hereby agree that at all times after the Closing
Date, the Board of Directors of the Company shall consist of not less than seven
members, including the individuals described in this Section 3.1(a). The Voting
Stockholders shall take all actions necessary to elect, or to cause the Board of
Directors to approve and appoint, the designees described below to be members of
the Board of Directors, and such other members as may be selected by the holders
of Voting Stock from time to time outstanding:
(i) four individuals, designated by the beneficial owners of the
majority of the shares of Common Stock beneficially owned by the Jordan
Investors ("Jordan Directors"); and
(ii) three individuals designated by the holders of a majority of the
shares of Common Stock beneficially owned by the Management Stockholders;
provided, that such individuals have executed employment agreements with
--------
the Company, and that such employment agreements remain in full force and
effect ("Management Directors").
(b) Each Voting Stockholder hereby agrees to vote all shares of Voting
Stock owned or held of record by such Stockholder at each annual or special
meeting of Stockholders of the Company at which directors of the Company are to
be elected, in favor of, or to take all actions by written consent in lieu of
any such meeting as are necessary to cause, the election as members of the Board
of Directors of those individuals described in Section 3.1(a) in accordance
with, and to otherwise effect the intent of, the provisions of Section 3.1(a).
Section 3.2 Vacancies. In the event that a vacancy is created on the
---------
Board of Directors at any time by the death, disability, retirement, resignation
or removal of any member of
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<PAGE>
the Board of Directors, or for any other reason there shall exist or occur any
vacancy on the Board of Directors, each Voting Stockholder hereby agrees to take
such actions as will result in the election or appointment as a director of an
individual designated or elected to fill such vacancy and serve as a director by
the Stockholders that had designated or elected (pursuant to Section 3.1) the
director whose death, disability, retirement, resignation or removal resulted in
such vacancy on the Board of Directors (in the manner set forth in Section 3.1).
In the interim from the time the vacancy is created until a new director is
elected, if the vacancy is for a Jordan Director, the remaining Jordan Directors
may appoint a replacement to act as a director until a new director is duly
elected, and if the vacancy is for a Management Director, the remaining
Management Directors may appoint a replacement to act as a director until a new
director is duly elected.
Section 3.3 Covenant to Vote. Each Voting Stockholder hereby agrees to
----------------
take all actions necessary to call, or cause the Company and the appropriate
officers and directors of the Company to call, an annual meeting (and when
circumstances so require, a special meeting) of Stockholders of the Company and
to vote all shares of Voting Stock owned or held of record by such Voting
Stockholder at any such meeting and at any other annual or special meeting of
stockholders in favor of, or take all actions by written consent in lieu of any
such meeting as may be necessary to cause, the election as members of the Board
of Directors of those individuals so designated in accordance with, and to
otherwise effect the intent of, this Article III. In addition, each Voting
Stockholder agrees to vote the shares of Voting Stock owned by such Stockholder
upon any other matter arising under this Agreement submitted to a vote of the
Stockholders in such a manner as to implement the terms of this Agreement. In
addition, each Voting Stockholder is aware of the terms of the Letter Agreement.
Section 3.4 Issuance of Senior Preferred Stock. The Company shall not
----------------------------------
issue shares of a class of Senior Preferred Stock with an aggregate liquidation
preference (including all issuances of Senior Preferred Stock after the date
hereof) in excess of $15,000,000 without the consent of the holders of a
majority of the Class A Preferred Stock and the Class B Preferred Stock then
outstanding, voting together as a single class.
ARTICLE IV
Transfers of Stock
------------------
Section 4.1 Restrictions on Transfer. Each Stockholder agrees that such
------------------------
Stockholder will not, directly or indirectly,
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<PAGE>
offer, sell, transfer, assign or otherwise dispose of (or make any exchange,
gift, assignment or pledge of) (collectively, for purposes of Articles IV and V
hereof only, a "transfer") any Securities or Warrants, as the case may be,
except (a) as provided in Section 4.2; (b) in accordance with Article V; (c) an
exchange of Common Stock of one class for Common Stock of another class in
accordance with Section 8.1(b); (d) a conversion of Common Stock of one class
into Common Stock of another class pursuant to the Certificate of Incorporation;
(e) the exercise of Warrants; (f) pursuant to the Management Subscription
Agreement; or (g) with regard to any pledge, hypothecation or charge by MCIT.
In addition to the other restrictions noted in this Article IV, each Stockholder
agrees that it will not, directly or indirectly, transfer any of its Securities
or Warrants except as permitted under the Securities Act and other applicable
securities laws.
Section 4.2 Exceptions to Restrictions. The provisions of Section 4.1 and
--------------------------
Article V (other than Section 5.8) shall not apply to any of the following
transfers:
(a) (i) From JZCC to the Jordan Investors or any Jordan Party, (ii) from
any of the Jordan Investors or any Jordan Party to any of the other Jordan
Investors, (iii) from any Jordan Investor or any Jordan Party to any Trust
solely for such Jordan Investor's or such Jordan Party's benefit or the benefit
of such Jordan Investor's or such Jordan Party's spouse or children (as the case
may be); provided, that such Jordan Investor or such Jordan Party acts as
--------
trustee and retains the sole power to direct the voting and disposition of such
shares; and provided, further, that in the case referred to in clause (iii),
-------- -------
each such Person including any such trust (each a "Permitted Transferee", shall
execute a counterpart of and become a party to this Agreement and shall agree in
a writing in form and substance satisfactory to the Company to be bound and
becomes bound by the terms of this Agreement.
(b) (i) From any Management Investor to such Management Investor's spouse
or children, (ii) from any Management Investor to any trust solely for such
Management Investor's benefit or the benefit of such Management Investor's
spouse or children, (iii) from any Jaro Investor to such Jaro Investor's spouse
or children, (iv) from any Jaro Investor to any trust solely for the benefit of
such Jaro Investor's spouse or children, (v) from any Osborn Investor to such
Osborn Investor's spouse or children or (vi) from any Osborn Investor to any
trust solely for the benefit of such Osborn Investor's spouse or children;
provided, that, in each case referred to above, such Management Investor, Jaro
- --------
Investor or Osborn Investor, as the case may be, acts as trustee and retains the
sole power to direct the voting and disposition of such Securities; and
provided, further that each such Person
- -------- -------
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<PAGE>
including any such trust (each a "Permitted Transferee") shall execute a
counterpart of and become a party to this Agreement and shall agree in a writing
in form and substance satisfactory to the Company to be bound and becomes bound
by the terms of this Agreement as a Stockholder.
(c) from the FNBB Affiliate, to any of its respective affiliates, the
Jordan Investors or any Institutional Lender.
(d) From any Stockholder to any Affiliate of the Company, or pursuant to a
merger or consolidation involving the Company or a sale of all or substantially
all of the outstanding shares of Common Stock.
(e) Pursuant to the provisions of the Credit Agreement, including any
pledge of stock or foreclosure on that pledge.
(f) Pursuant to a Public Offering or an open market sale following a
Public Offering in accordance with Rule 144 of the Commission.
(g) Transfers by the Jordan Investors or the Jordan Parties of Preferred
Stock, including donations to charitable organizations.
Section 4.3 Burger King Authorization. Other than (i) as set forth in
-------------------------
Section 4.1(c), (d), (e) or (f), (ii) as set forth in Section 4.2(a), (b), (c),
(d) or (g); provided, that, with respect to Section 4.2(b), the transfer of
--------
Stock by either Lawrence Jaro or William Osborn do not result in either Mr. Jaro
or Mr. Osborn holding less than 5% of the Company's Voting Stock, (iii)
transfers of Securities other than Voting Stock, and (iv) transfers that would
not result in a "Change of Control" (as defined in the MCIT Purchase Agreement),
the Company and each Stockholder agree and acknowledge that any issuance or
transfer of Stock must be authorized by Burger King in accordance with the terms
and conditions set forth in the Franchise Agreement and the Burger King
Regulations.
If at any time any Owner who is a Stockholder shall desire to transfer
Securities or Warrants owned by him or it (such Stockholder desiring to transfer
shares of such Stock or Warrants being referred to herein as an "Owner Selling
Stockholder"), then such Owner Selling Stockholder shall deliver written notice
of its desire to transfer such Securities or Warrants, accompanied by a copy of
a proposal relating to such sale, to each of Burger King and to the Company,
setting forth such Owner Selling Stockholder's desire to make such sale, the
number and the class of shares of Securities or Warrants proposed to be
transferred and other terms applicable thereto.
-14-
<PAGE>
Upon receipt of the notice referred to above, the Company will use its best
efforts to cause Burger King to consent to the transfer proposal.
Notwithstanding the foregoing, any Owner who is a Stockholder acknowledges,
agrees and consents to any and all stop transfer restrictions placed on their
Securities and Warrants prior to the Company's receipt of Burger King's consent
to the transfer and the satisfaction of all applicable agreements, rules and
regulations regarding the transfer or conveyance of the Securities and Warrants.
Section 4.4 Endorsement of Certificates.
---------------------------
(a) Upon the execution of this Agreement, in addition to any other legend
which the Company may deem advisable under the Securities Act and certain state
securities laws, all Warrants and certificates representing shares of issued and
outstanding Common Stock shall be endorsed at all times prior to any Public
Distribution as follows:
THIS CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE ONLY UPON
COMPLIANCE WITH, THE PROVISIONS OF A STOCKHOLDERS AGREEMENT, DATED
SEPTEMBER 1, 1994, AMONG THE COMPANY AND ITS STOCKHOLDERS, AS AMENDED;
SUBSCRIPTION AGREEMENTS, DATED SEPTEMBER 1, 1994, AMONG THE COMPANY
AND CERTAIN INVESTORS THEREIN, AS AMENDED AND THE TERMS AND CONDITIONS
OF FRANCHISE AND OTHER AGREEMENTS WITH BURGER KING CORPORATION.
REFERENCE IS MADE TO SUCH AGREEMENTS AND THE RESTRICTIVE PROVISIONS OF
THE CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE COMPANY. COPIES
OF THE ABOVE REFERENCED AGREEMENTS ARE ON FILE AT THE OFFICE OF THE
COMPANY AT THE JORDAN COMPANY, 9 WEST 57TH STREET, NEW YORK, NEW YORK
10019.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN
EXEMPTION FROM REGISTRATION, UNDER SAID ACT.
(b) Except as otherwise expressly provided in this Agreement, all Warrants
and certificates representing shares of Stock hereafter issued to or acquired by
any of the Stockholders or their successors hereto (including, without
limitation, all certificates representing shares of Common Stock hereafter
issued upon conversion of shares of Non-Voting Common Stock) shall bear the
legends set forth above, and the Warrants and shares of Stock represented by
such certificates shall be subject to the applicable provisions of this
Agreement. The obligations of each party hereto shall be binding upon each
transferee to whom Securities or Warrants are transferred by any party hereto,
whether or not such transfer is permitted under the terms of this
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<PAGE>
Agreement, except for transfers pursuant to a Public Offering. Prior to
consummation of any transfer, except for transfers pursuant to a Public
Offering, such party shall cause the transferee to execute an agreement in form
and substance reasonably satisfactory to the other parties hereto, providing
that such transferee shall fully comply with the terms of this Agreement.
Prompt notice shall be given to the Company and each Stockholder by the
transferor of any transfer (whether or not to a Permitted Transferee) of any
Securities or Warrants.
Section 4.5 Improper Transfer. Any attempt to transfer or encumber any
-----------------
shares of Securities or Warrants not in accordance with this Agreement shall be
null and void and neither the Company nor any transfer agent of such securities
shall give any effect to such attempted transfer or encumbrance in its stock
records.
ARTICLE V
Rights of First Offer;
----------------------
New Securities; Tag Along Sales
-------------------------------
Section 5.1 Transfers by a Stockholder.
--------------------------
(a) Except for sales of securities contemplated by Article VI hereof,
transfers permitted by Sections 4.1, 4.2 and 4.3, transfers of Preferred Stock
and transactions subject to Section 5.9, if at any time any Stockholder shall
desire to sell any Stock or Warrants owned by him or it (such Stockholder
desiring to sell shares of such Stock or Warrants being referred to herein as a
"Selling Stockholder"), then such Selling Stockholder shall deliver written
notice of its desire to sell such Stock or Warrants (a "Notice of Intention"),
accompanied by a copy of a proposal relating to such sale (the "Sale Proposal"),
to each of the other Stockholders and to the Company, setting forth such Selling
Stockholder's desire to make such sale (which shall be for cash only), the
number and class of shares of Stock or Warrants proposed to be transferred (the
"Offered Securities") and the price at which such Selling Stockholder proposes
to sell the Offered Securities (the "First Offer Price") and other terms
applicable thereto.
(b) Upon receipt of the Notice of Intention, the Company and the other
Stockholders shall then have the right to purchase at the First Offer Price and
on the other terms specified in the Sale Proposal all or, subject to Section
5.1(d), any portion of the Offered Securities in the following order of
priority: (i) if the Selling Stockholder is a Management Investor, the other
Management Investors shall have the first right to purchase the Offered
Securities pro rata among those Management Investors so
-16-
<PAGE>
electing on the basis of the respective number of shares of Common Stock or
Warrants owned or held as trustee by such Management Investors (or in such other
proportions as such Management Investors may agree), then the Company shall have
the second right to purchase the Offered Securities, and thereafter, the Jordan
Investors shall have the right to purchase the Offered Securities pro rata among
those of the Jordan Investors so electing on the basis of the respective numbers
of shares of Common Stock or Warrants owned by such Jordan Investors (or in such
other proportion as such Jordan Investors may agree) and thereafter, the other
Stockholders (excluding the Management Investors) shall have the right to
purchase the Offered Securities pro rata among the Stockholders (excluding the
Management Investors) so electing on the basis of the respective numbers of
shares of Common Stock or Warrants owned by such Stockholders (or in such other
proportion as such other Stockholders may agree); (ii) if the Selling
Stockholder is a Jordan Investor, the other Jordan Investors shall have the
first right to purchase the Offered Securities pro rata among those of the
Jordan Investors so electing on the basis of the respective numbers of shares of
Common Stock or Warrants owned by such Jordan Investors (or in such other
proportion as such Jordan Investors may agree), and thereafter, the Company
shall have the right to purchase the Offered Securities and thereafter, all
other Stockholders shall have the right to purchase the Offered Securities pro
rata among the Stockholders so electing to purchase on the basis of the
respective numbers of shares of Common Stock (including Warrant Stock) owned by
such Stockholders (or in such other proportion as such other stockholders may
agree); and (iii) if the Selling Stockholder is the FNBB Affiliate, or MCIT, the
Jordan Investors shall have the first right to purchase the Offered Securities
pro rata among those of the Jordan Investors so electing on the basis of the
respective numbers of shares of Common Stock (including Warrant Stock) owned by
such Jordan Investors (or in such other proportion as such Jordan Investors may
agree), and thereafter, the Company shall have the right to purchase the Offered
Securities and thereafter, all other Stockholders shall have the right to
purchase the Offered Securities pro rata among the Stockholders so electing on
the basis of the respective numbers of shares of Common Stock (including Warrant
Stock) owned by such Stockholders (or in such other proportion as such other
Stockholders may agree). The rights of the Stockholders and the Company
pursuant to this Section 5.1(b) shall be exercisable by the delivery of notice
to the Selling Stockholder (the "Notice of Exercise"), within 30 calendar days
from the date of delivery of the Notice of Intention. The Notice of Exercise
shall state the total number of shares of the Offered Securities such
Stockholder (or the Company) is willing to purchase without regard to whether or
not other Stockholders purchase any shares of the Offered Securities. A copy of
such Notice of Exercise shall also be delivered by each
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<PAGE>
Stockholder to the Company and each other Stockholder. The rights of the
Stockholders and the Company pursuant to this Section 5.1(b) shall terminate if
unexercised 30 calendar days after the date of delivery of the Notice of
Intention.
Notwithstanding the foregoing, no Management Investor, other than Lawrence
Jaro, William Osborn, Gary Hubert or Joel Aaseby shall be entitled to purchase
any shares of Common Stock or Warrants hereunder unless such shares shall
concurrently be duly assigned, transferred and delivered to the trustee of the
Jaro Voting Trust or Osborn Voting Trust and such shares shall thereafter be
subject to the Jaro or Osborn Voting Trust Agreement.
(c) In the event that the Stockholders or the Company exercise their
rights to purchase any or all of the Offered Securities in accordance with
Section 5.1(b), then the Selling Stockholder must sell the Offered Securities to
such Stockholders (or, as the case may be, the Company) within 30 calendar days
from the date of delivery of the Notice of Exercise received by the Selling
Stockholder.
(d) Notwithstanding the foregoing provisions of this Section 5.1, unless
the Selling Stockholder shall have consented to the purchase of less than all of
the Offered Securities, no Stockholder or Stockholders nor the Company may
purchase any Offered Securities hereunder unless all of the Offered Securities
are to be so purchased.
(e) For purposes of this Article V, any Person who has failed to give
notice of the election of an option hereunder within the specified time period
will be deemed to have waived its rights on the day after the last day of such
period.
(f) Each Stockholder agrees and acknowledges that the Company may purchase
or acquire Common Stock pursuant to Section 5.1(b) hereof, and approves such
purchases and acquisitions, and waives any objection or claim relating thereto,
whether against the Company, the Board of Directors or otherwise.
Section 5.2 Transfer of Offered Shares to Third Parties. If all notices
-------------------------------------------
required to be given pursuant to Section 5.1 have been duly given and the
Stockholders and the Company do not exercise their respective options to
purchase all of the Offered Securities at the First Offer Price and the Selling
Stockholder does not desire to sell less than all the Offered Securities or if
with the consent of the Selling Stockholder the other Stockholders and the
Company purchase less than all of the Offered Securities pursuant to the
provisions hereof, then in either such event the Selling Stockholder shall have
the right, subject to compliance by the Selling Stockholder with the
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provisions of Section 4.3 and Section 4.4(b) hereof, for a period of 120
calendar days from the earlier of (i) the expiration of the option period
pursuant to Section 5.1 with respect to such Sale Proposal or (ii) the date on
which such Selling Stockholder receives notice from the other Stockholders and
the Company that they will not exercise in whole or in part the options granted
pursuant to Section 5.1, to sell to any third party which is not an Affiliate
of, or related by consanguinity or marriage to, the Selling Stockholder the
Offered Securities remaining unsold at a price of not less than 95% of the First
Offer Price, and on the other terms specified in the Sale Proposal.
Section 5.3 Purchase of Offered Shares. The consummation of any purchase
--------------------------
and sale pursuant to Section 5.1 shall take place on such date, not later than
30 calendar days after the expiration of the option period pursuant to Section
5.1 with respect to such option, as the Selling Stockholder shall select. Prior
to the consummation of any sale pursuant to Section 5.1, the Selling Stockholder
shall comply with Section 4.3 and Section 4.4(b) hereof. Upon the consummation
of any such purchase and sale, the Selling Stockholder shall deliver
certificates evidencing the Offered Securities sold duly endorsed, or
accompanied by written instruments of transfer in form satisfactory to the
purchaser duly executed by the Selling Stockholder free and clear of any liens,
against delivery of the First Offer Price, payable in the manner specified in
Section 5.1(a).
Section 5.4 Waiting Period with Respect to Subsequent Transfers. In the
---------------------------------------------------
event that the Stockholders and the Company do not exercise their options to
purchase all of the Offered Securities, and the Selling Stockholder shall not
have sold the remaining Offered Securities to a third party for any reason
before the expiration, as applicable, of the 120-day period described in Section
5.2, then such Selling Stockholder shall not give another Notice of Intention
pursuant to Section 5.1 for a period of 90 calendar days after the last day of
such 120-day period.
Section 5.5 Right of First Refusal for New Securities.
-----------------------------------------
(a) The Company hereby grants to each of the Stockholders a right of first
refusal to purchase shares of any New Securities (as defined below) which the
Company may, from time to time, propose to issue and sell. Such right of first
refusal shall allow each Stockholder to purchase a pro rata portion of the
shares of Common Stock, Preferred Stock or Warrants as may be included in the
New Securities proposed to be issued, determined with reference to the aggregate
number of outstanding shares of Common Stock (including all Warrant Stock) or
Preferred Stock (as the case may be) held by such Stockholder before the
proposed
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issuance of New Securities. In the event a Stockholder does not purchase any or
all of its pro rata portion of New Securities, the remaining Stockholders shall
have the right to purchase such unpurchased New Securities or respective pro
rata portion until all of the New Securities are purchased or until no other
Stockholder desires to purchase any more New Securities. The right of first
refusal granted hereunder shall terminate if unexercised within 30 calendar days
after receipt of the notice described in Section 5.5(c) below.
(b) "New Securities" shall mean any authorized but unissued shares, and
any treasury shares, of capital stock of the Company and all rights, options or
warrants to purchase capital stock, and securities of any type whatsoever that
are, or may become, convertible into capital stock; provided, however, that the
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term "New Securities" does not include (i) securities issued upon conversion of
shares of Non-Voting Common Stock into Common Stock, in accordance with the
Certificate of Incorporation and this Agreement; (ii) securities issued pursuant
to the acquisition of another corporation by the Company by merger, purchase of
all or substantially all of the assets or other reorganization whereby the
Company shall become the owner of more than 50% of the voting power of such
corporation; (iii) shares of Common Stock issued in connection with any stock
split or stock dividend of the Company; (iv) any borrowings, direct or indirect,
from financial institutions or other Persons by the Company, whether or not
presently authorized, including any type of loan or payment evidenced by any
type of debt instrument, and any capital stock issued in connection with such
borrowings (other than a borrowing from a Jordan Party), including warrants,
options or other rights to purchase capital stock, provided that such borrowings
are not convertible into or exchangeable for capital stock of the Company; (v)
shares of Common Stock issued pursuant to any Public Offering; (vi) Warrant
Stock; (vii) shares of Preferred Stock issued and paid as dividends on
outstanding Preferred Stock or (viii) shares of capital stock or rights, options
or warrants to purchase capital stock to be issued to employees of the Company
or its Subsidiaries, provided, that no more than two percent (2%) of the
--------
outstanding capital stock on February 7, 1996 shall be available for issuances
after such date.
(c) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Stockholder written notice of its intention,
describing the class and number of shares of Common Stock or Preferred Stock (as
the case may be) it intends to issue as New Securities, the purchase price
therefor (which shall be payable solely in cash) and the terms upon which the
Company proposes to issue the same. Each Stockholder shall have 30 calendar
days from the date such notice is given to determine whether to purchase all or
any portion of
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the Stockholder's pro rata share of such New Securities for the purchase price
and upon the terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
Notwithstanding the provisions of this Section 5.5, no Jaro Investor or Osborn
Investor, other than Lawrence Jaro or William Osborn shall be entitled to
purchase any shares of Common Stock hereunder unless such shares shall
concurrently be made subject to the provisions of Section 8.3, as the case may
be.
Section 5.6 Legally Binding Obligation; Power of Attorney; Personal
-------------------------------------------------------
Rights.
- ------
(a) Subject to Section 5.1(a), making a written offer, giving or failing
to give written notice within the stated period, accepting an offer or making a
decision or election, in each case as provided in Section 5.1 or 5.2, shall
create a legally binding obligation to buy or sell, or an obligation not to buy
or sell, as the case may be, the subject Common Stock as provided in such
Section 5.1 or 5.2.
(b) Subject to Section 5.1(a), each holder of Common Stock hereby appoints
JZCC as an attorney-in-fact for such holder with the power to execute such
documents and take such other actions to provide for the transfer of Common
Stock owned by such holder in accordance with this Article V. JZCC is hereby
authorized (i) to transfer such Common Stock on the books of the Company at the
direction and without regard to the surrender of certificates or instruments
representing such Common Stock held by such holder, and (ii) to place on all
certificates or instruments representing Common Stock a legend reflecting this
authority to transfer such Common Stock.
Section 5.7 Right to Join in Sale.
---------------------
(a) Anything in this Agreement to the contrary notwithstanding, if any
Stockholder or group of Stockholders proposes, in a single transaction or a
series of transactions during any six-month period (other than transfers to a
Permitted Transferee pursuant to Section 4.2 and transactions subject to Section
5.9 and transactions pursuant to Section 8 of the Management Subscription
Agreement) to sell, dispose of or otherwise transfer 5% or more of the
outstanding Common Stock and Warrant Stock or, if less than such amount, in the
case of any Stockholder which owns Common Stock or Warrant Stock on the date
hereof, 50% or more of its initial holdings of such interests in Common Stock or
Warrant Stock, as the case may be (each a "Disposing Stockholder"), such person
or group shall refrain from effecting such transaction unless, prior to the
consummation thereof, each other Stockholder, including a Warrant Stock
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holder, shall have been afforded the opportunity to join in such sale of Common
Stock or Warrant Stock on a pro rata basis, as hereinafter provided.
(b) Prior to consummation of any proposed sale, disposition or transfer of
shares of Common Stock or Warrant Stock described in Section 5.7(a), the
Disposing Stockholder shall cause the person or group that proposes to acquire
such shares (the "Proposed Purchaser") to offer (the "Purchase Offer") in
writing to each other Stockholder to purchase shares of Common Stock or Warrant
Stock owned by such Stockholder (regardless of whether the shares of Common
Stock or Warrant Stock proposed to be sold by the Disposing Stockholders are the
same class as the shares of Common Stock or Warrant Stock owned by such
Stockholders), such that the number of shares of such Common Stock or Warrant
Stock so offered to be purchased from such Stockholder shall be equal to the
product obtained by multiplying the total number of shares of such Common Stock
or Warrant Stock then owned by such Stockholder by a fraction, the numerator of
which is the aggregate number of shares of Common Stock and Warrant Stock
proposed to be purchased by the Proposed Purchaser from all Stockholders
(including the Disposing Stockholder or Stockholders) and the denominator of
which is the aggregate number of shares of Common Stock and Warrant Stock or
shares of Common Stock underlying the Warrants then outstanding. Such purchase
shall be made at the highest price per share and on such other terms and
conditions as the Proposed Purchaser has offered to purchase shares of Common
Stock or Warrant Stock to be sold by the Disposing Stockholder or Stockholders.
Each Stockholder shall have 20 calendar days from the date of receipt of the
Purchase Offer in which to accept such Purchase Offer, and the closing of such
purchase shall occur within 30 calendar days after such acceptance or at such
other time as such Stockholder and the Proposed Purchaser may agree. The number
of shares of Common Stock or Warrants to be sold to the Proposed Purchaser by
the Disposing Stockholder or Stockholders shall be reduced by the aggregate
number of shares of Common Stock or Warrant Stock purchased by the Proposed
Purchaser from the other Stockholders pursuant to the acceptance by them of
Purchase Offers in accordance with the provisions of this Section 5.7(b). In
the event of any sale of Warrant Stock pursuant to this Section 5.7, to the
extent that Warrant Stock consists of unexercised Warrants, such sale may be
made either by sale of all or a part of the relevant Warrant, or by exercise of
the Warrant and sale of the applicable Warrant Stock. In the event that a sale
or other transfer subject to this Section 5.7 is to be made to a Proposed
Purchaser who is not a Stockholder, the Disposing Stockholder shall notify the
Proposed Purchaser that the sale or other transfer is subject to this Section
5.7 and shall ensure that no sale or other transfer is consummated without the
Proposed Purchaser first complying with this Section 5.7. It
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shall be the responsibility of each Disposing Stockholder to determine whether
any transaction to which it is a party is subject to this Section 5.7.
Section 5.8 Retention and Sale of Control.
-----------------------------
Notwithstanding any other provisions of this Agreement to the contrary, but
subject to the last sentence of this Section 5.8, prior to the completion of a
Public Distribution, except with the specific prior written consent of the FNBB
Affiliate and MCIT, the Jordan Investors shall not effect or permit any sale or
other disposition of Common Stock or Warrants, or cause or permit any merger,
consolidation or other transaction involving the Company to take place or enter
into or permit the Company to enter into any agreement, arrangement, commitment
or understanding with respect to the foregoing, if immediately after giving
effect to such sale, disposition, merger, consolidation or other transaction, a
"Change of Control" (as defined in the MCIT Purchase Agreement) would occur.
For purposes of this Section 5.8, the term "Jordan Investors" shall not include
any Permitted Transferee of any such Persons other than Permitted Transferees
referred to in Section 4.2(b) hereof.
Section 5.9 Take Along.
----------
If at any time both (i) Jordan Investors owning interests representing a
majority of the shares of Common Stock or Warrants beneficially owned by the
Jordan Investors and (ii) the FNBB Affiliate (such Jordan Investors and the FNBB
Affiliate being referred to in this Section 5.9 as the "Selling Investors")
shall determine to sell or exchange (in a business combination or otherwise)
two-thirds or more of their aggregate shares of Common Stock or Warrants in a
bona fide arm's-length transaction to a third party in which the same price per
share shall be payable in respect of all shares of any class of the Common Stock
or Warrants, then, upon the written request of such Selling Investors, each
other Jordan Investor, each Management Investor, each Jaro Investor and each
Osborn Investor shall be obligated to, and shall, if so requested by such third
party, (a) sell, transfer and deliver or cause to be sold, transferred and
delivered to such third party, all shares of Common Stock or Warrants owned by
them at the same price per share (irrespective of class) and on the same terms
as are applicable to the Selling Investors, and (b) if stockholder approval of
the transaction is required, vote his, her or its shares of Voting Stock in
favor thereof. The provisions of Sections 5.1 through 5.4, inclusive, and
Section 5.7 shall not apply to any transactions to which this Section 5.9
applies.
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ARTICLE VI
Registration Rights
-------------------
Section 6.1 Demand Registrations.
--------------------
(a) At any time and from time to time after the earlier of September
1, 1998 or the effectuation of an Initial Public Offering by the Company,
holders of a majority of the shares of Stock held by the Jordan Investors (other
than MCIT) and the FNBB Affiliate may request in writing that the Company effect
the registration under the Securities Act of all or part of such holders'
Registrable Securities, specifying in the request the number and type of
Registrable Securities to be registered by each such holder and the intended
method of disposition thereof (such notice is hereinafter referred to as a
"Holder Request"). Upon receipt of such Holder Request, the Company will
promptly give written notice of such requested registration to all other holders
of Registrable Securities, which other holders shall have the right to include
the Registrable Securities held by them in such registration and thereupon the
Company will, as expeditiously as possible, use its best efforts to effect the
registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by such requesting Stockholders; and
(ii) all other Registrable Securities which the Company has been
requested to register by any other holder thereof by written request given
to the Company within 30 calendar days after the giving of such written
notice by the Company (which request shall specify the intended method of
disposition of such Registrable Securities), all to the extent necessary to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered;
provided, however, that the Company shall not be obligated to file a
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registration statement relating to any Holder Request under this Section
6.1(a):
(x) unless the Company shall have received requests for such
registration with respect to at least 15% of the shares of Common
Stock then outstanding (including all Warrant Stock) with respect to
the first Holder Request, and unless the Company shall have received
requests for such registration with respect to 10% of the shares of
Common Stock then outstanding with respect to each Holder Request
under this Section 6 thereafter;
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(y) other than a registration statement on Form S-3 or a similar
short form registration statement, within a period of 12 months after
the effective date of any other registration statement relating to any
registration request under this Section 6.1(a) that was not effected
on Form S-3 (or any similar short form); or
(z) within a nine-month period immediately following the
effective date of a registration previously effected by the Company
pursuant to this Section 6.1;
provided, further, however, that the Company may postpone for not more than
-------- ------- -------
90 calendar days, on one occasion only with respect to each request for
registration made under this Section 6.1(a), the filing or effectiveness of
a registration statement under this Section 6.1(a) if the Company and a
majority of the Jordan Investors agree that such registration might
reasonably be expected to have an adverse effect on any proposal or plan by
the Company to engage in any acquisition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer or
similar transaction; provided, that in such event, the holders of
--------
Registrable Securities initiating the request for such registration will be
entitled to withdraw such request, and if such request is withdrawn such
registration will not count as one of the permitted registrations under
this Section 6.1. In any event, the Company will pay all Registration
Expenses in connection with any registration initiated under this Section
6.1.
(b) Intentionally Omitted.
(c) Notwithstanding the foregoing provisions of Section 6.1 (a) the
Company shall not be obligated to effect more than one registration pursuant to
this Section 6.1 at the request of a majority of the Jordan Investors, in any
twelve month period, in each case through a firm commitment underwriting through
a nationally recognized underwriter (an "Underwritten Offering").
(d) If the Company proposes to effect a registration requested pursuant to
this Section 6.1 by the filing of a registration statement on Form S-3 (or any
similar short-form registration statement), the Company will comply with any
request by the Managing Underwriter (as defined in Subsection (g), below) to
effect such registration on another permitted form if such Managing Underwriter
advises the Company that, in its opinion, the use of another form of
registration statement is of material importance of such proposed offering.
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(e) A registration requested pursuant to Section 6.1.(a) will not be deemed
to have been effected unless it has become effective; provided, that if after it
--------
has become effective, the offering of Registrable Securities pursuant to such
registration is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court, such
registration will be deemed not to have been effected.
(f) The Company will pay all Registration Expenses in connection with each
of the registrations of Registrable Securities effected by it pursuant to this
Section 6.1.
(g) The Company shall have the right, with the approval of the Jordan
Investors to select the investment banker (or investment bankers) that shall
manage the offering (collectively, the "Managing Underwriter").
(h) In connection with any offering pursuant to this Section 6.1, the only
shares that may be included in such offering are (i) Registrable Securities, and
(ii) shares of authorized but unissued Common Stock that the Company elects to
include in such offering ("Company Securities").
(i) If in connection with any Underwritten Offering pursuant to this
Section 6.1. the Managing Underwriter shall advise the Company that, in its
judgment, the number of shares proposed to be included in such offering should
be limited due to market conditions, then the Company will promptly so advise
each holder of Registrable Securities that has requested registration, and
shares shall be excluded from such offering in the following order until such
limitation has been met:
(A) (1) Company Securities, if any, shall be excluded until all of the
Company Securities shall have been so excluded, and, thereafter,
(2) until the Jordan Investors shall have included in such offering
the lesser of (i) 25% of the aggregate amount of Securities held
by the Jordan Investors as of February 7, 1996 (such amount as
adjusted for stock splits, recapitalizations and similar events
and reduced by the amount of Securities previously sold by the
Jordan Investors pursuant to Section 6.1 or 6.2 ) and (ii) the
total amount of Registrable Securities requested by the Jordan
Investors to be included in such offering, the Registrable
Securities requested to be included in such offering pursuant to
Section 6.1(a) by Persons shall be excluded pro rata, based on
the respective number of Registrable
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Securities as to which registration has been so requested by such
Persons, and, thereafter,
(3) the Registrable Securities requested to be included in such
offering pursuant to Section 6.1(a) by Persons other than the
FNBB Affiliate shall be excluded pro rata, based on the
respective number of Registrable Securities as to which
registration has been so requested by such Persons.
(j) If any shares of Common Stock requested to be included in a sale
pursuant to this Section 6.1. shall not be outstanding but shall be issuable
upon conversion of shares of Non-Voting Common Stock which are outstanding, then
the FNBB Affiliate and the Company shall take all actions necessary in order to
convert such shares of Non-Voting Common Stock into shares of Common Stock in
order to effect such sale.
Section 6.2 Piggyback Registrations.
-----------------------
(a) If the Company at any time proposes to register any of its equity
securities under the Securities Act (other than a registration on Form S-4 or S-
8 or any successor or similar forms thereto and other than pursuant to a
registration under Section 6.1.), whether or not for sale for its own account,
on a form and in a manner that would permit registration of Registrable
Securities for sale to the public under the Securities Act, it will give written
notice to all the holders of Registrable Securities promptly of its intention to
do so, describing such securities and specifying the form and manner and the
other relevant facts involved in such proposed registration (including, without
limitation, (x) whether or not such registration will be in connection with an
underwritten offering of Registrable Securities and, if so, the identity of the
Managing Underwriter and whether such offering will be pursuant to a "best
efforts" or "firm commitment" underwriting and (y) the price (net of any
underwriting commissions, discounts and the like) at which the Registrable
Securities are reasonably expected to be sold). Upon the written request of any
such holder delivered to the Company within 30 calendar days after the receipt
of any such notice (which request shall specify the Registrable Securities
intended to be disposed of by such holder and the intended method of disposition
thereof), the Company will use best efforts to effect the registration under the
Securities Act of all of the Registrable Securities that the Company has been so
requested to register; provided, however, that:
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(i) If, at any time after giving such written notice of its intention
to register any securities and prior to the effective date of the
registration statement filed in
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connection with such registration, the Company shall determine for any
reason not to register such securities, the Company may, at its election,
give written notice of such determination to each holder of Registrable
Securities who made a request as hereinabove provided and thereupon the
Company shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection therewith),
without prejudice, however, to the rights, of the Jordan Investors and the
FNBB Affiliate to request that such registration be effected as a
registration under Section 6.1.
(ii) If such registration involves an Underwritten Offering, all
holders of Registrable Securities requesting to be included in the
Company's registration must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and conditions as
apply to the Company.
No registration effected under this Section 6.2 shall relieve the Company of its
obligation to effect registration upon request under Section 6.1.
(b) The Company shall not be obligated to effect any registration of
Registrable Securities under this Section 6.2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange offers,
dividend reinvestment plans of stock option or other employee benefit plans.
(c) The Registration Expenses incurred in connection with each registration
of Registrable Securities requested pursuant to this Section 6.2. shall be paid
by the Company.
(d) If in connection with any Underwritten Offering pursuant to this
Section 6.2. the Managing Underwriter shall advise the Company that, in its
judgment, the number of shares proposed to be included in such offering should
be limited due to market conditions, then the Company shall exclude shares from
such offering in the following order until such limitation has been met:
(1) until the Jordan Investors shall have included in such offering the
lesser of (i) 25% of the aggregate amount of Securities held by the
Jordan Investors as of February 7, 1996 (such amount as adjusted for
stock splits, recapitalizations and similar events and reduced by the
amount of Securities previously sold by the Jordan Investors pursuant
to Section 6.1 or 6.2 ) and (ii) the total amount of Registrable
Securities
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requested by the Jordan Investors to be included in such offering, the
Registrable Securities requested to be included in such offering shall
be excluded pro rata, based on the respective number of Registrable
Securities as to which registration has been so requested by such
Persons, and, thereafter
(2) the Registrable Securities requested to be included in such offering
by Persons other than the FNBB Affiliate shall be excluded pro rata,
based on the respective number of Registrable Securities as to which
registration has been so requested by such Persons.
(e) In connection with any Underwritten Offering with respect to which
holders of Registrable Securities shall have requested registration pursuant to
this Section 6.2, the Company shall have the right to select the Managing
Underwriter with respect to the offering; provided, that such Managing
--------
Underwriter is reasonably acceptable to the holders of a majority of the
Registrable Securities requested to be sold in such Underwritten Offering.
(f) If any shares of Common Stock requested to be included in a sale
pursuant to this Section 6.2. shall not be outstanding but shall be issuable
upon conversion of shares of Non-Voting Common Stock which are outstanding, then
the FNBB Affiliate and the Company shall take all actions necessary in order to
convert such shares of Non-Voting Common Stock into shares of Common Stock in
order to effect such sale.
Section 6.3 Registration Procedures.
-----------------------
(a) If and whenever the Company is required to use its best efforts to
effect or cause the registration of any Registrable Securities under the
Securities Act as provided in Section 6.1 or 6.2, the Company will, as
expeditiously as possible:
(i) Prepare and, in any event within 90 calendar days after the end
of the period within which requests for registration may be given to the
Company, file with the Commission a registration statement with respect to
such Registrable Securities and use its best efforts to cause such
registration statements to become and remain effective; provided, that in
--------
the case of a registration provided for in Section 6.1. or 6.2, before
filing a registration statement or prospectus or any amendments or
supplements thereof, the Company will furnish to the counsel selected by
the Jordan Investors copies of all such documents proposed to be filed,
which documents will be subject to the review of such counsel; and,
provided, further, that the Company may discontinue any registration of its
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securities that is being
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effected pursuant to Section 6.2 at any time prior to the effective date of
the registration statement relating thereto.
(ii) Prepare and file with the Commission such amendments (including
post-effective amendments) and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep
such registration statement effective for a period as may be requested by
the Jordan Investors not exceeding nine months and to comply with the
provisions of the Securities Act with respect to the disposition of all
Common Stock covered by such registration statement during such period in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement.
(iii) Furnish to each holder of Registrable Securities covered by the
registration statement and to each underwriter, if any, of such Registrable
Securities, such number of copies of a prospectus and preliminary
prospectus for delivery in conformity with the requirements of the
Securities Act, and such other documents, as such Person may reasonably
request, in order to facilitate the public sale or other disposition of the
Registrable Securities.
(iv) Use its best efforts to register or qualify such Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each seller shall
reasonably request, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition of the Registrable Securities owned by such seller, in such
jurisdictions, except that the Company shall not for any such purpose be
required (A) to qualify to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this Section 6.3(a)(iv), it
is not then so qualified, or (B) to subject itself to taxation in any such
jurisdiction, or (C) to take any action which would subject it to general
or unlimited service of process in any such jurisdiction where it is then
so subject.
(v) Use its best efforts to cause such Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof to consummate the disposition of such
Registrable Securities.
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(vi) Immediately notify each seller of Registrable Securities covered
by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act within the
appropriate period mentioned in Section 6.3(a)(ii), if the Company becomes
aware that the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing, and, at the request of any such seller, deliver a reasonable
number of copies of an amended or supplemental prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(vii) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and make generally available to its
security holders, in each case as soon as practicable, but not later than
45 calendar days after the close of the period covered thereby (90 calendar
days in case the period covered corresponds to a fiscal year of the
Company), an earnings statement of the Company which will satisfy the
provisions of Section 11(a) of the Securities Act.
(viii) Use its best efforts in cooperation with the underwriters to
list such Registrable Securities on each securities exchange as they may
reasonably designate.
(ix) In the event the offering is an Underwritten Offering, use its
best efforts to obtain a "cold comfort" letter from the independent public
accountants for the Company in customary form and covering such matters of
the type customarily covered by such letters as (i) the Jordan Investors or
(ii) the sellers of a majority of any class of such Registrable Securities
(excluding shares being sold by the Jordan Investors) reasonably request.
(x) Execute and deliver all instruments and documents (including in
an Underwritten Offering an underwriting agreement in customary form) and
take such other actions and obtain such certificates and opinions as (i)
the Jordan Investors or (ii) sellers of a majority of any class of such
Registrable Securities (excluding shares being sold by the Jordan
Investors) reasonably request in order to effect an underwritten public
offering of such Registrable Securities.
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(b) Each holder of Registrable Securities will, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
6.3(a)(vi), forthwith discontinue disposition of the Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until such holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 6.3(a)(vi).
(c) If a registration pursuant to Section 6.1 or 6.2 involves an
Underwritten Offering, each holder of Registrable Securities agrees, whether or
not such holder's Registrable Securities are included in such registration, not
to effect any public sale or distribution, including any sale pursuant to Rule
144 under the Securities Act, of any Registrable Securities, or of any security
convertible into or exchangeable or exercisable for any Registrable Securities
(other than as part of such Underwritten Offering), without the consent of the
Managing Underwriter, during a period commencing seven calendar days before and
ending 90 calendar days (or such lesser number as the Managing Underwriter shall
designate) after the effective date of such registration.
(d) If a registration pursuant to Section 6.1 or 6.2 involves an
Underwritten Offering, the Company agrees, if so required by the Managing
Underwriter, not to effect any public sale or distribution of any of its equity
or debt securities, as the case may be, or securities convertible into or
exchangeable or exercisable for any of such equity or debt securities, as the
case may be, during a period commencing seven calendar days before and ending 90
calendar days after the effective date of such registration, except for such
Underwritten Offering or except in connection with a stock option plan, stock
purchase plan, savings or similar plan, or an acquisition, merger or exchange
offer.
(e) If a registration pursuant to Section 6.1 or 6.2 involves an
Underwritten Offering, any holder of Registrable Securities requesting to be
included in such registration may elect, in writing, prior to the effective date
of the registration statement filed in connection with such registration, not to
register such securities in connection with such registration, unless such
holder has agreed with the Company or the Managing Underwriter to limit its
rights under this Section 6.3.
(f) It is understood that in any Underwritten Offering in addition to any
shares of Common Stock (the "initial shares") the underwriters have committed to
purchase, the underwriting agreement may grant the underwriters an option to
purchase up to a number of additional shares of authorized but unissued shares
of Common Stock (the "option shares") equal to 15% of the initial
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shares (or such other maximum amount as the NASD may then permit), solely to
cover over-allotments. Shares of Common Stock proposed to be sold by the
Company and the other sellers shall be allocated between initial shares and
option securities as agreed or, in the absence of agreement, pursuant to Section
6.1(i) or 6.2(d), as the case may be. The number of initial shares and option
shares to be sold by requesting holders shall be allocated pro rata among all
such holders on the basis of the relative number of shares of Registrable
Securities each such holder has requested to be included in such registration.
(g) Notwithstanding anything in this Article VI to the contrary, in lieu of
converting any share of Non-Voting Common Stock into Common Stock prior to or
simultaneously with the filing or the effectiveness of any registration
statement filed pursuant to this Article VI, the holder of such Non-Voting
Common Stock may sell such Non-Voting Common Stock to the underwriter of the
offering being registered upon the undertaking of such underwriter to convert
such Non-Voting Common Stock before making any distribution pursuant to such
registration statement and to include the Common Stock issued upon such
conversion among the securities being offered pursuant to such registration
statement.
Section 6.4 Indemnification.
---------------
(a) In the event of any registration of any securities of the Company under
the Securities Act pursuant to Section 6.1 or 6.2, the Company will, and it
hereby agrees to, indemnify and hold harmless, to the extent permitted by law,
each seller of any Registrable Securities covered by such registration
statement, its directors and officers or general and limited partners, each
other Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such seller or any such
underwriter within the meaning of the Securities Act, as follows:
(i) against any and all loss, liability, claim, damage or expense
whatsoever arising out of or based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration statement
(or any amendment or supplement thereto), including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading, or arising out of an untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein not misleading;
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(ii) against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement of any
litigation, or investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of the
Company; and
(iii) against any and all expense reasonably incurred by them in
connection with investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) above;
provided, however, that this indemnity does not apply to any loss, liability,
- -------- -------
claim, damage or expense to the extent arising out of an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any such seller or underwriter expressly for use in the preparation of
any registration statement (or any amendment thereto) or any preliminary
prospectus or prospectus (or any amendment or supplement thereto); and provided,
--------
further, that the Company will not be liable to any Person who participates as
- -------
an underwriter in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, under the indemnity agreement in this Section 6.4(a) with
respect to any preliminary prospectus or final prospectus or final prospectus as
amended or supplemented, as the case may be, to the extent that any such loss,
claim, damage or liability of such underwriter or controlling Person results
from the fact that such underwriter sold Registrable Securities to a Person to
whom there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the final prospectus or of the final prospectus as then
amended or supplemented, whichever is most recent, if the Company has previously
furnished copies thereof to such underwriter. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such seller or any such director, officer, general or limited partner,
investment advisor or agent, underwriter or controlling Person and shall survive
the transfer of such securities by such seller.
(b) The Company may require, as a condition to including any Registrable
Securities in any registration statement filed in
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accordance with Section 6.1 or 6.2, that the Company shall have received an
undertaking reasonably satisfactory to it from the prospective seller of such
Registrable Securities or any underwriter, to indemnify and hold harmless (in
the same manner and to the same extent as set forth in Section 6.4(a)) the
Company with respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary, final or
summary prospectus contained therein, or any amendment or supplement, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such seller or underwriter specifically stating that
it is for use in the preparation of such registration statement, preliminary,
final or summary prospectus or amendment or supplement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling Person and
shall survive the transfer of such securities by such seller. In that event,
the obligations of the Company and such sellers pursuant to this Section 6.4 are
to be several and not joint; provided, however, that with respect to each claim
-------- -------
pursuant to this Section, the Company shall be liable for the full amount of
such claim, and each such seller's liability under this Section 6.4 shall be
limited to an amount equal to the net proceeds (after deducting the underwriting
discount and expenses) received by such seller from the sale of Registrable
Securities held by such seller pursuant to this Agreement.
(c) Promptly after receipt by an indemnified party hereunder of written
notice of the commencement of any action or proceeding involving a claim
referred to in this Section 6.4, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to such indemnifying party of the commencement of such action; provided,
--------
however, that the failure of any indemnified party to give notice as provided
- -------
herein shall not relieve the indemnifying party of its obligations under this
Section 6.4, except to the extent (not including any such notice of an
underwriter) that the indemnifying party is actually prejudiced by such failure
to give notice. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim (in which case the indemnifying party shall not be liable for the
fees and expenses of more than one firm of counsel for a majority of the sellers
of Registrable Securities and one firm of counsel selected by the Jordan
Investors, or more than one firm of counsel for the underwriters in connection
with any one action or separate but similar or related actions), the
indemnifying party will be entitled to participate in and to assume the defense
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thereof, jointly with any other indemnifying party similar notified, to the
extent that it may wish with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party for any legal or other expenses subsequently
incurred by such indemnifying party in connection with the defense thereof.
(d) The Company and each seller of Registrable Securities shall provide for
the foregoing indemnity (with appropriate modifications) in any underwriting
agreement with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority.
Section 6.5 Contribution. In order to provide for just and equitable
------------
contribution in circumstances under which the indemnity contemplated by Section
6.4 is for any reason not available, the parties required to indemnify by the
terms thereof shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Company, any seller of Registrable Securities and one or more of
the underwriters, except to the extent that contribution is not permitted under
Section 11(f) of the Securities Act. In determining the amounts which the
respective parties shall contribute, there shall be considered the relative
benefits received by each party from the offering of the Registrable Securities
(taking into account the portion of the proceeds of the offering realized by
each), the parties' relative knowledge and access to information concerning the
matter with respect to which the claim was asserted, the opportunity to correct
and prevent any statement or omission and any other equitable considerations
appropriate under the circumstances. The Company and each Person selling
securities agree with each other that no seller of Registrable Securities shall
be required to contribute any amount in excess of the amount such seller would
have been required to pay to an indemnified party if the indemnity under Section
6.4(b) were available. The Company and each such seller agree with each other
and the underwriters of the Registrable Securities, if requested by such
underwriters, that it would not be equitable if the amount of such contribution
were determined by pro rata or per capita allocation (even if the underwriters
were treated as one entity for such purpose) or for the underwriters' portion of
such contribution to exceed the percentage that the underwriting discount bears
to the initial public offering price of the Registrable Securities. For purposes
of this Section 6.5, each Person, if any, who controls an underwriter within the
meaning of Section 15 of the Securities Act shall have the same rights to
contribution as such underwriter, and each director and each
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officer of the Company who signed the registration statement, and each Person,
if any, who controls the Company or a seller of Registrable Securities within
the meaning of Section 15 of the Securities Act shall have the same rights to
contribution as the Company or a seller of Registrable Securities, as the case
may be.
Section 6.6 Rule 144. If the Company shall have filed a registration
--------
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company covenants that it will file the reports required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations adopted by
the Commission thereunder (or, if the Company is not required to file such
reports, it will, upon the request of any holder of Registrable Securities, make
publicly available other information), and it will take such further action as
any holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell shares of Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (i) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
ARTICLE VII
Termination
-----------
Section 7.1 Certain Terminations.
--------------------
(a) The provisions of Articles III, IV and V shall terminate on the date on
which any of the following events first occurs: (i) a Public Distribution, (ii)
a merger or consolidation of the Company with or into another Person that is not
an Affiliate of the Company, as a result of which the Stockholders own less than
65% of the outstanding shares of Voting Stock of the surviving or resulting
corporation, (iii) the sale or other disposition in compliance with Section 2.1
of all or substantially all the assets of the Company to a Person that is not an
Affiliate of the Company, or (iv) ten years from the date of this Agreement.
(b) The provisions of Section 8.3 shall terminate ten years from the date
of this Agreement.
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(c) Notwithstanding the foregoing, this Agreement shall in any event
terminate with respect to any Stockholder when such Stockholder no longer owns
any Securities or Warrants.
ARTICLE VIII
Miscellaneous
-------------
Section 8.1 Other Covenants.
---------------
(a) For so long as any Stockholder holds in the aggregate 5% or more of the
Common Stock then outstanding, such Stockholder may upon reasonable prior notice
visit and inspect the properties of the Company and each Subsidiary of the
Company and examine and copy (at their own expense) their books of record and
account, and discuss their affairs, finances and accounts with their officers
and their current and prior independent public accountants all at such
reasonable times as such Stockholder or Stockholders may desire. All materials
and information obtained pursuant to this Section 8.1(a) shall be kept
confidential by the Stockholders and shall not be disclosed to any third party
(other than to their Affiliates) unless expressly agreed to by the Company or as
required pursuant to applicable law, in connection with judicial or arbitral
proceedings or upon request of any governmental or regulatory authority.
(b) Notwithstanding anything to the contrary contained in this Agreement,
the FNBB Affiliate may, at any time and from time to time, exchange any number
of shares of Non-Voting Common Stock held by them for an equal number of shares
of Common Stock; provided, however, that immediately after giving effect to any
-------- -------
such exchange, the aggregate number of shares of Common Stock held by the FNBB
Affiliate shall not exceed 4.99% of the aggregate number of shares of Common
Stock then outstanding. Such exchange shall be effected in each case by the
delivery by the FNBB Affiliate of certificates representing such shares, duly
endorsed or accompanied by duly executed stock powers, to the Company at its
principal office, together with written notice stating the number of such shares
to be so exchanged, whereupon the Company shall issue to the FNBB Affiliate new
certificates representing a number of shares of Common Stock equal to the number
of shares of Non-Voting Common Stock so exchanged, which shares of Common Stock
when so issued shall be duly and validly issued, fully paid and non-assessable.
The Company shall at all times reserve a sufficient number of shares of its
authorized but unissued Common Stock to permit compliance with the provisions of
this Section 8.1(b). Any shares of Non-Voting Common Stock acquired by the
Company in exchange for shares of Common Stock pursuant to this Section 8.1(b)
shall be cancelled and retired.
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<PAGE>
Section 8.2 Financial Information; List of Stockholders.
-------------------------------------------
(a) The Company agrees to furnish to each Stockholder, for so long as such
Stockholder holds any Common Stock, Preferred Stock or Warrant as soon as
available the following financial statements and other information:
(i) copies of the consolidated and consolidating balance sheets of
the Company and its Subsidiaries as of the end of the first, second and
third quarterly accounting periods, and of the related consolidated and
consolidating statements of income and retained earnings and cash flows for
such accounting period and for the portion of the fiscal year ended with
the last day of such accounting period, all in reasonable detail and
stating in comparative form the consolidated and consolidating figures as
of the end of and for the corresponding date and period in the previous
fiscal year, all certified by its chief financial officer as complete and
correct and as presenting fairly the information contained therein in
accordance with the same accounting practices used in preparing the audited
financial statements for the fiscal year most recently ended required to be
delivered by paragraph (ii) below, subject to recurring non-material
changes resulting from year-end audit adjustments, absence of the notes
required by GAAP and year end accruals; and
(ii) copies of the consolidated and consolidating balance sheets of
the Company and its Subsidiaries as of the end of each fiscal year, and of
the related consolidated and consolidating statements of income and
retained earnings and cash flows for such fiscal year, all in reasonable
detail and stating in comparative form the respective consolidated and
consolidating figures as of the end of and for the previous fiscal year,
and, in the case of such consolidated statements, accompanied by a report
thereon of independent certified public accountants of recognized national
standing selected by the Company and acceptable to Stockholders (the
"Accountants"), which report shall be unqualified as to going concern and
scope of audit and shall state that such consolidated financial statements
present fairly the consolidated financial position of the Company and its
Subsidiaries as at the dates indicated and their consolidated income and
retained earnings and cash flows for the periods indicated in conformity
with GAAP applied on a basis consistent with prior years (except for such
changes with which the Accountants shall concur) and that the examination
by such Accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted auditing
standards; and
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<PAGE>
(iii) copies of any proxy statements, financial statements and
reports as the Company or its Subsidiaries shall send or make available
generally to any of their security holders, and copies of all regular and
periodic reports and of all registration statements (other than on Form S-8
or Form 701 or a similar form) which the Company or its Subsidiaries may
file with the Securities and Exchange Commission or with any securities
exchange.
(b) The Company agrees to furnish to any Stockholder holding in the
aggregate 5% or more of the Common Stock then outstanding, any other
information, including without limitation financial statements and computations
relating to the performance of this Agreement and/or the affairs of the Company
or its Subsidiaries that any such Stockholder may from time to time reasonably
request and which is capable of being obtained, produced or generated without
undue effort or expense by the Company or such Subsidiary or of which any of
them has knowledge (including, without limitation, a brief statement containing
a management discussion and analysis of the financial condition of the Company
and its Subsidiaries and describing the results of operations and significant
events relating to the Company and Subsidiaries for any fiscal period; copies of
all minutes of meetings of Board of Directors; copies of all information
furnished to stockholders at or in connection with all meetings of stockholders
of the Company, a copy of all information furnished to members of the Board of
Directors of the Company, and a copy of a list of shareholders of the Company).
(c) Not less than 30 calendar days after the end of each fiscal year of the
Company, and from time to time upon the request of any Jordan Investor, the
Company shall provide to such Jordan Investor a list of all stockholders of the
Company indicating the respective numbers of shares owned of Common Stock or
Preferred Stock, as the case may be, by them.
(d) The Company agrees to provide all information and make any filings
reasonably requested by any Stockholder that are required by Section 1202 of the
Internal Revenue Code of 1986, as amended, so long as such information and
filings do not have an adverse effect in respect of the Company's business,
operations, results, tax positions, conditions or prospects.
Section 8.3 Covenants of the Jaro and Osborn Investors.
------------------------------------------
(a) Each of the Osborn Investors hereby appoints William Osborn as their
proxy pursuant to the Osborn Proxy Agreement, with full power of substitution,
to represent and vote, in his sole discretion, all Securities which they would
be entitled to vote at any annual or special meeting of the Company's
stockholders and to execute and deliver, in his sole discretion,
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<PAGE>
any written consent by the holders of the Company's Securities in which they
would be entitled to join. Each of the Osborn Investors acknowledges and agrees
that such proxy is coupled with an interest and cannot be terminated or revoked
until the termination of this Agreement. Any transfer of Securities by the
foregoing persons to a Permitted Transferee will be subject to this proxy and
conditioned upon the Company's receipt of a proxy, in form and substance
identical to this proxy, from such Permitted Transferee. In the event that
William Osborn is no longer employed by Enterprises, the Osborn Investors hereby
agree that this proxy may be exercised by a majority of the Management
Directors. Each of the Osborn Investors agrees to execute and deliver to the
Company any instruments or documents which they may reasonably request in order
to effectuate this proxy.
(b) Each of the Jaro Investors hereby appoints Lawrence Jaro as their
proxy pursuant to the Jaro Proxy Agreement, with full power of substitution, to
represent and vote, in his sole discretion, all Securities which they would be
entitled to vote at any annual or special meeting of the Company's stockholders
and to execute and deliver, in his sole discretion, any written consent by the
holders of the Company's Securities in which they would be entitled to join.
Each of the Jaro Investors acknowledges and agrees that such proxy is coupled
with an interest and cannot be terminated or revoked until the termination of
this Agreement. Any transfer of Securities by the foregoing persons to a
Permitted Transferee will be subject to this proxy and conditioned upon the
Company's receipt of a proxy, in form and substance identical to this proxy,
from such Permitted Transferee. In the event that Lawrence Jaro is no longer
employed by Enterprises, the Jaro Investors hereby agree that this proxy may be
exercised by a majority of the Management Directors. Each of the Jaro Investors
agrees to execute and deliver to the Company any instruments or documents which
they may reasonably request in order to effectuate this proxy.
Section 8.4 RIGHT OF SETOFF. Intentionally omitted.
---------------
Section 8.5 Successors and Assigns. Except as otherwise provided herein,
----------------------
all of the terms and provisions of this Agreement shall be binding upon, shall
inure to the benefit of and shall be enforceable by the respective successors
and assigns of the parties hereto. No Stockholder may assign any of its rights
hereunder to any Person other than a transferee that has complied with the
requirements of Sections 4.2 and 5.3 (if applicable) as provided therein in all
respects. The Company may not assign any of its rights hereunder to any Person
other than an Affiliate of the Company. If any transferee of any Stockholder
shall acquire any Securities or Warrants, in any manner, whether by operation of
law or otherwise, such shares shall be held subject to all of the terms of this
Agreement, and
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by taking and holding such shares such Person shall be entitled to receive the
benefits of and be conclusively deemed to have agreed to be bound by and to
comply with all of the terms and provisions of this Agreement.
Section 8.6 Amendment and Modification; Waiver of Compliance; Conflicts.
-----------------------------------------------------------
(a) This Agreement may be amended only by a written instrument duly
executed by (i) the holders of a majority of the shares of capital stock held by
the Jordan Investors, (ii) to the extent required under Section 11.8 under the
Credit Agreement, or if such proposed amendment would materially adversely
affect the rights of the FNBB Affiliate under this Agreement, the FNBB
Affiliate, and (iii) to the extent that such proposed amendment would materially
adversely affect the rights of the Management Investors under this Agreement as
a group, the holders of a majority of the shares of Voting Stock owned by the
Management Investors or which may be voted, pursuant to the provisions of
Section 8.3, by either Lawrence Jaro, William Osborn or a majority of the
Management Directors. In the event of the amendment or modification of this
Agreement in accordance with its terms, the Stockholders shall cause the Board
of Directors of the Company to meet within 30 calendar days following such
amendment or modification or as soon thereafter as is practicable for the
purpose of adopting any amendment to the Certificate of Incorporation and By-
Laws of the Company that may be required as a result of such amendment or
modification to this Agreement, and, if required, proposing such amendments to
the Stockholders entitled to vote thereon, and the Stockholders agree to vote in
favor of such amendments.
(b) Except as otherwise provided in this Agreement, any failure of any of
the parties to comply with any obligation, covenant, agreement or condition
herein may be waived by the party entitled to the benefits thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
(c) In the event of any conflict between the provisions of this Agreement
and the provisions of any other agreement, the provisions of this Agreement
shall govern and prevail.
Section 8.7 Notices. Any notice, request, claim, demand, document and
-------
other communication hereunder to any party shall be effective upon receipt (or
refusal of receipt) and shall be in writing and delivered personally or sent by
telex or telecopy (with such telex or telecopy confirmed promptly in writing
sent
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<PAGE>
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 (answer back received) or
telecopy, or five business days after being so mailed.
Section 8.8 Entire Agreement. This Agreement and the other writings
----------------
referred to herein or delivered pursuant hereto which form a part hereof contain
the entire agreement among the parties hereto with respect to the subject
transactions contemplated hereby and supersede all prior oral and written
agreements and memoranda and undertakings among the parties hereto with regard
to this subject matter. The Company represents to the Stockholders that the
rights granted to the holders hereunder do not in any way conflict with and are
not inconsistent with the rights granted or obligations accepted under any other
agreement (including the Certificate of Incorporation) to which the Company is a
party. Neither the Company nor any Subsidiary of the Company will hereafter
enter into any agreement with respect to its equity or debt securities which is
inconsistent with the rights granted to the holders of Registrable Securities or
any Stockholder under this Agreement without obtaining the prior written consent
of the Stockholder or holder of Registrable Securities whose rights would be
thereby affected.
Section 8.9 Injunctive Relief. The Stockholders acknowledge and agree
-----------------
that a violation of any of the terms of this Agreement will cause the
Stockholders irreparable injury for which an adequate remedy at law is not
available. Therefore, the Stockholders agree that the Company and each
Stockholder shall be entitled to an injunction, restraining order or other
equitable relief from any court of competent jurisdiction, restraining any
Stockholder from committing any violations of the provisions of this Agreement.
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Section 8.10 Inspection. For so long as this Agreement shall be in
----------
effect, this Agreement shall be made available for inspection by any Stockholder
at the principal executive offices of the Company.
Section 8.11 Headings. The section and paragraph headings contained in
--------
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 8.12 Recapitalizations, Exchanges, Etc., Affecting the Common
--------------------------------------------------------
Stock; New Issuances.
- --------------------
(a) The provisions of this Agreement shall apply, to the full extent set
forth herein with respect to the Common Stock and the Preferred Stock and to any
and all equity or debt securities of the Company or any successor or assign of
the Company (whether by merger, consolidation, sale of assets, or otherwise)
which may be issued in respect of, in exchange for, or in substitution of, such
equity or debt securities and shall be appropriately adjusted for any stock
dividends, splits, reverse splits, combinations, reclassifications,
recapitalizations, reorganizations and the like occurring after the date hereof.
(b) In the event that the Company enters into an agreement providing for
the merger or consolidation of the Company with another entity or for an
exchange of the equity securities of such entities pursuant to which
Stockholders of the Company would be entitled to receive equity securities of
the surviving or any other corporation, the Company shall cause such agreement
to provide that any holder of shares of Non-Voting Common Stock shall be
entitled to receive non-voting equity securities of such surviving or other
corporation convertible into voting equity securities in the same manner as the
Non-Voting Common Stock.
Section 8.13 Ratification of Prior Acts of Board of Directors of Company;
------------------------------------------------------------
Right to Negotiate. Each of the Stockholders hereby adopts, ratifies and
- ------------------
confirms all of the actions heretofore taken by the Board of Directors in all
respects, including, without limitation, in respect of the Offerings and the
transactions contemplated thereby. Nothing in this Agreement (apart from
Article V hereof) shall be deemed to restrict or prohibit the Company from
purchasing Stock from any Stockholder at any time upon such terms and conditions
and at such price as may be mutually agreed upon between the Company and such
Stockholder, whether or not at the time of such purchase circumstances exist
which specifically grant the Company the right to purchase, or such Stockholder
the right to sell, Stock pursuant to the terms of this Agreement.
-44-
<PAGE>
Section 8.14 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED,
----------
APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. EACH
OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF
THIS AGREEMENT BY A STOCKHOLDER, THE COMPANY WOULD BE IRREPARABLY HARMED AND
COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY OTHER
REMEDY TO WHICH IT MAY BE ENTITLED AT LAW OR IN EQUITY, THE COMPANY SHALL BE
ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. EACH
PARTY AGREES THAT JURISDICTION AND VENUE WILL BE PROPER IN CHICAGO, ILLINOIS AND
WAIVES ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. EACH PARTY WAIVES
PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING
AN ACTION OR PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL
JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE PARTY AT THE
ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE PROVIDED BY THE LAWS OF THE
STATE OF ILLINOIS OR THE UNITED STATES. THE CHOICE OF FORUM SET FORTH IN THIS
SECTION 8.14 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE SAME IN ANY OTHER APPROPRIATE JURISDICTION.
Section 8.15 ARBITRATION. SUBJECT TO THE RIGHT OF THE COMPANY TO PURSUE
-----------
INJUNCTIVE RELIEF PURSUANT TO SECTION 8.15, ANY DISPUTE BETWEEN OR AMONG THE
PARTIES TO THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS
NEGOTIATION, EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR
DEALING OR ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT
LIMITATION ANY CLAIM UNDER THE SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, ANY OTHER STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD
OR BOTH, THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR
FEDERAL OR STATE COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY
PURSUANT TO, ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF
THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN
CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF
ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO
SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES, SUBJECT
TO CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. (S)(S) 1 ET SEQ.
ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF RECORD.
Section 8.16 No Strict Construction. The language used in this Agreement
----------------------
will be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
person.
Section 8.17 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an
-45-
<PAGE>
original, but all of which together shall constitute one and the same
instrument.
Section 8.18 Obligations Under the MCIT Purchase Agreement.
---------------------------------------------
(a) The Company, the Jordan Investors and each Jordan Party hereby agree
to use their best efforts to refrain from exercising their voting rights as
required by the Abstention Letter (as defined in the MCIT Purchase Agreement)
for so long as such letter is in full force and effect.
(b) The Company will use its best efforts to fulfill the terms and
conditions of the Preemption Letter (as defined in the MCIT Purchase Agreement)
for so long as such letter is in full force and effect.
-46-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
AMERIKING, INC.
By:______________________________
Name:
Title:
MCIT PLC
By:______________________________
Name:
Title:
BANCBOSTON INVESTMENTS, INC.
By:______________________________
Name:
Title:
JORDAN INVESTORS:
Jordan/Zalaznick Capital Company
By:______________________________
Name:
General Partner
Leucadia Investors, Inc.
By:______________________________
Name:
Title:
John W. Jordan, II Revocable Trust
_________________________________
John W. Jordan, II
Trustee
-47-
<PAGE>
_________________________________
David W. Zalaznick
_________________________________
Jonathan F. Boucher
_________________________________
John R. Lowden
_________________________________
Adam E. Max
John M. Camp Profit Sharing Plan
By:______________________________
John M. Camp
Trustee
_________________________________
John M. Camp
_________________________________
A. Richard Caputo, Jr.
James E. Jordan, Jr. Profit Sharing Plan and Trust
By:______________________________
James E. Jordan, Jr.
Trustee
Paul Rodzevik Profit Sharing Plan and Trust
By:______________________________
Paul Rodzevik
Trustee
-48-
<PAGE>
MANAGEMENT STOCKHOLDERS:
_________________________________
Lawrence Jaro
_________________________________
William Osborn
_________________________________
Gary Hubert
_________________________________
Joel Aaseby
_________________________________
Don Stahurski
_________________________________
Scott Vasatka
JARO INVESTORS:
Tabor Restaurants Associates, Inc.
By:______________________________
Lawrence Jaro
President
Jaro Enterprises, Inc.
By:______________________________
Lawrence Jaro
President
-49-
<PAGE>
Jaro Restaurants Associates, Inc.
By:______________________________
Lawrence Jaro
President
JB Restaurants, Inc.
By:______________________________
Lawrence Jaro
President
OSBORN INVESTORS:
Osburger, Inc.
By:______________________________
William Osborn
President
Castleking, Inc.
By:______________________________
William Osborn
President
White-Osborn Restaurants, Inc.
By:______________________________
William Osborn
President
-50-
<PAGE>
EXHIBIT 4.46
AMENDMENT NO. 1
TO
STOCK OPTION AGREEMENT
THIS AMENDMENT NO. 1 TO STOCK OPTION AGREEMENT (this "Amendment No. 1") is
dated as of November 26, 1996, by and among AmeriKing, Inc., a Delaware
corporation (the "Company"), Donald Stahurski ("Stahurski") and Scott Vasatka
("Vasatka").
W I T N E S E T H:
-----------------
WHEREAS, the Company and Stahurski entered into a Stock Option Agreement,
dated as of September 1, 1994 (the "Stahurski Option Agreement");
WHEREAS, the Company and Vasatka entered into a Stock Option Agreement,
dated as of September 1, 1994 (the "Vasatka Option Agreement"); and
WHEREAS, pursuant to the terms of a Recapitalization Agreement, of even
date herewith, by and among the Company and the stockholders of the Company who
appear on the signature pages thereto, (i) the existing classes of common stock
have been reclassified and (ii) the shares of reclassified common stock are
being split 863.281-for-1; and
WHEREAS, the Company acknowledges it will benefit and desires to amend each
of the Stahurski Option Agreement and the Vasatka Option Agreement in accordance
with the provisions of this Amendment No. 1.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency which are hereby acknowledged, the parties hereto as follows:
A G R E E M E N T:
- - - - - - - - -
SECTION 1. Amendment. Effective as of the date hereof, Section A. of each
---------
of the Stahurski Option Agreement and the Vasatka Option Agreement shall be
deleted in their entirety and replaced with the following:
<PAGE>
A. Award of Options. The Company hereby awards to the Grantee an
----------------
option (the "Option") to purchase a total of 4,851.64 shares of Common
Stock, par value $.01 per share, of the Company (the "Common Stock").
The price at which a share of Common Stock may be purchased pursuant
to the exercise of the Option (the "Option Price") shall be $.1158 per
share.
SECTION 2. Effect of this Amendment No. 1 on the Other Terms of the
--------------------------------------------------------
Management Consulting Agreement. Except as expressly amended and modified
- -------------------------------
herein, all other terms of each of the Stahurski Option Agreement and the
Vasatka Option Agreement shall remain in full force and effect as originally
made and entered into by the parties thereto.
SECTION 3. Governing Law. This Amendment No. 1 shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware (excluding
provisions relating to choice of law).
SECTION 4. Necessary Documents. The parties hereto agree to execute or
-------------------
cause to be executed at any time, any and all other documents or instruments
necessary to carry out the terms of this Agreement.
SECTION 5. Counterparts. This Amendment No. 1 may be executed in any
------------
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument, and all
signatures need not appear on any one counterpart.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date first written above.
AMERIKING, INC.
By:______________________________
Name: A. Richard Caputo, Jr.
Title: Vice President
______________________________
Name: Donald Stahurski
______________________________
Name: Scott Vasatka
-3-
<PAGE>
AMENDMENT NO. 1
TO
MANAGEMENT SUBSCRIPTION AGREEMENT
THIS AMENDMENT NO. 1 TO MANAGEMENT SUBSCRIPTION AGREEMENT (this
"Amendment No. 1") is dated as of November 26, 1996, by and among AmeriKing,
Inc., a Delaware corporation (the "Company") and the persons whose names appear
on the signature pages hereto (collectively, the "Stockholders").
W I T N E S S E T H
-------------------
WHEREAS, the Company and the Stockholders entered into a Management
Subscription Agreement, dated as of September 1, 1994 (the "Management
Subscription Agreement"), pursuant to which the Stockholders subscribed for the
purchase of certain securities of the Company, including shares of common stock
of the Company; and
WHEREAS, pursuant to the terms of the Recapitalization Agreement, of
even date herewith, by and among the Company and the stockholders of the Company
who appear on the signature pages thereto, (i) the existing classes of common
stock have been reclassified into a single class of common stock and (ii) the
reclassified common stock has been split 863.281-for-1; and
WHEREAS, the Company and the Stockholders each acknowledge that they
will benefit and desire to amend the Management Subscription Agreement in
accordance with the terms of this Amendment No. 1.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
A G R E E M E N T
-----------------
SECTION 1. Amendment. Effective as of the date hereof, the parties
---------
agree that the Management Subscription Agreement shall be amended as follows:
(a) Exhibit 1 to the Management Subscription Agreement shall be
deleted in its entirety and replaced with Exhibit 1 attached hereto.
---------
(b) Section 8(e) shall be amended by replacing the words "or (b) an
initial public offering of any shares of Stock." with the words "or (b) a public
offering of Common Stock of the Company
<PAGE>
with net proceeds to the Company of at least $50 million pursuant to a firm
commitment underwriting."
(c) A new Section 8(g) shall be inserted as follows:
"(g) Conversions, Stock Splits. All repurchases pursuant to this Section
------------------------- -------
8 shall apply to shares of capital stock referenced in this Section 8 as
- ---------
well as any shares of capital stock held by such Stockholders as a result
of an exchange, conversion, recapitalization, stock split, reverse
stocksplit or other similar reclassification of the capital stock of the
Company."
(d) Section 10(c) shall be amended by replacing the dollar amount "$100"
with the dollar amount "$0.11584."
(e) Section 10 shall be amended by adding the following definition for
common stock in the appropriate alphabetical order and by revising the
subsection numbers of the definition section accordingly:
"(c) "Common Stock" for purposes of Section 8 of this Agreement only,
------------ ---------
shall mean Class D Common Stock of the Company and any shares of Common
Stock received in connection with a conversion or exchange of Class D
Common Stock or other securities into Common Stock of the Company."
SECTION 2. Effect of this Amendment No. 1 on the Other Terms of the
--------------------------------------------------------
Management Consulting Agreement. Except as expressly amended and modified
- -------------------------------
herein, all other terms of each of the Management Subscription Agreement shall
remain in full force and effect as originally made and entered into by the
parties thereto.
SECTION 3. Governing Law. This Amendment No. 1 shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware (excluding
provisions relating to choice of law).
SECTION 4. Necessary Documents. The parties hereto agree to execute or
-------------------
cause to be executed at any time, any and all other documents or instruments
necessary to carry out the terms of this Agreement.
SECTION 5. Counterparts. This Amendment No. 1 may be executed in any
------------
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument, and all
signatures need not appear on any one counterpart.
-2-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has signed this Agreement:
AMERIKING, INC.
By ___________________________________
Name:
Title:
STOCKHOLDERS:
Tabor Restaurants Associates, Inc.
By ___________________________________
Name:
Title:
Jaro Enterprises, Inc.
By ___________________________________
Name:
Title:
Jaro Restaurants, Inc.
By ___________________________________
Name:
Title:
JB Restaurants, Inc.
By ___________________________________
Name:
Title:
-3-
<PAGE>
Castleking, Inc.
By ___________________________________
Name:
Title:
White-Osborn Restaurants, Inc.
By ___________________________________
Name:
Title:
Osburger, Inc.
By ___________________________________
Name:
Title:
______________________________________
Lawrence Jaro
______________________________________
William Osborn
______________________________________
Gary Hubert
______________________________________
Joel Aaseby
______________________________________
Donald Stahurski
______________________________________
Scott Vasatka
-4-
<PAGE>
<TABLE>
<CAPTION>
Subordinated
Notes
No. of Shares (All Value
No. of Shares of Class A\\2\\ No. of Shares of Class B Restaurant of
Name of Common Stock Preferred Stock Preferred Stock Securities) Consideration
- --------------------------- ----------------------- ---------------------- ----------------------- ------------- -------------
Set 1 Set 2 Set 1 Set 2 Set 1 Set 2
Securities Securities Securities Securities Securities Securities
---------- ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tabor Restaurants - 7,019 - 87.00 - 29.00 - $ 116,813.13
Associates, Inc.(1)
Jaro Restaurants - 14,786 - 187.50 - 62.50 $ 112,000 $ 363,712.84
Associates, Inc.(2)
Jaro Enterprises, Inc.(3) - 38,301 - 90.00 - 30.00 $1,224,000 $1,348,436.69
JB Restaurants, Inc.(4) - 106,842 - 550.50 - 183.50 $2,019,000 $2,765,376.34
Castleking, Inc.(5) - 23,201 - 187.50 - 62.50 $ 385,769 $ 638,456.63
White-Osborn Restaurants, - 28,802 - 97.50 - 32.50 $ 659,231 $ 792,567.37
Inc.(6)
Lawrence Jaro 29,101 - - - - - - $ 3,371.00
William Osborn 29,101 - - - - - - $ 3,371.00
Gary Hubert 29,101 - - - - - - $ 3,371.00
Joel Aaseby 9,703 - - - - - - 1,124.00
Total 97,006 218,951 0 1200 0 400 $4,400,000 $6,036,600.00
</TABLE>
OPTIONS
-------
Don Stahurski Options to purchase 4,851 shares of Common Stock
Scott Vasatka Options to purchase 4,851 shares of Common Stock
1. Lawrence Jaro owns 100% of the common stock of Tabor Restaurants
Associates, Inc. All of the Set 2 Securities received by Tabor Restaurants
Associates, Inc. will be subject to the repurchase provisions of Section 8.
2. Lawrence Jaro owns 100% of the common stock of Jaro Restaurants Associates,
Inc. All of the Set 2 Securities received by Jaro Restaurants Associates,
Inc. will be subject to the repurchase provisions of Section 8.
3. Lawrence Jaro owns 100% of the common stock of Jaro Enterprises, Inc. All
of the Set 2 Securities received by Jaro Enterprises, Inc. shall be subject
to the repurchase provisions of Section 8.
4. Lawrence Jaro owns 75% of the common stock of JB Restaurants, Inc.
Seventh-five percent (75%) of the Set 2 Securities received by JB
Restaurants, Inc. shall be subject to the repurchase provisions of Section
8.
5. William Osborn owns 75% of the common stock of Castleking, Inc. Seventy-
five percent (75%) of the Set 2 Securities received Castleking, Inc. will
be subject to the repurchase provisions of Section 8.
6. William Osborn owns 65% of the common stock of White-Osborn Restaurants,
Inc. Sixty-five percent (65%) of the Set 2 Securities received White-
Osborn, Inc. will be subject to the repurchase provisions of Section 8.
<PAGE>
RESTATED EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
--------------------------------------------------
This Restated Employment and Non-Interference Agreement (this
"Agreement") is dated as of December 3, 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 Non-
Interference Agreement, dated as September 1, 1994 (the "Prior Employment
----------------
Agreement");
- ---------
WHEREAS, Executive and the Company wish to terminate the Prior
Employment Agreement in its entirety simultaneously with the execution of this
Agreement, which will replace the prior Employment Agreement;
WHEREAS, the Company wishes to obtain the future services of the
Executive for the Company; and
WHEREAS, the Executive is willing, upon the terms and conditions
herein set forth, to provide services hereunder; and
WHEREAS, the Company wishes to secure the Executive's non-
interference, upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Nature of Employment
--------------------
Subject to Section 3, the Company hereby employs Executive, and
---------
Executive agrees to accept such employment, during the Term of Employment (as
defined in Section 3(a)) as Vice Chairman of Parent and the Company and to
------------
undertake such duties and responsibilities as may be reasonably and specifically
assigned to Executive from time to time by the Chairman. The Vice Chairman
shall have no duties except as specifically instructed or delegated to him in
writing by the Chairman and shall have no authority, unless so delegated in
writing, to bind or otherwise act for Parent or the Company.
<PAGE>
2. Extent of Employment
--------------------
(a) During the Term of Employment, the Executive shall perform his
obligations hereunder faithfully and to the best of his ability at the location
set forth below in paragraph 2(d), under the direction of the Chairman and Board
of Directors of the Company, and shall abide by the rules, customs and usages
from time to time established by the Company and the Parent."
(b) During the Term of Employment, the Executive shall devote such
amount of his business time, energy and skill as may be reasonably necessary for
the performance of his duties, responsibilities and obligations hereunder
(except for vacation periods and reasonable periods of illness or other
incapacity).
(c) Nothing contained herein shall require Executive to follow any
directive or to perform any act which would violate any of the rules and
regulations as provided by the Burger King Corporation franchise entity form of
ownership guidelines, the Burger King Uniform Franchise Offering Circular, as
amended or updated from time-to-time, and any other franchise and other
regulations and requirements, from time to time in effect (the "Burger King
-----------
Regulations") of the Burger King Corporation or any laws, ordinances,
- -----------
regulations or rules of any governmental, regulatory or administrative body,
agent or authority, any court or judicial authority, or any public, private or
industry regulatory authority. Subject to clause (e) below, Executive shall act
in good faith in accordance with all Burger King Regulations and laws,
ordinances, regulations or rules of any governmental, regulatory or
administrative body, agent or authority, any court or judicial authority, or any
public, private or industry regulatory authority to the extent the Executive
knows or has reasonable notice of such Burger King regulations, laws,
ordinances, regulations or rules.
(d) During the Term of Employment, the Executive shall live in the
Chicago, the Front Range of Colorado or any other area selected by Executive.
The Company will pay the Executive a one-time lump sum of $50,000 plus
documented out-of-pocket expenses to move Executive's personal belongings and
household items, as a transition expense payment, upon the date of this
Agreement to provide suitable and appropriate transition arrangements,
including, should Executive arrange, an executive office, secretarial and office
services for a transition for Executive.
(e) The Company will use reasonable efforts to cause Executive to be
promptly removed and released as an "Owner" or "Managing Owner" under the Burger
King Regulations, although Executive will remain subject to those
classifications and responsibilities at the date hereof, and Executive will
remain, in any event, subject to certain lease and related guarantees in
connection with the Company's prior acquisition of restaurants from Sheldon
Friedman.
-2-
<PAGE>
3. Term of Employment; Termination
-------------------------------
(a) The "Term of Employment" shall commence on the date hereof and
------------------
shall continue until September 1, 1999. Should the Executive's employment by
the Company be earlier terminated pursuant to Section 3(b), the Term of
------------
Employment shall end on the date of such earlier termination.
(b) Subject to the payments contemplated by Section 3(e), Term of
Employment may be terminated at any time by the Company:
(i) upon the death of Executive;
(ii) for Cause (as defined in Section 3(c));
------------
Termination shall become effective upon the delivery by the Company to the
Executive of notice specifying such termination and the reasons therefor.
(c) For the purposes of this Section 3, "Cause" shall mean any of the
--------- -----
following:
(i) Executive's conviction of a serious felony or a crime involving
embezzlement, conversion of property or moral turpitude;
(ii) a final, non-appealable finding of Executive's fraud,
embezzlement or conversion of property;
(iii) a final non-appealable finding of Executive's breach of any of
his fiduciary duties to the Company or its stockholders or making of a
willful misrepresentation or omission which breach, misrepresentation or
omission might reasonably be expected to materially adversely affect the
business, properties, assets, condition (financial or other) or prospects
of the Company, provided, that, the Executive has been given notice and 30
days from such notice fails to cure the breach, misrepresentation or
omission;
(iv) Executive's willful and continual neglect or failure to discharge
his duties, responsibilities or obligations prescribed by this Agreement or
any other agreement between the Executive and the Company, provided, that,
the Executive has been given notice and 30 days from such notice fails to
cure the neglect or failure;
(v) Executive's habitual drunkenness or substance abuse, which
materially interferes with Executive's ability to discharge his duties,
responsibilities and obligations prescribed by this Agreement, provided
that Executive has been given notice and 30 days from such notice fails to
cure such drunkenness or abuse;
-3-
<PAGE>
(vi) Executive's material and knowing violation of any obligations
imposed upon Executive, personally, as opposed to upon the Company, whether
as a stockholder or otherwise, under this Agreement, the Purchase and Sale
Agreement, dated September 1, 1994, by and among the Company, the Parent
and Burger King Corporation, the Franchise Agreement, dated September 1,
1994, by and among the Company, Parent and Burger King Corporation, the
Certificate of Incorporation or By-Laws of the Company, or the Burger King
Regulations, each as amended to date, provided, that the Executive has been
given notice and 90 days from such notice fails to cure the violation;
(vii) Executive's personal (as opposed to the Company's) material and
knowing failure, to observe or comply with Burger King Regulations whether
as an officer, stockholder or otherwise, in any material respect or in any
manner which might reasonably have a material adverse effect in respect of
the Company's ongoing business, operations, conditions, franchises, other
business relationships or properties; provided, that the Executive has been
given notice and 90 days from such notice fails to cure the failure, or
(viii) Executive disparaging or making other public statements that
injure or damage Parent, Company or their respective businesses.
(d) In the event Executive's employment is terminated pursuant to
(i) Section 3(b)(i), the Company will pay to Executive (or his estate
or representative) the full amounts to which he would be entitled under
Section 4(a) for the period from effectiveness of termination through the
first anniversary of such termination;
(ii) Section 3(b)(ii) there will be no amounts owing by the Company
to Executive under this Agreement from and after such termination, except
for accrued, but unused vacation pay and sick pay which shall be paid to
the Executive in accordance with Company practices; and
Termination of the Term of Employment will not terminate Sections 7, 8, 10
through 21, or any other provisions not associated specifically with the Term of
Employment.
In the event of Termination and the Company is obligated to make payments
pursuant to this Section 3(e), the Company's payment obligations under this
Section 3(e) will be mitigated and reduced to the extent of Executive's
compensation under alternative employment during the period for which payments
are owed by the Company pursuant to this Section 3(e).
4. Compensation. During the Term of Employment, the Company shall pay
------------
compensation to Executive as follows:
-4-
<PAGE>
(a) As base compensation for his services hereunder, in bimonthly
installments, a base salary at a rate of $225,000 per annum.
(b) During the Term of Employment the Executive shall receive an automobile
allowance of $800 per month and reimbursements for automobile insurance,
repairs, maintenance and business related fuel not to exceed $6,000 per annum.
(c) During the Term of Employment, the Company will purchase and pay the
premium payments for a life insurance policy in an amount up to $1 million (such
amount to be determined by the Executive) on the life of the Executive for the
benefit of beneficiaries designated by the Executive; provided that the premium
payments on such life insurance policy are less than $10,000 per annum.
5. Reimbursement of Expenses
-------------------------
During the Term of Employment, and in addition to Section 2(d), the Company
shall reimburse Executive for documented travel and other expenses reasonably
incurred by Executive in connection with attending meetings of the Board of
Directors or in connection with activities expressly authorized in writing by
the Chairman, in each case, while serving as Vice Chairman in accordance with
this Agreement, but not any other expenses incurred by Executive for any other
purpose, all in accordance with the rules, customs and usages promulgated by the
Company from time to time in effect.
6. Benefits
--------
During the Term of Employment, the Executive shall be entitled to
perquisites and benefits (including health, short and long term disability,
pension and life insurance benefits consistent with past practice, or as
increased from time to time) referred to herein or expressly approved for
Executive by the Board of Directors.
7. Confidential Information
------------------------
(a) During and after the Term of Employment, Executive will not, directly
or indirectly in one or a series of transactions, disclose to any person, or use
or otherwise exploit for the Executive's own benefit or for the benefit of
anyone other than the Company, any Confidential Information (as defined in
Section 9), whether prepared by Executive or not; provided, however, that any
- --------- -------- -------
Confidential Information may be disclosed to officers, representatives,
employees and agents of the Company who need to know such Confidential
Information in order to perform the services or conduct the operations required
or expected of them in the Business (as defined in Section 9). Executive shall
---------
use his best efforts to prevent the removal of any Confidential Information from
the premises of the Company, except as required in his normal course of
employment by the Company. Executive shall use his best efforts to cause all
persons or entities to whom any Confidential Information shall be
-5-
<PAGE>
disclosed by him hereunder to observe the terms and conditions set forth herein
as though each such person or entity was bound hereby. Executive shall have no
obligation hereunder to keep confidential any Confidential Information if and to
the extent disclosure of any thereof is specifically required by law; provided,
--------
however, that in the event disclosure is required by applicable law, the
- -------
Executive shall provide the Company with prompt notice of such requirement,
prior to making any disclosure, so that the Company may seek an appropriate
protective order. At the request of the Company, Executive agrees to deliver to
the Company, at any time during the Term of Employment, or thereafter, all
Confidential Information that he may possess or control. Executive agrees that
all Confidential Information of the Company (whether now or hereafter existing)
conceived, discovered or made by him during the Term of Employment exclusively
belongs to the Company (and not to Executive). Executive will promptly disclose
such Confidential Information to the Company and perform all actions reasonably
requested by the Company to establish and confirm such exclusive ownership.
(b) The terms of this Section 7 shall survive the termination of this
---------
Agreement regardless of who terminates this Agreement, or the reasons therefor.
8. Non-Interference
----------------
(a) Executive acknowledges that services to be provided give him the
opportunity to have special knowledge of the Company and its Confidential
Information and the capabilities of individuals employed by or affiliated with
the Company and that interference in these relationships would cause irreparable
injury to the Company. In consideration of this Agreement, Executive covenants
and agrees that:
(i) From the date hereof until the later to occur of three years from
the date hereof, or the first anniversary of expiration on termination of
the Term of Employment (the "Restricted Period"), Executive will not,
without the express written approval of the Board of Directors of the
Company, anywhere in the Market, directly or indirectly, in one or a series
of transactions, own, manage, operate, control, invest or acquire an
interest in, or otherwise engage or participate in, whether as a
proprietor, partner, stockholder, lender, director, officer, employee,
joint venturer, investor, lessor, supplier, agent, representative or other
participant, in any business which competes, directly or indirectly, with
the Business in the Market ("Competitive Business") without regard to (A)
--------------------
whether the Competitive Business has its office, manufacturing or other
business facilities within or without the Market, (B) whether any of the
activities of the Executive referred to above occur or are performed within
or without the Market or (C) whether the Executive resides, or reports to
an office, within or without the Market; provided, however, that (x) the
-------- -------
Executive may, anywhere in the Market, directly or indirectly, in one or a
series of transactions, own, invest or acquire an interest in up to five
percent (5%) of the capital stock of a
-6-
<PAGE>
corporation whose capital stock is traded publicly, or that (y) Executive
may accept employment with a successor company to the Company.
(ii) During the Restricted Period (which shall not include any period
of violation of this Agreement by Executive or period which is required for
litigation to enforce the rights hereunder), Executive will not without the
express prior written approval of the Board of Directors of the Company (A)
directly or indirectly, in one or a series of transactions, recruit,
solicit or otherwise induce or influence any proprietor, partner,
stockholder, lender, director, officer, employee, sales agent, joint
venturer, investor, lessor, supplier, customer, agent, representative or
any other person which has a business relationship with the Company or had
a business relationship with the Company within the twenty-four (24) month
period preceding the date of the incident in question, to discontinue,
reduce or modify such employment, agency or business relationship with the
Company, or (B) employ or seek to employ or cause any Competitive Business
to employ or seek to employ any person or agent who is then (or was at any
time within six (6) months prior to the date the Executive or the
Competitive Business employs or seeks to employ such person) employed or
retained by the Company. Notwithstanding the foregoing, nothing herein
shall prevent the Executive from providing a letter of recommendation to an
employee with respect to a future employment opportunity.
(iii) During the Restricted Period, Executive will not publicly
disparage the Parent or the Company or its affiliates or their respective
businesses.
(iv) The scope and term of this Section 8 would not preclude him from
---------
earning a living with an entity that is not a Competitive Business.
(b) Upon a final, non-appealable finding that the Executive has breached
his obligations in any material respect under this Section 8, the Company, in
---------
addition to pursuing all available remedies under this Agreement, at law or
otherwise, and without limiting its right to pursue the same shall cease all
payments to the Executive under this Agreement or any other agreement.
9. Definitions
-----------
"Burger King Regulations" is defined in Section 1.
------------------------ ---------
"Business" means (a) the construction, development, operations, ownership
--------
and promotion of restaurants in which the Burger King Corporation is either (i)
the exclusive franchisor or (ii) co-franchisor in a dual-use restaurant
involving or relating principally to hamburgers as a major menu item, or (b) any
similar or incidental business involving or relating principally to hamburgers
as a major menu item conducted, or engaged in, by the Company prior to the date
hereof or at any time during the Term of Employment.
-7-
<PAGE>
"Cause" is defined in Section 3(d).
----- ------------
"Companies" means Parent and its successors or any of its direct or
---------
indirect subsidiaries (including the Company), now or hereafter existing.
"Company" is defined in the introduction.
-------
"Competitive Business" is defined in Section 8(a)(i).
-------------------- ---------------
"Confidential Information" means any confidential information including,
------------------------
without limitation, any study, data, calculations, software storage media or
other compilation of information, patent, patent application, copyright,
trademark, trade name, service mark, service name, "know-how", trade secrets,
customer lists, details of client or consultant contracts, pricing policies,
operational methods, marketing plans or strategies, product development
techniques or plans, business acquisition plans or any portion or phase of any
scientific or technical information, ideas, discoveries, designs, computer
programs (including source of object codes), processes, procedures, formulae,
improvements or other proprietary or intellectual property of the Company,
whether or not in written or tangible form, and whether or not registered, and
including all files, records, manuals, books, catalogues, memoranda, notes,
summaries, plans, reports, records, documents and other evidence thereof. The
term "Confidential Information" does not include, and there shall be no
------------------------
obligation hereunder with respect to, information that becomes generally
available to the public other than as a result of a disclosure by the Executive
not permissible hereunder.
"Executive" means William Osborn or his estate, if deceased.
---------
"Market" means any county in the United States of America and each similar
------
jurisdiction in any other country in which the Business was conducted by or
engaged in by the Company prior to the date hereof or is conducted or engaged
in, or for which a restaurant site is in development, by the Company at any time
during the Term of Employment.
"Restricted Period" is defined in Section 8(a)(i).
----------------- ---------------
"Term of Employment" is defined in Section 3(a).
------------------ ------------
10. Notice
------
Any notice, request, demand or other communication required or permitted to
be given under this Agreement shall be given in writing and if delivered
personally, or sent by
-8-
<PAGE>
certified or registered mail, return receipt requested, as follows (or to such
other addressee or address as shall be set forth in a notice given in the same
manner):
If to Executive: William Osborn
___________
___________
with a copy to:
Freeborn & Peters
950 Seventeenth Street
Suite 2600
Denver, Colorado 80202
Attention: Ernest J. Panasci, Esq.
If to Company: AmeriKing
2215 Enterprise Drive
Suite 1502
Westchester, IL 60154
Attention: Chairman
with a copy to:
Mayer, Brown & Platt
1675 Broadway
Suite 1900
New York, New York 10019
Attention: James B. Carlson, Esq.
Any such notices shall be deemed to be given on the date personally delivered or
such return receipt is issued.
11. Executive's Representation
--------------------------
Executive hereby warrants and represents to the Company that: (i)
Executive has carefully reviewed this Agreement and the Prior Employment
Agreement and has consulted with such advisors as Executive considers
appropriate in connection with this Agreement and the Prior Employment
Agreement, (ii) Executive is not subject to any covenants, agreements or
restrictions, including without limitation any covenants, agreements or
restrictions arising out of Executive's prior employment or the Burger King
Regulations which would be
-9-
<PAGE>
breached or violated by Executive's execution of this Agreement or by
Executive's performance of his duties hereunder and (iii) Executive will not
knowingly breach or violate any provision of the Burger King Regulations in any
material respect or in any manner which might reasonably have a material adverse
effect in respect of the Company's ongoing business, operations, conditions,
franchises, or other business relationships or properties.
12. Other Matters
-------------
(a) Executive agrees and acknowledges that the obligations owed to
Executive under this Agreement are solely the obligations of the Company, and
that none of the Company's stockholders, directors, officers or lenders will
have any obligations or liabilities in respect of this Agreement and the subject
matter hereof.
(b) Executive and the Company hereby agree and acknowledge that this
Agreement replaces and supersedes the Prior Employment Agreement, and upon the
execution of this Agreement, the Prior Employment Agreement shall automatically
be terminated and rendered without force and effect and that the Executive shall
release and discharge the Company and Parent, and their respective directors,
stockholders, officers and lenders from any further obligations or liabilities
thereunder, including any compensation, bonus or severance thereunder.
13. Validity
--------
If, for any reason, any provision hereof shall be determined to be invalid
or unenforceable, the validity and effect of the other provisions hereof shall
not be affected thereby.
14. Severability
------------
Whenever possible, each provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein. If any court determines that any
provision of Section 8 or any other provision hereof is unenforceable because of
---------
the power to reduce the scope or duration of such provision, as the case may be
and, in its reduced form, such provision shall then be enforceable.
-10-
<PAGE>
15. Waiver of Breach; Specific Performance
--------------------------------------
The waiver by the Company or Executive of a breach of any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any other breach of such other party. Each of the parties (and third party
beneficiaries) to this Agreement will be entitled to enforce its rights under
this breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of
Sections 7 and 8 of this Agreement and that any party (and third party
- ---------- -
beneficiaries) may in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive relief,
including temporary restraining orders, preliminary injunctions and permanent
injunctions in order to enforce or prevent any violations of the provisions of
this Agreement. In the event either party takes legal action to enforce any of
the terms or provisions of this Agreement, the nonprevailing party shall pay the
successful party's costs and expenses, including but not limited to, reasonable
attorneys' fees, incurred in such action.
16. Assignment; Third Parties
-------------------------
Neither the Executive nor the Company may assign, transfer, pledge,
hypothecate, encumber or otherwise dispose of this Agreement or any of his or
its respective rights or obligations hereunder, without the prior written
consent of the other. The parties agree and acknowledge that each of the
Companies and the stockholders and investors therein are intended to be third
party beneficiaries of, and have rights and interests in respect of, Executive's
agreements set forth in Sections 7 and 8.
---------- -
17. Amendment; Entire Agreement
---------------------------
This Agreement may not be changed orally but only by an agreement in
writing agreed to by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought. This Agreement embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter of this Agreement, and supersedes and replaces all prior
agreements, understandings and commitments with respect to such subject matter,
including the Prior Employment Agreement.
18. Litigation
----------
THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. EACH OF THE PARTIES HERETO
ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF THIS AGREEMENT, THE
NON-BREACHING PARTY WOULD BE IRREPARABLY HARMED AND COULD NOT BE MADE WHOLE BY
MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY OTHER REMEDY TO
-11-
<PAGE>
WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE PARTIES SHALL BE ENTITLED TO
SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. EACH PARTY AGREES
THAT JURISDICTION AND VENUE WILL BE PROPER IN CHICAGO, ILLINOIS AND WAIVES ANY
OBJECTIONS BASED UPON FORUM NON CONVENIENS. EACH PARTY WAIVES PERSONAL SERVICE
OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR
PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL JURISDICTION IF
SERVED BY REGISTERED OR CERTIFIED MAIL TO THE PARTY AT THE ADDRESS SET FORTH IN
THIS AGREEMENT, OR AS OTHERWISE PROVIDED BY THE LAWS OF THE STATE OF ILLINOIS OR
THE UNITED STATES. THE CHOICE OF FORUM SET FORTH IN THIS SECTION 11(G) SHALL
NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN ANY OTHER
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY
OTHER APPROPRIATE JURISDICTION.
19. Arbitration
-----------
ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO THIS AGREEMENT RELATING TO OR
IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION, EXECUTION, PERFORMANCE, SUBJECT
MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR ACTIONS UNDER OR IN RESPECT OF
THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION ANY CLAIM UNDER THE SECURITIES
ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, ANY OTHER STATE OR FEDERAL
LAW RELATING TO SECURITIES OR FRAUD OR BOTH, THE RACKETEER INFLUENCED AND
CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR FEDERAL OR STATE COMMON LAW, SHALL BE
SUBMITTED TO, AND RESOLVED EXCLUSIVELY PURSUANT TO, ARBITRATION IN ACCORDANCE
WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION.
SUCH ARBITRATION SHALL TAKE PLACE IN CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO
THE SUBSTANTIVE LAW OF THE STATE OF ILLINOIS. DECISIONS AS TO FINDINGS OF FACT
AND CONCLUSIONS OF LAW PURSUANT TO SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE
AND BINDING ON THE PARTIES, SUBJECT TO CONFIRMATION, MODIFICATION OR CHALLENGE
PURSUANT TO 9 U.S.C. (S)(S) 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.
-12-
<PAGE>
21. Counterparts
------------
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the day
and year first written above.
EXECUTIVE:
------------------------------------------
Name: William Osborn
NATIONAL RESTAURANT ENTERPRISES, INC.
By
---------------------------------------
Name: A. Richard Caputo, Jr.
Title: Vice President
-13-
<PAGE>
================================================================================
RECAPITALIZATION AGREEMENT
among
AMERIKING, INC.
BANCBOSTON INVESTMENTS INC.
MCIT PLC
PMI MEZZANINE FUND, L.P.
and
THE OTHER STOCKHOLDERS NAMED ON THE SIGNATURE PAGES HERETO
-------------------------------
Dated as of November 26, 1996
-------------------------------
================================================================================
<PAGE>
RECAPITALIZATION AGREEMENT
RECAPITALIZATION AGREEMENT (this "Agreement") dated as of November 26,
---------
1996, by and among National Restaurant Enterprises, Inc. ("Enterprises"),
-----------
AmeriKing, Inc. (the "Company"), (i) each of MCIT PLC ("MCIT"), BancBoston
------- ----
Investments, Inc. ("BBI"), PMI Mezzanine Fund, L.P. ("PMI"), Jordan/Zalaznick
--- ---
Capital Company, Leucadia Investors, Inc., John W. Jordan II Revocable Trust,
Thomas H. Quinn, John M. Camp Profit Sharing Plan, John M. Camp, David W.
Zalaznick, Jonathan F. Boucher, John R. Lowden, Adam E. Max, A. Richard Caputo,
Jr., James E. Jordan, Profit Sharing Plan and Trust, Paul Rodzevick, Profit
Sharing Plan and Trust, Lawrence E. Jaro ("Jaro"), William C. Osborn ("Osborn"),
---- ------
Gary W. Hubert, Joel D. Aaseby, Scott E. Vasatka, Donald Stahurski, Tabor
Restaurant Associates, Inc., Jaro Enterprises, Inc., Jaro Restaurant Associates,
Inc., JB Restaurants, Inc., Osburger, Inc., White-Osborn Restaurants, Inc.,
Castleking, Inc., Dennis Hogerty, Jerald Dunn and JII Partners (collectively,
other than PMI, referred to herein as the "Common Stockholders") and (ii) each
-------------------
of MCIT, BBI, Leucadia Investors, Inc., John W. Jordan II Revocable Trust, David
W. Zalaznick, Jonathan F. Boucher, John R. Lowden, Adam E. Max, Tabor Restaurant
Associates, Inc., Jaro Enterprises, Inc., Jaro Restaurant Associates, Inc., JB
Restaurants, Inc., Osburger, Inc., White-Osborn Restaurants, Inc. and
Castleking, Inc. (collectively referred to herein as the "Preferred
---------
Stockholders"). The Common Stockholders, Preferred Stockholders, together with
PMI, the Company and TJC Management Corporation ("TJC") are referred to herein
---
as the "Parties".
-------
R E C I T A L S
- - - - - - - -
WHEREAS, the Parties desire to recapitalize the Company, and in
connection therewith, the Company has filed a Registration Statement on Form S-1
(File No. 333-04261) (as amended or supplemented, the "Registration Statement")
----------------------
relating to the proposed public offerings (the "Offerings") of $100.0 million
---------
aggregate principal amount of Senior Notes due 2006 (the "Senior Notes") and
------------
$30.0 million aggregate principal amount of Units (the "Units") consisting of
-----
Senior Exchangeable Preferred Stock due 2008 ("Senior Preferred Stock") and
----------------------
Common Stock $.01 par value of the Company;
WHEREAS, the proposed recapitalization ("Recapitalization") includes
----------------
the following primary components: (a) (i) the reclassification of all of the
issued and outstanding shares of (x) Class A Common Stock, Class C Common Stock
and Class D Common Stock into an equal number of shares of Common Stock and (y)
Class B Common Stock into an equal number of shares of Non-Voting Common Stock
and (ii) the retirement of each of the Class A Common Stock, Class B Common
Stock, Class C Common Stock and Class D Common Stock as classes of capital stock
of the Company (collectively, the "Reclassification"); (b) following the
----------------
Reclassification the 863.281-for-1 stock split (the "Stock Split") of all
-----------
outstanding shares of Common Stock; (c) the Offerings; (d) the prepayment in
full of the
<PAGE>
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 September 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
------------------
September 30, 1996; (f) the prepayment in full of the Company's $4.4 million
aggregate principal amount of 12.75% Seller Notes due 2005 (the "Seller Notes")
------------
held by affiliates of Jaro and Osborn as of June 30, 1996; (g) the repayment of
Borrowings under the Credit Agreement in the aggregate amount of $86.6 million
and the termination of Term Loan A and Term Loan B pursuant to the terms of the
Credit Agreement; (h) the cancellation of all of the warrants to purchase Class
C Common Stock of the Company issued by the Company to PMI; (i) the amendment of
the Stockholders Agreement; (j) the amendment of the Management Subscription
Agreement; (k) the amendment of the Option Agreements; and (l) all other related
transactions, agreements and instruments contemplated by this Agreement and/or
described, and based upon the assumptions described, in the Registration
Statement.
WHEREAS, the Company is required to notify BKC and obtain its consent
prior to amending any of the Company's corporate governance documents, including
without limitation, those instruments specified in Section 5.3 of this
Agreement;
WHEREAS, pursuant to the rules and regulations of the Securities and
Exchange Commission, the Company is required to file the Amended and Restated
Company Charter prior to the effective date of the Registration Statement; and
WHEREAS, in order to implement the
Recapitalization, the Parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms
shall have the meanings specified below:
"Amended and Restated Company By-Laws" means the Company's Amended and
------------------------------------
Restated By-Laws substantially in the form of Exhibit A hereto.
---------
"Amended and Restated Company Charter" means the Company's Amended and
------------------------------------
Restated Certificate of Incorporation substantially in the form of Exhibit B
---------
hereto.
"Amended and Restated Stockholders Agreement" means the Amended and
-------------------------------------------
Restated Stockholders Agreement substantially in the form of Exhibit C hereto.
---------
-2-
<PAGE>
"Amendment No. 1 to Option Agreement" means Amendment No. 1 to each of
-----------------------------------
the Option Agreements substantially in the form of Exhibit D hereto..
---------
"Amendment No. 1 to Management Subscription Agreement" means Amendment
----------------------------------------------------
No. 1 to the Management Subscription Agreement dated the date hereof
substantially in the form of Exhibit E hereto.
---------
"BKC" means the Burger King Corporation.
---
"Certificate of Designation" means the Certificate of Designation
--------------------------
authorizing the Senior Preferred Stock.
"Class A Common Stock" means the Company's Class A Common Stock, par
--------------------
value $.01 per share.
"Class B Common Stock" means the Company's Class B Common Stock, par
--------------------
value $.01 per share.
"Class C Common Stock" means the Company's Class C Common Stock, par
--------------------
value $.01 per share.
"Class D Common Stock" means the Company's Class D Common Stock, par
--------------------
value $.01 per share.
"Class A//1// Preferred Stock" means the Company's Class A//1//
----------------------------
Preferred Stock, par value $.01 per share.
"Class A\\2\\ Preferred Stock" means the Company's Class A\\2\\
----------------------------
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, after giving effect to the Recapitalization.
"Common Stockholders" has the meaning specified in the preamble to
-------------------
this Agreement.
-3-
<PAGE>
"Company" has the meaning as specified in the preamble to this
-------
Agreement.
"Consulting Agreement" means the Management and Consulting Agreement
--------------------
between the Company and TJC, dated as of September 1, 1994, as amended from time
to time.
"Credit Agreement" means the Second Amended and Restated Credit
----------------
Agreement, dated February 7, 1996, by and among Enterprises, the Company, The
First National Bank of Boston and the other lenders thereto and the First
National Bank of Boston, as agent.
"Directors Indemnification Agreements" means the Indemnification
------------------------------------
Agreements substantially in the form of Exhibit F hereto.
---------
"Enterprises" has the meaning specified in the preamble of this
Agreement.
"Equity Securities" of the Company means the Class A\\1\\ Preferred
-----------------
Stock, Class A\\2\\ Preferred Stock, Class B Preferred Stock, Class A Common
Stock, Class B Common Stock, Class C Common Stock and Class D Common Stock.
"Jaro" has the meaning specified in the preamble.
----
"Jordan Investors" means Jordan/Zalaznick Capital Company, Leucadia
----------------
Investors, Inc., TJC, John W. Jordan II Revocable Trust, David W. Zalaznick,
Thomas H. Quinn, Jonathan F. Boucher, John R. Lowden, Adam E. Max, John M. Camp
Profit Sharing Plan, John M. Camp, A. Richard Caputo, Jr., James E. Jordan, Jr.
Profit Sharing Plan and Trust, Paul Rodzevick Profit Sharing Plan and Trust,
Dennis Hogerty, Jerald Dunn and JII Partners.
"Jordan Investors' Representative" has the meaning specified in
--------------------------------
Section 8.2 of this Agreement.
- -----------
"Liens" means any security interest, lien, charge, restriction,
-----
encumbrance or other interest of another Person.
"Management Investors" means Osborn, Gary W. Hubert, Joel D. Aaseby,
--------------------
Scott E. Vasatka, Donald Stahurski, Osburger, Inc., Castleking, Inc. and White-
Osborn Restaurants, Inc.
"Management Investors' Representative" has the meaning specified in
------------------------------------
Section 8.2 of this Agreement.
- -----------
"Management Subscription Agreement" means the Management Subscription
---------------------------------
Agreement, dated September 1, 1994, by and among the Company and the
stockholders listed on the signature page thereto.
-4-
<PAGE>
"Material Adverse Effect" means any circumstances or event that (i)
-----------------------
has, or may be reasonably expected to have, any materially adverse effect upon
the validity or enforceability of this Agreement or any of the other
Recapitalization Documents or (ii) is, or may be reasonably expected to be,
materially adverse to the business or operations of the Company and its
subsidiaries, taken as a whole.
"MCIT" has the meaning specified in the preamble to this Agreement.
----
"Non-Voting Common Stock" means the Company's non-voting common stock,
-----------------------
par value $.01 per share after giving effect to the Recapitalization.
"Offerings" shall mean the concurrent public offerings of Senior Notes
---------
and Units pursuant to the Registration Statement.
"Option Agreements" mean the Stock Option Agreements, dated September
-----------------
1, 1994, between the Company and each of Scott Vasatka and Donald Stahurski.
"Osborn" has the meaning specified in the preamble to this Agreement.
------
"Parties" has the meaning specified in the preamble to this Agreement.
-------
"Person" means any individual, corporation, partnership, joint
------
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof or any other entity.
"PMI" has the meaning specified in the preamble to this Agreement.
---
"Preferred Stock" means the Company's Class A\\1\\ Preferred Stock,
---------------
Class A\\2\\ Preferred Stock, Class B Preferred Stock and Senior Preferred
Stock.
"Preferred Stockholders" has the meaning specified in the preamble to
----------------------
this Agreement.
"Pricing Committee" means the Pricing Committee of the Company's Board
-----------------
of Directors, established in connection with the Offerings, and composed of
Messrs. Caputo and Jaro.
"Recapitalization" has the meaning specified in the recitals to this
----------------
Agreement.
"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.
-5-
<PAGE>
"Reclassification" has the meaning set forth in recitals to this
----------------
Agreement.
"Registration Statement" has the meaning set forth in the recitals to
----------------------
this Agreement.
"Seller Notes" has the meaning specified in the recitals to this
------------
Agreement.
"Senior Notes" has the meaning specified in the recitals to this
------------
Agreement.
"Senior Subordinated Notes" has the meaning specified in the recitals
-------------------------
to this Agreement.
"Stock Split" has the meaning specified in the recitals to this
-----------
Agreement.
"Stockholder Chart" means the stockholder chart described in Section
----------------- -------
2.3 and set forth as Exhibit G hereto.
- --- ---------
"Stockholders" means the Common Stockholders, PMI and the Preferred
------------
Stockholders.
"Stockholders Agreement" means the Stockholders Agreement, dated as of
----------------------
September 1, 1994, as amended by Consent and Amendment No. 1 to the Stockholders
Agreement, dated as of November 30, 1994, as further amended by Waiver and
Amendment No. 2 to the Stockholders Agreement, dated as of February 7, 1996, and
as further amended and restated by the Amended and Restated Stockholders
Agreement.
"Subordinated Notes" has the meaning specified in the recitals to
------------------
this Agreement.
"Termination Date" means January 31, 1997.
----------------
"TJC" has the meaning specified in the preamble to this Agreement.
---
"Underwriting Agreements" means the Underwriting Agreements, to be
-----------------------
entered into by the Company and the Underwriters in connection with the
Offerings.
"Underwriters" means Donaldson, Lufkin & Jenrette Securities
------------
Corporation and Jeffries & Company Inc., as representatives, on behalf of
themselves and the other underwriters named in the Underwriting Agreements.
-6-
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the other Parties to
this Agreement, as of the Closing Time, as follows:
Section 2.1. Due Authorization. The Company is a duly organized,
-----------------
validly existing corporation under the laws of the State of Delaware. Each of
this Agreement and the other Recapitalization Documents have been duly
authorized, executed and delivered by the Company and each of this Agreement and
such other Recapitalization Documents is a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
enforceability of creditors' rights generally and by general principles of
equity (whether arising under a proceeding at law or in equity). The Amended
and Restated Company Charter has been duly filed with the Secretary of State of
the State of Delaware.
Section 2.2. Authority; No Conflicts. The Company has the corporate
-----------------------
power and authority and the legal right to make, deliver and perform, and has
taken all necessary corporate action to authorize the transactions contemplated
by this Agreement and the other Recapitalization Documents, and to conduct its
business as described in the Registration Statement. Neither the execution and
delivery of this Agreement or the other Recapitalization Documents nor the
consummation of any of the transactions contemplated herein or therein nor
compliance with the terms and provisions hereof or thereof (a) violates or will
violate any law or regulation or any order or decree of any court or government
instrumentality applicable to the Company or any of its subsidiaries or
properties, except such violations as would not, in the aggregate, have a
Material Adverse Effect, or (b) conflicts with or would result in the breach of,
or constitutes a default under, any contract, lease, indenture, loan agreement,
mortgage, deed of trust or other agreement or instrument to which the Company or
any of its subsidiaries, is a party or by which any of them or any of their
respective assets may be bound, except such conflicts, breaches or defaults as
have been waived or consents therefor have been obtained or such conflicts,
breaches or defaults as would not, in the aggregate, have a Material Adverse
Effect. Except as contemplated herein, no consent, approval, authorization or
order is presently required in connection with the execution and delivery of
this Agreement or the Recapitalization Documents by the Company or the
consummation of the transactions contemplated hereby or thereby that has not
been obtained, except for such consents, approvals, authorizations or orders as
would not, in the aggregate, have a Material Adverse Effect.
-7-
<PAGE>
Section 2.3. Capital Stock.
-------------
(a) At the Closing Time, the Company's authorized capital stock shall
consist of 4,000,000 shares of Common Stock, 300,000 shares of Non-Voting Common
Stock and 2,607,000 shares of Preferred Stock, including 7,500 shares of
existing Preferred Stock, and 2,500,000 shares of Senior Preferred Stock and
100,000 shares of undesignated Preferred Stock. At the Closing Time but prior
to the consummation of the Offerings, the Company shall have 893,290 shares of
Common Stock outstanding and 1,207,500 shares of Preferred Stock outstanding.
(b) Set forth on the Stockholder Chart is a true, complete and
correct chart showing, among other things, the record ownership of the Company's
Equity Securities prior to the Recapitalization.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE OTHER PARTIES
Each of the Parties to this Agreement (other than the Company and
Enterprises) represents and warrants, severally as to themselves and not
jointly, to each of the other Parties to this Agreement, as of the Closing Time,
as follows:
Section 3.1. Due Authorization. Each of this Agreement and the other
-----------------
Recapitalization Documents to which such Party is a party have been duly
authorized, executed and delivered by such Party, as required, and each of this
Agreement and such other Recapitalization Documents is a legal, valid and
binding obligation of such Party, enforceable against such Party, in accordance
with its terms, except as enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforceability of creditors' rights generally and by general
principles of equity (whether arising under a proceeding at law or in equity).
Section 3.2. Authority; No Conflicts. Such Party has the power and
-----------------------
authority and the legal right to make, deliver and perform, and has taken all
necessary corporate action to authorize the transactions contemplated by, this
Agreement and the other Recapitalization Documents to which such Party is a
party. Neither the execution and delivery of this Agreement or such
Recapitalization Documents nor the consummation of any of the transactions
contemplated herein or therein nor compliance with the terms and provisions
hereof or thereof (a) violates or will violate any law or regulation or any
order or decree of any court or government instrumentality applicable to such
Party, except such violations as 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
-8-
<PAGE>
party or by which they or any of their respective assets may be bound, except
such conflicts, breaches or defaults as have been waived or consents therefor
have been obtained or such conflicts, breaches or defaults as would not, in the
aggregate, have a Material Adverse Effect. No consent, approval, authorization
or order of any governmental authority is presently required in connection with
the execution and delivery of this Agreement or the Recapitalization Documents
by such Party or the consummation of the transactions contemplated hereby or
thereby that has not been obtained.
Section 3.3. Capital Stock. Such Party, if a Stockholder, is the
-------------
record and beneficial owner of the Company's Equity Securities ascribed to such
Party in the Stockholder Chart and beneficially owns such Equity Securities free
and clear of any Liens, other than such as may be created under the Stockholders
Agreement.
ARTICLE IV
THE CLOSING
Section 4.1. Closing. Upon satisfaction of the conditions set forth
-------
herein, the transactions contemplated by this Agreement, other than those
contemplated by Sections 5.2, 5.3, 5.4(a), 5.10 and 5.12 which will be deemed
------------ --- ------ ---- ----
consummated at the times set forth therein, shall be consummated at the closing
(the "Closing") thereof, which shall occur on the closing date of the Offerings
-------
(the "Closing Time") at the offices of Mayer, Brown & Platt, New York, New York,
------------
or at such other place as shall be agreed upon by the Stockholders and the
Company. All of the transactions contemplated by this Agreement shall be deemed
to have been consummated simultaneously and none of such transactions shall be
deemed consummated unless all of such transactions are consummated.
Notwithstanding the foregoing, if the Closing does not occur by the Termination
Date, none of the Parties hereto shall have any obligations under Article V or
---------
otherwise under this Agreement or any Exhibits attached hereto.
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.
-9-
<PAGE>
Section 5.2. Amended Charter Documents.
-------------------------
(a) Prior to the effective date of the Registration Statement, the
Amended and Restated Company Charter that provides for, among other things, the
authorization of 92,500 shares of undesignated Preferred Stock will be duly
approved and adopted as the Charter of the Company and filed by the Company with
the Secretary of State of the State of Delaware.
In the event the Closing does not occur by the Termination Date, then
the Stockholders hereby consent, and the Company hereby agrees, without any
further action by the Stockholders, to promptly effect an amendment to the
Amended and Restated Company Charter so that it is identical to the Company's
certificate of incorporation in effect as of the date hereof.
(b) At or prior to the Closing, the Amended and Restated Company By-
Laws will be duly approved and adopted as the By-Laws of the Company.
(c) Prior to the Closing Time, the Certificate of Designation will be
filed by the Company with the Secretary of State of the State of Delaware.
(d) Prior to the effective date of the Registration Statement, BKC
will consent to the adoption by the Company of those documents referred to in
Sections 5.2(a), 5.2(b) and 5.2(c) of this Agreement.
- --------------- ------ ------
Section 5.3. Reclassification and Stock Split.
--------------------------------
(a) Effective simultaneously upon the filing of the Amended and
Restated Company Charter, the Reclassification shall be effected and (i) each
share of Class A Common Stock, Class C Common Stock and Class D Common Stock
currently issued and outstanding shall be converted into a like number of shares
of Common Stock and (ii) each share of Class B Common Stock currently issued and
outstanding shall be converted into a like number of shares of Non-Voting Common
Stock. Upon written notice, holders of the Class A Common Stock, Class C Common
Stock or Class D Common Stock shall deliver their stock certificates to the
Company for cancellation and such certificates that are not so delivered will
thereafter represent the right to receive a new certificate or certificates
representing an equivalent number of shares of Common Stock or Non-Voting Common
Stock, as the case may be, subject to the effect of the Stock Split.
(b) the Stock Split shall be consummated and each holder of shares of
capital stock of the Company shall be entitled to receive a new certificate or
certificates representing the appropriate number of shares of Common Stock or
Non-Voting Common Stock, as the case may be.
-10-
<PAGE>
(c) As a result of the Reclassification and the Stock Split, if any
fractional interest in a share of Common Stock or Non-Voting Common Stock, as
the case may be, would be deliverable, the Company, in lieu of delivering the
fractional share, shall pay an amount to the holder thereof equal to the fair
market value of such fractional interest as determined by the Board of
Directors.
Section 5.4. Issuance of Securities.
----------------------
(a) At or prior to the effective date, the Stockholders, will have
consented to the Offerings and to the execution and delivery of the Underwriting
Agreements by the Company to the Underwriters.
(b) At the Closing the Company and the Underwriters will consummate
the Offerings pursuant to the terms of the Underwriting Agreements and the
Company will issue the Senior Notes, the Units, the Senior Preferred Stock and
the Common Stock.
Section 5.5. Repayment of Credit Agreement Borrowings.
----------------------------------------
(a) At the Closing, the Company will use a portion of the net
proceeds from the Offerings to repay the entire outstanding aggregate principal
amount of the Term Loan A facility, Term Loan B facility and Revolving Credit
facility (each as defined in the Credit Agreement) plus accrued interest and any
other amounts owed thereon through the Closing Date. At the Closing, the
lenders under the Credit Agreement, will deliver to the Company the notes
evidencing the principal amount of the Term Loan A facility and the Term Loan B
facility held by such lenders to be repaid together with written instructions to
complete the repayment.
Section 5.6. Subordinated Note Repurchase.
----------------------------
(a) At the Closing, the Company will use a portion of the net
proceeds from the Offerings to repurchase at a minimum of 105% of the principal
amount the entire outstanding aggregate principal amount of the Senior
Subordinated Notes plus the applicable prepayment premium and will pay accrued
interest thereon through the Closing Time. Upon repurchase by the Company, such
notes shall cease to accrue interest and the Company's obligations thereunder
shall be cancelled. At the Closing, the holders of the Senior Subordinated
Notes will deliver to the Company the note(s) evidencing the principal amount of
Senior Subordinated Notes held by such holder to be repurchased, together with
written instructions to complete such repurchase.
(b) At the Closing, the Company will use a portion of the net
proceeds from the Offerings to repurchase at 100% of the principal amount the
entire outstanding aggregate 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
-11-
<PAGE>
and the Company's obligations thereunder shall be cancelled. At the Closing,
the holders of the Subordinated Notes will deliver to the Company the note(s)
evidencing the principal amount of Subordinated Notes held by such holder to be
repurchased, together with written instructions to complete such repurchase.
(c) At the Closing, the Company will use a portion of the net
proceeds from the Offerings to repurchase at 100% of the principal amount the
entire outstanding aggregate principal amount of the Seller Notes from the
holders thereof and will pay 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 Seller Notes will deliver to the Company the notes evidencing the
principal amount of Seller Notes held by such holder to be repurchased, together
with written instructions to complete such repurchase.
Section 5.7. Repurchase of Warrants. At the Closing, the Company
----------------------
will repurchase all of the warrants issued to PMI pursuant to Section 18 of the
Common Stock Purchase Warrants, dated February 7, 1996, issued by the Company,
pursuant to a repurchase agreement substantially in the form of Exhibit H.
---------
Section 5.8. Osborn Employment Agreement. At or prior to the
---------------------------
Closing, Mr. Osborn will enter into a new Employment and Non-Interference
Agreement in substantially the form of Exhibit I hereto.
---------
Section 5.9. Directors Indemnification Agreements. At the Closing,
------------------------------------
the Company will enter into the Directors Indemnification Agreements with each
of the signatories to the Registration Statement in substantially the form of
Exhibit F hereto.
- ---------
Section 5.10. 1996 Annual Meeting of Stockholders. The Parties
-----------------------------------
hereby agree to execute and deliver stockholder consents, substantially in the
form of Exhibit J hereto, with regard to (a) the Amended and Restated Company
---------
Charter, (b) the Amended and Restated Company By-Laws, (c) the Reclassification,
(d) the Stock Split, (e) the Recapitalization Agreement and Recapitalization
Documents, (f) the election of directors of the Company as reasonably requested
by the Company, (g) the ratification of the appointment of accountants and (h)
such other matters as the Pricing Committee shall determine to submit for
stockholder approval. The Parties hereto hereby agree and acknowledge that such
stockholder consents shall serve as and constitute the Company's 1996 Annual
Meeting of Stockholders.
Section 5.11. Amended and Restated Stockholders Agreement. At the
-------------------------------------------
Closing, the Company and the Stockholders will execute, deliver and consummate
the Amended and Restated Stockholders Agreement.
-12-
<PAGE>
Section 5.12. Amendment to Management Subscription Agreement.
----------------------------------------------
Effective upon the filing of the Amended and Restated Company Charter, the
Company, Jaro and affiliates of Jaro and the Management Investors Subscription
will execute, deliver and consummate Amendment No. 1 to the Management
Agreement.
Section 5.13. Amendment to Option Agreements. Effective upon the
------------------------------
filing of the Amended and Restated Company Charter, the Company, Enterprises,
Scott E. Vasatka and Donald Stahurski will execute, deliver and consummate the
Amendment No. 1 to the Option Agreements.
ARTICLE VI
CONDITIONS OF THE PARTIES'
(OTHER THAN THE COMPANY AND ENTERPRISES) OBLIGATIONS
Section 6.1. Conditions of the Stockholders' Obligations. The
-------------------------------------------
obligation of each of the Parties (other than the Company and Enterprises) on
the Closing Time to consummate the transactions contemplated by Article V of
---------
this Agreement will be subject to the prior or concurrent satisfaction on the
Closing Time of the following conditions:
(a) Representations and Warranties; Agreements; No Default. The
------------------------------------------------------
representations and warranties of the Company set forth in this Agreement
will be true in all material respects at and as if repeated on and as of
the Closing Time after giving effect to the transactions contemplated
hereby; and the Company will have executed, delivered and consummated all
Recapitalization Documents on its part to be performed pursuant to this
Agreement on or prior to the Closing Time.
(b) Certificate as to Representations, Etc. The Parties (other than
--------------------------------------
the Company and Enterprises) will each have received an Officers'
Certificate signed by the Chief Executive Officer and the Chief Financial
Officer of the Company, addressed to the Parties (other than the Company
and Enterprises) and dated as of the date of the Closing, certifying the
accuracy of the statements set forth in clause (a) above.
(c) Recapitalization and Recapitalization Documents. (a) Each of
-----------------------------------------------
the other Parties to the Recapitalization Documents will have executed,
delivered and consummated the Recapitalization Documents to which they are
parties, (b) the Offerings will close concurrently with the Closing
hereunder and (c) the Recapitalization will have been consummated.
-13-
<PAGE>
(d) Closing Papers. The Parties will have received copies of the
--------------
following:
(i) copies of the resolutions adopted by the Board of Directors
and stockholders of the Company authorizing the execution, delivery
and performance of this Agreement and each of the Recapitalization
Documents and the other transactions contemplated hereby;
(ii) copies of each of the Recapitalization Documents; and
(iii) an incumbency certificate in respect of officers of the
Company executing the Recapitalization Documents, a standard good
standing certificate from the Secretary of the State of Delaware in
respect of the Company, and such other customary and standard
documents reasonably requested by any of the Parties.
ARTICLE VII
CONDITIONS OF THE COMPANY'S OBLIGATIONS
Section 7.1. Conditions of the Company's Obligations. The obligation of
---------------------------------------
the Company on the Closing Time to consummate the transactions contemplated by
this Agreement will be subject to the prior or concurrent satisfaction on the
Closing Time of the following conditions:
(a) Representations and Warranties; Agreements. The representations
------------------------------------------
and warranties of the other Parties set forth in this Agreement shall be
true in all material respects at and as if repeated on and as of the
Closing Time after giving effect to the transactions contemplated hereby
and the other Parties will have performed all agreements on their part to
be performed pursuant to this Agreement on or prior to the Closing Time.
(b) Recapitalization and Recapitalization Documents. (a) Each of
-----------------------------------------------
the other Parties to the Recapitalization Documents will have executed,
delivered and consummated the Recapitalization Documents to which they are
parties, (b) the Offerings will be consummated, (c) the Recapitalization
will have been consummated and (d) BKC shall have delivered a written
consent to the Company with respect to the matters set forth in Section
5.2(d) of this Agreement.
(c) Consummation of the Offerings. The Offerings shall have been
-----------------------------
consummated substantially in accordance with the terms set forth in the
Registration Statement.
-14-
<PAGE>
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Waiver of First Refusal, Anti-Dilution Rights and
-------------------------------------------------
Registration Rights. Each of the Parties (i) waives any right of first refusal
- -------------------
it may have from the issuance and sale of the Units, Senior Preferred Stock or
Common Stock in the Offerings, including, but not limited to, any prior notice
or response periods any Party may be entitled to, (ii) waives any right it may
have to anti-dilution adjustment of its Equity Securities (including any
warrants or options to purchase any Equity Securities) arising from the issuance
and sale of the Units, Senior Preferred Stock or Common Stock in the Offerings;
provided that such waiver shall not apply to any adjustments required as a
result of the Stock Split and (iii) waives any "piggyback registration rights"
it may have and related notice requirements as a result of the Offerings.
Section 8.2. Power of Attorney.
-----------------
(a) Each of the Jordan Investors hereby appoints A. Richard Caputo,
Jr., or his designee, to serve as his 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 appoints Lawrence Jaro,
or his designee, to serve as his agent and attorney-in-fact (the "Management
----------
Investors' Representative"), with full power and authority (including power of
- -------------------------
substitution), in the name of and for an on behalf of each of the Management
Investors, or in its own name as the Management Investors' Representative, to
take all actions required or permitted under this Agreement and in connection
with the transactions contemplated hereby (including, without limitation, the
execution and delivery of each of the Recapitalization Documents and to effect
all of the transactions set forth in Article V hereof). The authority conferred
hereby shall be an agency coupled with an interest, and all authority conferred
hereby is irrevocable and not subject to termination by any of the Management
Investors, or by operation of law, whether by the death or incapacity of any of
the Management Investors, or the occurrence of any
-15-
<PAGE>
other event. Any notice given to the Management Investors' Representative shall
constitute effective notice to each of the Management Investors, and any other
party to this Agreement or any other Person may rely on any notice, consent,
election or other communication received from the Management Investors'
Representative as if such notice, consent, election or other communication had
been received from each of the Management Investors.
(c) The Jordan Investors' Representative and the Management
Investors' Representative shall have no duties or responsibilities except those
expressly set forth herein. The Jordan Investors' Representative and the
Management Investors' Representative shall be held harmless by the Jordan
Investors and the Management Investors, as the case may be, from any liability,
loss, claim, demand or expense (including attorney's fees and expenses) arising
out of or in connection with the performance of their obligations in accordance
with this Agreement, except for any of the foregoing arising out of the gross
negligence or willful misconduct of the Jordan Investors' Representative and the
Management Investors' Representative, as the case may be. The foregoing
provision shall survive the resignation or substitution of the Jordan Investors'
Representative or the Management Investors' Representative, as the case may be,
or the termination of this Agreement.
Section 8.3. Notices. Subject to Section 8.2 hereof, all notices and
-------
other communications pertaining to this Agreement shall be in writing and shall
be delivered in person with receipt acknowledged, or telecopied and confirmed
immediately in writing by a copy mailed by registered or certified mail, return
receipt requested, postage prepaid, addressed as hereafter set forth, or mailed
by registered or certified mail, return receipt requested, postage prepaid, to
the address set forth under the respective party's name on the signature pages
to this Agreement, or to such other person or address as shall be furnished to
the other party in compliance with this Section.
Section 8.4. Consent to Amendments and Waivers. The provisions of this
---------------------------------
Agreement may be amended only if the Company has obtained the written consent of
the holders of a majority of the Equity Securities (as if each share was
accorded one vote), provided that (a) any adjustments to the Recapitalization
Documents and the Recapitalization generally resulting from the determination of
the interest rate of the Senior Notes or Senior Preferred Stock or the number of
shares of Units, Senior Preferred Stock or Common Stock to be issued in the
Offerings will not be considered amendments, and (b) waivers, supplements and
modifications with regard to the representations and warranties in this
Agreement will not be considered amendments.
Section 8.5. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of New York.
Section 8.6. Successors and Assigns. Whenever in this Agreement any of
----------------------
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants and agreements of the
Company contained herein shall bind its successors and assigns. The Company may
not assign or transfer any of its rights or
-16-
<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.
-17-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto as Common Stockholders have duly
executed this Agreement as of the date first above written.
AMERIKING, INC.
By:
------------------------------------------
Name:
Title:
Address:
NATIONAL RESTAURANT
ENTERPRISES, INC.
By:
------------------------------------------
Name:
Title:
Address:
MCIT PLC
By:
------------------------------------------
Name:
Title:
Address:
BANCBOSTON INVESTMENTS INC.
By:
------------------------------------------
Name:
Title:
Address:
-18-
<PAGE>
PMI MEZZANINE FUND, L.P.,
a Delaware limited partnership
PACIFIC MEZZANINE INVESTORS, L.L.C.
a Delaware limited liability company,
its General Partner
By:
------------------------------------------
Name:
Title:
Address:
JORDAN INVESTORS:
JORDAN/ZALAZNICK CAPITAL COMPANY
By:
------------------------------------------
Name:
Title:
LEUCADIA INVESTORS, INC.
By:
------------------------------------------
Name:
Title:
-19-
<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
-20-
<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
-21-
<PAGE>
PAUL RODZEVIK PROFIT SHARING PLAN
AND TRUST
By:
----------------------------------------------
Name: Paul Rodzevik
Title: Trustee
----------------------------------------------
Dennis Hogerty
----------------------------------------------
Jerald Dunn
JII PARTNERS
By:
----------------------------------------------
Name:
Title:
-22-
<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
-23-
<PAGE>
JARO INVESTORS:
TABOR RESTAURANTS ASSOCIATES, INC.
By:
----------------------------------------------
Name: Lawrence Jaro
Title: President
JARO ENTERPRISES, INC.
By:
----------------------------------------------
Name: Lawrence Jaro
Title: President
JARO RESTAURANTS ASSOCIATES, INC.
By:
----------------------------------------------
Name: Lawrence Jaro
Title: President
JB RESTAURANTS, INC.
By:
----------------------------------------------
Name: Lawrence Jaro
Title: President
-24-
<PAGE>
OSBORN INVESTORS:
OSBURGER, INC.
By:
----------------------------------------------
Name: William Osborn
Title: President
CASTLEKING, INC.
By:
----------------------------------------------
Name: William Osborn
Title: President
WHITE-OSBORN RESTAURANTS, INC.
By:
----------------------------------------------
Name: William Osborn
Title: President
----------------------------------------------
Thomas H. Quinn
TJC MANAGEMENT CORPORATION
By:
----------------------------------------------
Name:
Title:
-25-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto as Preferred Stockholders have duly
executed this Agreement as of the date first written above.
MCIT PLC
By:
----------------------------------------------
Name:
Title:
Address:
BANCBOSTON INVESTMENTS INC.
By:
----------------------------------------------
Name:
Title:
Address:
LEUCADIA INVESTORS, INC.
By:
----------------------------------------------
Name:
Title:
JOHN W. JORDAN, II REVOCABLE TRUST
----------------------------------------------
Name: John W. Jordan, II
Title: Trustee
----------------------------------------------
David W. Zalaznick
-26-
<PAGE>
----------------------------------------------
Jonathan F. Boucher
----------------------------------------------
John R. Lowden
----------------------------------------------
Adam E. Max
JARO INVESTORS:
TABOR RESTAURANTS ASSOCIATES, INC.
By:
----------------------------------------------
Name: Lawrence Jaro
Title: President
JARO ENTERPRISES, INC.
By:
----------------------------------------------
Name: Lawrence Jaro
Title: President
JARO RESTAURANTS ASSOCIATES, INC.
By:
----------------------------------------------
Name: Lawrence Jaro
Title: President
-27-
<PAGE>
JB RESTAURANTS, INC.
By:
----------------------------------------------
Name: Lawrence Jaro
Title: President
OSBORN INVESTORS:
OSBURGER, INC.
By:
----------------------------------------------
Name: William Osborn
Title: President
CASTLEKING, INC.
By:
----------------------------------------------
Name: William Osborn
Title: President
WHITE-OSBORN RESTAURANTS, INC.
By:
----------------------------------------------
Name: William Osborn
Title: President
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<PAGE>
EXHIBIT A
AMENDED AND RESTATED COMPANY BY-LAWS
<PAGE>
EXHIBIT B
AMENDED AND RESTATED COMPANY CHARTER
<PAGE>
EXHIBIT C
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
<PAGE>
EXHIBIT D
AMENDMENT NO. 1 TO OPTION AGREEMENT
<PAGE>
EXHIBIT E
AMENDMENT NO. 1 TO MANAGEMENT SUBSCRIPTION AGREEMENT
<PAGE>
EXHIBIT F
INDEMNIFICATION AGREEMENT
<PAGE>
EXHIBIT G
STOCKHOLDER CHART
<PAGE>
EXHIBIT H
PMI WARRANT REPURCHASE AGREEMENT
TO COME
<PAGE>
EXHIBIT I
RESTATED OSBORN EMPLOYMENT AND NON-DISCLOSURE AGREEMENT
<PAGE>
EXHIBIT J
STOCKHOLDER WRITTEN CONSENT IN LIEU OF 1996 ANNUAL MEETING
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINITIONS
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 2.1. Due Authorization............................................ 7
Section 2.2. Authority; No Conflicts...................................... 7
Section 2.3. Capital Stock................................................ 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE OTHER PARTIES
Section 3.1. Due Authorization............................................ 8
Section 3.2. Authority; No Conflicts...................................... 8
Section 3.3. Capital Stock................................................ 9
ARTICLE IV
THE CLOSING
Section 4.1. Closing...................................................... 9
ARTICLE V
THE RECAPITALIZATION
Section 5.1. General...................................................... 9
Section 5.2. Amended Charter Documents.................................... 10
Section 5.3. Reclassification and Stock Split............................. 10
Section 5.4. Issuance of Securities....................................... 11
Section 5.5. Repayment of Credit Agreement Borrowings..................... 11
Section 5.6. Subordinated Note Repurchase................................. 11
Section 5.7. Repurchase of Warrants....................................... 12
Section 5.8. Osborn Employment Agreement.................................. 12
Section 5.9. Directors Indemnification Agreements......................... 12
Section 5.10. 1996 Annual Meeting of Stockholders......................... 12
</TABLE>
i
<PAGE>
<TABLE>
Page
<S> <C>
Section 5.11. Amended and Restated Stockholders Agreement................. 12
Section 5.12. Amendment to Management Subscription Agreement.............. 13
Section 5.13. Amendment to Option Agreements.............................. 13
ARTICLE VI
CONDITIONS OF THE PARTIES'
(OTHER THAN THE COMPANY AND ENTERPRISES) OBLIGATIONS
Section 6.1. Conditions of the Stockholders' Obligations.................. 13
ARTICLE VII
CONDITIONS OF THE COMPANY'S OBLIGATIONS
Section 7.1. Conditions of the Company's Obligations...................... 14
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Waiver of First Refusal, Anti-Dilution Rights
and Registration Rights.................................... 15
Section 8.2. Power of Attorney............................................ 15
Section 8.3. Notices...................................................... 16
Section 8.4. Consent to Amendments and Waivers............................ 16
Section 8.5. Governing Law................................................ 16
Section 8.6. Successors and Assigns....................................... 16
Section 8.7. Survival..................................................... 17
</TABLE>
ii
<PAGE>
EXHIBITS
A Amended and Restated Company By-Laws
B Amended and Restated Company Charter
C Amended and Restated Stockholders Agreement
D Amendment No. 1 to Option Agreement
E Amendment No. 1 to Management Subscription Agreement
F Indemnification Agreement
G Stockholder Chart
H PMI Warrant Repurchase Agreement
I Restated Osborn Employment and Non-Disclosure Agreement
J Stockholder Written Consent in Lieu of 1996 Annual Meeting
<PAGE>
- --------------------------------------------------------------------------------
SECOND AMENDMENT
TO SECOND AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT, AMENDMENT TO SECURITY
DOCUMENTS AND LIMITED WAIVER
- --------------------------------------------------------------------------------
Second Amendment dated as of May 13, 1996 to Second Amended and
Restated Revolving Credit and Term Loan Agreement, Amendment to Security
Documents and Limited Waiver (the "Second Amendment"), by and among NRE
HOLDINGS. INC., a Delaware corporation ("Holdings"), NATIONAL RESTAURANT
ENTERPRISES, INC., a Delaware corporation (the "Borrower"), THE FIRST NATIONAL
BANK OF BOSTON and the other lending institutions listed on Schedule 1 to the
Credit Agreement (as hereinafter defined) (the "Banks") and THE FIRST NATIONAL
BANK OF BOSTON, as agent for the Banks (in such capacity, the "Agent"), amending
and, as the case may be, waiving certain provisions of (a) the Second Amended
and Restated Revolving Credit and Term Loan Agreement dated as of February 7,
1996 (as amended and in effect from time to time, the "Credit Agreement") by and
among Holdings, the Borrower, the Banks and the Agent, (b) the Security
Agreement dated as of September 1, 1994 between the Borrower and the Agent (as
amended and in effect from time to time, the "Borrower Security Agreement") and
(c) the Security Agreement dated as of February 7, 1996 among AmeriKing Virginia
Corporation I ("AmeriKing Virginia"), AmeriKing Cincinnati Corporation I
("AmeriKing Cincinnati", and, collectively with AmeriKing Virginia, the
"Subsidiaries") and the Agent (as amended and in effect from time to time, the
"Subsidiary Security Agreement", and, collectively with the Borrower Security
Agreement, the "Security Agreements"). Terms not otherwise defined herein which
are defined in the Credit Agreement shall have the same respective meanings
herein as therein.
WHEREAS, Holdings, the Borrower, the Subsidiaries, the Banks and the
Agent have agreed to modify certain terms and conditions of the Credit Agreement
and the Security Agreements, as the case may be, as specifically set forth in
this Second Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ss.1. Amendment to ss.1 of the Credit Agreement. Section 1.1 of the
Credit Agreement is hereby amended by deleting the definition of "Eligible
Assignee" in its entirety and restating it as follows:
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 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
<PAGE>
-2-
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
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.
ss.2. to Amendment ss.6 of the Credit Agreement. Section 6.7 of the
Credit Agreement is hereby amended by (a) deleting the words "such certificates,
documents or other evidence, as required by the Code or Treasury Regulations
issued pursuant thereto, including" from ss.6.7 and inserting in place thereof a
comma and the words "(x) if such Bank is a "bank" within the meaning of Section
881(c)(3)(A) of the Code,"; and (b) inserting immediately after the words
"subject to a reduced rate of such tax under a provision of an applicable tax
treaty" the words "; 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 J 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."
ss.3. Amendment to ss.14 of the Credit Agreement. Section 14.4(b) of
the Credit Agreement is hereby amended by deleting ss.14.4(b) in its entirety
and restating it as follows:
(b) second, to all other Obligations on a pro rata basis;
provided, however, that distributions in respect of such Obligations
shall be made pari passu among (i) Obligations with respect to the
Agent's Fee payable pursuant to ss.6.2 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;
ss.4. Amendment to ss.20.1 of the Credit Agreement. Section 20.1 of the
Credit Agreement is hereby amended by deleting the words "each assignment shall
be in an amount no less than $5,000,000, or a larger integral multiple of
$1,000,000" from ss.20.1(c) and substituting in place thereof the words "each
assignment shall be in amount of no less than $4,000,000, 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".
ss.5. Amendment to Credit Agreement. The Credit Agreement is further
amended by inserting immediately after Exhibit I the Exhibit J annexed hereto.
<PAGE>
-3-
ss.6. Amendment to Security Documents. Section 17 of each of the
Security Agreements is hereby amended by deleting the words "in such order or
preference as the Bank may determine or" from the second sentence of ss.17 of
each Security Agreement.
ss.7. Limited Waiver. The parties hereto hereby acknowledge that, prior
to the effectiveness of this Second Amendment, pursuant to ss.20.1 of the Credit
Agreement, each assignment shall be in an amount of not less than $5,000,000,
and, after the effectiveness of this Second Amendment, each assignment shall be
in an amount of not less than $4,000,000. The parties hereto hereby agree that
for purposes of effecting an assignment by The First National Bank of Boston and
Heller Financial, Inc. to Merrill Lynch Prime Rate Portfolio ("Merrill Lynch")
pursuant to an Assignment and Acceptance dated or to be dated on or prior to May
14, 1996, the provisions of ss.20.1 of the Credit Agreement are hereby waived
solely to permit The First National Bank of Boston to assign $3,500,000 of its
interest in the Loans to Merrill Lynch and solely to permit Heller Financial,
Inc. to assign $500,000 of its interest in the Loans to Merrill Lynch.
ss.8. Conditions to Effectiveness. This Second Amendment shall not
become effective until the Agent receives, on or prior to May 13, 1996, a
counterpart of this Second Amendment executed by Holdings, the Borrower, the
Subsidiaries, the Majority Banks and the Agent.
ss.9. Representations and Warranties. Each of Holdings and the Borrower
hereby repeats, on and as of the date hereof, each of the representations and
warranties made by it in ss.8 of the Credit Agreement, provided, that all
references therein to the Credit Agreement shall refer to such Credit Agreement
as amended hereby. Each of the Borrower and the Subsidiaries hereby repeats, on
and as of the date hereof, each of the representations and warranties made by it
in the Security Agreements, provided, that all references therein to the
Security Agreements shall refer to such Security Agreement as amended hereby. In
addition, each of Holdings, the Borrower and each Subsidiary hereby represents
and warrants that the execution and delivery by Holdings, the Borrower and each
Subsidiary of this Second Amendment and the performance by Holdings, the
Borrower and each Subsidiary of all of their agreements and obligations under
the Credit Agreement and the Security Agreements as amended hereby are within
the corporate authority of each of Holdings, the Borrower and such Subsidiary
and have been duly authorized by all necessary corporate action on the part of
each of Holdings, the Borrower and such Subsidiary.
ss.10. Ratification, Etc. Except as expressly amended hereby, the
Credit Agreement and all documents, instruments and agreements related thereto,
including, but not limited to the Security Documents, are hereby ratified and
confirmed in all respects and shall continue in full force and effect. The
Credit Agreement and this Second Amendment and each of the Security Agreements
and this Second Amendment shall be read and construed as a single agreement. All
references in the Credit Agreement or any related agreement or instrument to the
Credit Agreement shall hereafter refer to the Credit Agreement as amended
hereby, and all references in each of the Security Agreements or any related
agreement or instrument to such Security Agreement shall hereafter refer to such
Security Agreement as amended hereby.
ss.11. No Waiver. Except as expressly set forth in ss.6 hereof, nothing
contained herein shall constitute a waiver of, impair or otherwise affect any
Obligations, any other obligation of Holdings, the Borrower or any rights of the
Agent or the Banks consequent thereon.
<PAGE>
-4-
ss.12. Counterparts. This Second Amendment may be executed in one or
more counterparts, each of which shall be deemed an original but which together
shall constitute one and the same instrument.
ss.13. Governing Law. THIS SECOND AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
[Remainder of Page Intentionally Left Blank]
<PAGE>
-5-
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as a document under seal as of the date first above written.
NRE HOLDINGS, INC.
By: [ILLEGIBLE]
--------------------------------
Title:
NATIONAL RESTAURANT ENTERPRISES, INC.
By: [ILLEGIBLE]
--------------------------------
Title:
AMERIKING VIRGINIA CORPORATION I
By: [ILLEGIBLE]
--------------------------------
Title:
AMERIKING CINCINNATI CORPORATION I
By: [ILLEGIBLE]
--------------------------------
Title:
THE FIRST NATIONAL BANK OF BOSTON,
individually and as Agent
By: ________________________________
Title:
<PAGE>
-5-
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as a document under seal as of the date first above written.
NRE HOLDINGS, INC.
By: ________________________________
Title:
NATIONAL RESTAURANT ENTERPRISES, INC.
By: ________________________________
Title:
AMERIKING VIRGINIA CORPORATION I
By: ________________________________
Title:
AMERIKING CINCINNATI CORPORATION I
By: ________________________________
Title:
THE FIRST NATIONAL BANK OF BOSTON,
individually and as Agent
By: [ILLEGIBLE]
--------------------------------
Title:
<PAGE>
-6-
CAISSE NATIONALE DE CREDIT AGRICOLE
By: [ILLEGIBLE]
--------------------------------
Title: [ILLEGIBLE]
HELLER FINANCIAL, INC.
By: ________________________________
Title:
COMERICA BANK - ILLINOIS
By: ________________________________
Title:
SANWA BUSINESS CREDIT CORPORATION
By: ________________________________
Title:
<PAGE>
-6-
CAISSE NATIONALE DE CREDIT AGRICOLE
By: ________________________________
Title:
HELLER FINANCIAL, INC.
By: [ILLEGIBLE]
--------------------------------
Title: Vice President
COMERICA BANK - ILLINOIS
By: ________________________________
Title:
SANWA BUSINESS CREDIT CORPORATION
By: ________________________________
Title:
<PAGE>
-6-
CAISSE NATIONALE DE CREDIT AGRICOLE
By: ________________________________
Title:
HELLER FINANCIAL, INC.
By: ________________________________
Title:
COMERICA BANK - ILLINOIS
By: [ILLEGIBLE]
--------------------------------
Title: Vice President
SANWA BUSINESS CREDIT CORPORATION
By: ________________________________
Title:
<PAGE>
-6-
CAISSE NATIONALE DE CREDIT AGRICOLE
By: ________________________________
Title:
HELLER FINANCIAL, INC.
By: ________________________________
Title:
COMERICA BANK - ILLINOIS
By: ________________________________
Title:
SANWA BUSINESS CREDIT CORPORATION
By: [ILLEGIBLE]
--------------------------------
Title: 1st Vice President
<PAGE>
-7-
RATIFICATION OF GUARANTY
Each of the undersigned guarantors hereby acknowledges and consents to
the foregoing Second Amendment as of May 13, 1996. and agrees that (a) the
Limited Guaranty dated as of September 1, 1994 (as amended and in effect from
time to time) from Holdings in favor of the Agent for the benefit of the Agent
and the Banks, and (b) the Guaranty dated as of February 7, 1996 from each of
AmeriKing Cincinnati Corporation I and AmeriKing Virginia Corporation I in favor
of the Agent for the benefit of the Agent and the Banks, and all other Loan
Documents to which each of Holdings, AmeriKing Cincinnati Corporation I and
AmeriKing Virginia Corporation I (collectively, the "Guarantors") are a party
remain in full force and effect, and each of the Guarantors confirms and
ratifies all of its obligations thereunder.
NRE HOLDINGS, INC
By: [ILLEGIBLE]
--------------------------------
Title:
AMERIKING CINCINNATI CORPORATION I
By: [ILLEGIBLE]
--------------------------------
Title:
AMERIKING VIRGINIA CORPORATION I
By: [ILLEGIBLE]
--------------------------------
Title:
<PAGE>
ASSIGNMENT AND ACCEPTANCE
Dated as of May 14, 1996
Reference is made to the Second Amended and Restated Revolving Credit
and Term Loan Agreement, dated as of February 7, 1996 (as from time to time
amended and in effect, the "Credit Agreement"), by and among NRE HOLDINGS, INC.,
a Delaware corporation ("Holdings"), NATIONAL RESTAURANT ENTERPRISES, INC., a
Delaware corporation (the "Borrower"), the lending institutions referred to
therein as Banks (collectively, the "Banks"), and THE FIRST NATIONAL BANK OF
BOSTON, a national banking association, as agent (in such capacity, the "Agent")
for the Banks. Capitalized terms used herein and not otherwise defined shall
have the meanings assigned to such terms in the Credit Agreement.
The First National Bank of Boston ("FNBB") and Heller Financial, Inc.
("Heller", and, collectively with FNBB, the "Assignors" and each individually,
an "Assignor"), Deutsche Financial Services Holding Corporation ("Deutsche"),
Banque Paribas ("Paribas"), Merrill Lynch Prime Rate Portfolio ("Merrill Lynch
Portfolio") and Merrill Lynch Senior Floating Rate Fund, Inc. ("Merrill Lynch
Fund", and, collectively with Deutsche, Paribas and Merrill Lynch Portfolio, the
"Assignees" and each individually an "Assignee") hereby agree as follows:
1. Assignment. Subject to the terms and conditions of this Assignment
and Acceptance, FNBB hereby sells and assigns to (a) Deutsche, and Deutsche
hereby purchases and assumes without recourse to FNBB, a $10,000,000 interest in
and to the rights, benefits, indemnities and obligations of FNBB under the
Credit Agreement, equal to 16.67% in respect of the Total Commitment, 16.67% in
respect of the Term Loan A and 0% in respect of the Term Loan B, with a
Commitment Percentage of 10% in respect of all of the Loans immediately prior to
the Effective Date (as hereinafter defined); (b) Paribas, and Paribas hereby
purchases and assumes without recourse to FNBB, a $10,000,000 interest in and to
the rights, benefits, indemnities and obligations of FNBB under the Credit
Agreement, equal to 16.67% in respect of the Total Commitment, 16.67% in respect
of the Term Loan A and 0% in respect of the Term Loan B, with a Commitment
Percentage of 10% in respect of all of the Loans immediately prior to the
Effective Date; (c) Merrill Lynch Portfolio, and Merrill Lynch Portfolio hereby
purchases and assumes without recourse to FNBB, a $3,500,000 interest in and to
the rights, benefits, indemnities and obligations of FNBB under the Credit
Agreement. In addition, subject to the terms and conditions of this Assignment
and Acceptance, Heller hereby sells and assigns to (a) Merrill Lynch Portfolio,
and Merrill Lynch Portfolio hereby
<PAGE>
-2-
purchases and assumes without recourse to Heller, a $500,000 interest in and to
the rights, benefits, indemnities and obligations of Heller under the Credit
Agreement, and, when taken together with the interest purchased by Merrill Lynch
Portfolio from FNBB as referenced above, is equal to 0% in respect of the Total
Commitment, 0% in respect of the Term Loan A and 10% in respect of the Term Loan
B, with a Commitment Percentage of 4% in respect of all of the Loans immediately
prior to the Effective Date (as hereinafter defined); and (b) Merrill Lynch
Fund, and Merrill Lynch Fund hereby purchases and assumes without recourse to
Heller, a $4,000,000 interest in and to the rights, benefits, indemnities and
obligations of Heller under the Credit Agreement, equal to 0% in respect of the
Total Commitment, 0% in respect of the Term Loan A and 10% in respect of the
Term Loan B, with a Commitment Percentage of 4% in respect of all of the Loans
immediately prior to the Effective Date.
2. Assignor's Representations. Each of the Assignors (a) represents and
warrants that (i) it is legally authorized to enter into this Assignment and
Acceptance, (ii) the execution, delivery and performance of this Assignment and
Acceptance does not conflict with any provision of law or of the charter or
by-laws of such Assignor, or of any agreement binding on such Assignor, (iii)
all acts, conditions and things required to be done and performed and to have
occurred prior to the execution, delivery and performance of this Assignment and
Acceptance, and to render the same the legal, valid and binding obligation of
such Assignor, enforceable against it in accordance with its terms, have been
done and performed and have occurred in due and strict compliance with all
applicable laws, and (iv) immediately after giving effect to all assignments
which have not yet become effective, such Assignor's Commitment Percentage will
be sufficient to give effect to this Assignment and Acceptance, (b) 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 the Credit Agreement or any of the other Loan Documents or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement, the other Loan Documents or any other instrument or
document furnished pursuant thereto or the attachment, perfection or priority of
any security interest or mortgage, other than that it is the legal and
beneficial owner of the interest being assigned by it hereunder free and clear
of any claim or encumbrance; (c) makes no representation or warranty and assumes
no responsibility with respect to the financial condition of Holdings, the
Borrower or any of their Subsidiaries or any other Person primarily or
secondarily liable in respect of any of the Obligations, or the performance or
observance by Holdings, the Borrower or any of their Subsidiaries or any other
Person primarily or secondarily liable in respect of any of the Obligations of
any of its obligations under the Credit Agreement or any of the other Loan
Documents or any other instrument or document delivered or executed pursuant
thereto; and (d) attaches hereto the Revolving Credit Note, Term Loan A Note
and/or Term Loan B Note, as the case may be, delivered to it under the Credit
Agreement. In addition, (a) FNBB represents and warrants that as of the date
hereof, its Commitment is $11,600,000, its Commitment Percentage is 44%, the
<PAGE>
-3-
aggregate outstanding principal balance of its Revolving Credit Loans equals
$____________, the aggregate amount of its Letter of Credit Participations
equals $0, the aggregate outstanding balance of its Term Loan A equals
$24,800,000 and the aggregate outstanding balance of its Term Loan B equals
$7,600,000 (in each case prior to giving effect to the assignments contemplated
hereby but after giving effect to any contemplated assignments which have not
yet become effective); and (b) Heller represents and warrants that as of the
date hereof, its Commitment Percentage is 25%, the aggregate outstanding
principal balance of its Term Loan B equals $25,000,000 (in each case prior to
giving effect to the assignments contemplated hereby but after giving effect to
any contemplated assignments which have not yet become effective).
Each of the Assignors requests that the Borrower exchange such
Assignor's Revolving Credit Note. Term Loan A Note and Term Loan B Note, asn the
case may be, for new Notes payable to such Assignor and each of the Assignees as
follows:
Notes Payable to Amount of Revolving Amount of Term Amount of Term
the Order of: Credit Note Loan A Note Loan B Note
- ---------------- ------------------- -------------- --------------
FNBB $6,600,000 $9,800,000 $ 4,100,000
Heller $0 $0 $20,500,000
Deutsche $2,500,000 $7,500,000 $0
Paribas $2,500,000 $7,500,000 $0
Merrill Lynch
Portfolio $0 $0 $4,000,000
Merrill Lynch
Fund $0 $0 $4,000,000
3. Assignees' Representations. Each of the Assignees (a) represents and
warrants that (i) it is duly and legally authorized to enter into this
Assignment and Acceptance, (ii) the execution, delivery and performance of this
Assignment and Acceptance do not conflict with any provision of law or of the
charter or by-laws of such Assignee, or of any agreement binding on such
Assignee, (iii) all acts, conditions and things required to be done and
performed and to have occurred prior to the execution, delivery and performance
of this Assignment and Acceptance, and to render the same the legal, valid and
binding obligation of such Assignee, enforceable against it in accordance with
its terms, have been done and performed and have occurred in due and strict
compliance with all applicable laws; (b) confirms that it has received a copy of
the Credit Agreement, together with copies of the most recent financial
statements delivered pursuant to ss.ss.8.4 and 9.4 thereof and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (c) agrees
that it will, independently and without reliance upon either of the Assignors,
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 the Credit Agreement; (d) represents and
warrants that it is an Eligible Assignee; (e) appoints and authorizes the Agent
to take such
<PAGE>
-4-
action as agent on its behalf and to exercise such powers under the Credit
Agreement and the other Loan Documents as are delegated to the Agent by the
terms thereof, together with such powers as are reasonably incidental thereto;
(f) agrees that it will perform in accordance with their terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Bank. In addition, each of Deutsche and Paribas
acknowledges that it has made arrangements with FNBB satisfactory to each of
Deutsche and Paribas with respect to its pro rata share of Letter of Credit Fees
in respect of outstanding Letters of Credit.
4. Effective Date. The effective date for this Assignment and
Acceptance shall be May 14, 1996 (the "Effective Date"). Following the execution
of this Assignment and Acceptance and the consent of the Borrower hereto having
been obtained, each party hereto shall deliver its duly executed counterpart
hereof to the Agent for acceptance by the Agent and recording in the Register by
the Agent. Schedule 1 to the Credit Agreement shall thereupon be replaced as of
the Effective Date by the Schedule 1 annexed hereto.
5. Rights Under Credit Agreement. Upon such acceptance and recording,
from and after the Effective Date, (a) each Assignee shall be a party to the
Credit Agreement and, to the extent provided in this Assignment and Acceptance,
have the rights and obligations of a Bank thereunder, and (b) each of the
Assignors shall, with respect to that portion of its interest under the Credit
Agreement assigned hereunder, relinquish its rights and be released from its
obligations under the Credit Agreement; provided, however, that each of the
Assignors shall retain its rights to be indemnified pursuant to ss.18 of the
Credit Agreement with respect to any claims or actions arising prior to the
Effective Date.
6. Payments. Upon such acceptance of this Assignment and Acceptance by
the Agent and such recording, from and after the Effective Date, the Agent shall
make all payments in respect of the rights and interests assigned hereby
(including payments of principal, interest, fees and other amounts) to each
Assignee. Each of the Assignors and each Assignee shall make any appropriate
adjustments in payments for periods prior to the Effective Date by the Agent or
with respect to the making of this assignment directly between themselves.
7. Governing Law. THIS ASSIGNMENT AND ACCEPTANCE IS INTENDED TO TAKE
EFFECT AS A SEALED INSTRUMENT TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO
CONFLICT OF LAWS).
8. Counterparts. This Assignment and Acceptance may be executed in any
number of counterparts which shall together constitute but one and the same
agreement.
<PAGE>
-5-
IN WITNESS WHEREOF, intending to be legally bound, each of the
undersigned has caused this Assignment and Acceptance to be executed on its
behalf by its officer thereunto duly authorized, as of the date first above
written.
THE FIRST NATIONAL BANK
OF BOSTON
By: /s/ Timothy M. Barns
--------------------------------
Timothy M. Barns, Director
<PAGE>
-6-
HELLER FINANCIAL, INC.
By: /s/ [ILLEGIBLE]
--------------------------------
Title: Vice President
<PAGE>
-7-
DEUTSCHE FINANCIAL SERVICES
HOLDING CORPORATION
By: /s/ [ILLEGIBLE]
--------------------------------
Title: VP
<PAGE>
-8-
BANQUE PARIBAS
By: /s/ Mark S. Black
--------------------------------
Title: Assistant Vice President
By: /s/ John J. McCormick, III
--------------------------------
Title: Vice President
<PAGE>
-9-
MERRILL LYNCH PRIME RATE
PORTFOLIO
By: Merrill Lynch Asset
Management, L.P., as
Investment Advisor
By: /s/ Anthony R. Clemente
--------------------------------
Title: Authorized Signatory
<PAGE>
-10-
MERRILL LYNCH SENIOR
FLOATING RATE FUND, INC.
By: /s/ Anthony R. Clemente
--------------------------------
Title: Authorized Signatory
<PAGE>
-11-
CONSENTED TO:
NATIONAL RESTAURANT
ENTERPRISES, INC.
By: /s/ [ILLEGIBLE]
--------------------------
Title:
THE FIRST NATIONAL BANK
OF BOSTON, as Agent
By: __________________________
Timothy M. Barns, Director
<PAGE>
-12-
CONSENTED TO:
NATIONAL RESTAURANT
ENTERPRISES, INC.
By: __________________________
Title:
THE FIRST NATIONAL BANK
OF BOSTON, as Agent
By: /s/ Timothy M. Barns
--------------------------
Timothy M. Barns, Director
<PAGE>
Schedule 1
<TABLE>
<CAPTION>
===============================================================================================
Revolving Commitment
Credit Loan Percentage
Banks Commitment Term Loan A Term Loan B Of All Loans
===============================================================================================
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The First National Bank
of Boston $6,600,000 $ 9,800,000 $ 4,100,000 20.5%
100 Federal
Boston, MA 02110
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Heller Financial, Inc.
500 West Monroe $0 $0 $20,500,000 20.5%
Chicago, IL 60661
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Sanwa Business Credit
Corporation $0 $10,000,000 $ 5,000,000 15.0%
One South Wacker
Chicago, IL 60606
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Credit Agricole
55 East Monroe Street $2,500,000 $ 7,500,000 $0 10.0%
Chicago, IL 60603-5702
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Deutsche Financial Services
Holding Corporation $2,500,000 $ 7,500,000 $0 10.0%
635 Maryville Centre Drive
St. Louis, MO 63141
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Banque Paribas
787 Seventh Avenue $2,500,000 $ 7,500,000 $0 10.0%
New York, NY 10019
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Comerica Bank Illinois
4747 W. Dempster $ 900,000 $ 2,700,000 $ 2,400,000 6.0%
Skokie, Illinois 60076
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Merrill Lynch Prime Rate
Portfolio $0 $0 $ 4,000,000 4.0%
800 Scudders Mill Road
Plainsboro, NJ 08536
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Merrill Lynch Senior
Floating Rate Fund, Inc. $0 $0 $ 4,000,000 4.0%
800 Scudders Mill Road
Plainsboro, NJ 08536
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
OPERATING AGREEMENT BY AMERIKING, INC
NATIONAL RESTAURANT ENTERPRISES, INC.
AND SUBSIDIARIES
THIS AGREEMENT is made as of the 3rd day of December, 1996, by and among
AmeriKing, Inc., a Delaware corporation formerly known as NRE Holdings, Inc.
("Parent"), National Restaurant Enterprises, Inc., a Delaware corporation
("NRE"), the subsidiary corporations of NRE and Parent identified on Schedule 1
to this Agreement (collectively, the "Subsidiaries"), and Burger King
Corporation, a Florida corporation ("BKC"). NRF and the Subsidiaries are also
referred to individually as "Franchisee" and collectively as "Franchisees."
1. Basis and Purpose. Each of the Franchisees is the franchisee pursuant
to certain Franchise Agreements (collectively, the "Franchise Agreements") with
BKC, its predecessors and assigns, for the operation of certain Burger King(R)
Restaurants (the "Restaurants"). With respect to certain of the Restaurants,
certain of the Franchisees are also the lessee (or the parent company of the
lessee) under certain lease agreements with BKC (collectively, the "Leases") for
the premises of the Restaurants. NRE owns all of the issued and outstanding
shares of stock of the Subsidiaries, and Parent owns all of the issued and
outstanding shares of the stock of NRE.
Parent has proposed making certain material changes to its capital
structure (the "Recapitalization"), as reflected in the pro forma financial
statements (the "Pro Forma") submitted to BKC by AmeriKing on November 6, 1996
and as further outlined in certain materials (as updated from time to time, the
"Registration Statement") filed by AmeriKing with the U.S. Securities and
Exchange Commission ("SEC"). Under the Recapitalization, AmeriKing will issue
SEC-registered "Senior Notes" for the principal amount of $100 million, due in
10 years, and concurrently issue SEC-registered "Units" comprised of "Senior
Preferred Stock" due in 2008 with an aggregate liquidation preference of $30
million and detachable shares of common stock. The proceeds of these concurrent
offerings (the "Offerings") are to be used chiefly for the repayment of current
debt of AmeriKing and subsidiaries. Because interest only is payable on the
Senior Notes until they become due, and because dividends on the Senior
Preferred are intended to be paid in kind for the first five years, the Pro
Forma shows a cash flow for the period covered that is significantly enhanced as
compared to cash flow under the existing capital structure of Parent and the
Franchisees. Under the Pro Forma, the cash flow is applied toward the
development of new restaurants.
Parent and the Franchisees desire to expand in terms of the number
of Burger King(R) restaurants that the Franchisees are franchised to own and
operate, and have asked BKC whether, and on what terms and conditions, BKC would
be willing to give the Franchisees financial approval to develop certain
additional restaurants after the Recapitalization. Such financial approval is a
condition (but not the only condition) to the Franchisees obtaining approval to
obtain additional franchises from BKC. Although BKC approves (and disapproves)
<PAGE>
applications for franchises in its sole discretion, it has developed general
guidelines (which may be modified from time to time by BKC in its sole
discretion) that it uses to determine whether a franchisee may be granted the
financial approval necessary to obtain additional franchises, and has the right
to impose conditions on the grant of franchises. Based on the Recapitalization
as reflected in the Pro Forma, BKC is prepared to grant Franchisees certain
financial approvals on an exception basis, subject to conditions set forth in
this Agreement.
2. Advertising/Investment Spending. Each of the Franchisees must spend
funds on advertising and promotion in addition to making the advertising
contribution to BKC (currently equal to 4% of gross sales) required under the
Franchise Agreements. This "Supplemental Advertising Expenditure" will be in
amount equal to the greater of 1% of "Gross Sales" (as that term is defined in
the Franchise Agreements) or such other percentage of Gross Sales then being
proposed by BKC as the "Investment Spending" contribution for the applicable
marketing areas in which the Franchisees are operating from time to time,
provided that the amount in excess of 1% of Gross Sales shall only be required
to be expended to the extent that other franchisees operating in the same
marketing area (as defined in terms of "area of dominant influence," or "ADI")
are also contributing at that level in excess of 1%. "Investment Spending"
refers to the programs for funding additional advertising within the various
ADIs, that are developed by BKC from time to time (generally on an annual basis)
and proposed to the franchisees operating with the respective ADIs for purposes
of obtaining their commitment to the proposed level of additional advertising
expenditure.
In recognition of the significant benefits that additional
advertising can confer upon the Burger King(R) system and the Restaurants within
the system, Parent and each of the Franchisees agree to enthusiastically support
and vote in favor of, and to fully cooperate with BKC in promoting within the
system the benefit of, the Investment Spending proposals advanced by BKC from
time to time, with the goal of maximizing the participation in Investment
Spending by all franchisees operating within the ADIs in which the Franchisees
operate. Each of the Franchisees agrees to participate in each Investment
Spending program proposed by BKC and to execute such contracts as BKC may use
from time to time to evidence the commitment of franchisees to Investment
Spending.
The Supplemental Advertising Expenditure shall be applied first
toward the obligations of the Franchisees to participate in Investment Spending
programs that have been approved within the applicable ADIs by the required
percentage of votes representing restaurants in that ADI. With respect to each
ADI in which any of the Franchisees operate, if the Investment Spending proposal
by BKC is not approved by the required percentage votes, then each such
Franchisee shall at its election, with respect to that ADI, spend the percentage
of its Gross Sales proposed by BKC as the Investment Spending contribution on
either: (a) the marketing programs contemplated by the proposed Investment
Spending program, notwithstanding that other franchisees are not participating;
or (b) an alternative local and restaurant oriented marketing program that has
been developed by such Franchisee, submitted to the appropriate "marketing
manager" (or person in a similar role) of BKC for approval, and approved by BKC,
which
2
<PAGE>
approval shall not be unreasonably withheld. An alternate marketing program
developed by a Franchisee and approved by BKC is referred to as an "Alternative
Marketing Program".
To the extent a Franchisee's Supplemental Advertising Expenditure
exceeds its obligations to participate in Investment Spending programs, the
excess amount shall be used for Alternative Marketing Programs.
3. Capital Reinvestment. On an annual basis, the Franchisees shall each
spend a minimum of 1% of gross sales on "capital reinvestment" in their
established restaurant base. (Any carryover capital spending commitments
associated with the acquisition of restaurants in Chattanooga would be separate
from this obligation.) BKC shall determine in its reasonable judgment the types
of expenditures that qualify as "capital reinvestment" for this purpose.
4. Development. NRE shall (within forty-five days after the date of this
Agreement) apply for and obtain approvals from BKC to obtain franchises from BKC
for seventeen (17) restaurants to be developed and opened in calendar year 1997.
Subject to compliance with this Agreement by Parent and Franchisees, BKC will
issue exception "financial approval" based on the Recapitalization for those
seventeen restaurants only. (NRE will also need to satisfy all other
then-current criteria of BKC applicable to NRE in order to receive BKC approval
("Expansion Approval") to obtain additional franchises.) NRE must execute a
target reservation agreement (the "TRA") for the seventeen restaurants to be
developed in 1997. That TRA will be modified form the standard form of Target
Reservation Agreement being offered by BKC to require NRE to make an additional
payment to BKC ("Opportunity Cost Payment") on or before December 28, 1997 if
NRE does not open a minimum number of restaurants in 1997 pursuant to the TRA.
NRE will not be required to make an Opportunity Cost Payment to BKC if NRE opens
at least fourteen (14) restaurants in 1997 pursuant to the TRA. The Opportunity
Cost Payment will be $150,000 if NRE opens only thirteen (13) restaurants (of
the required seventeen) in 1997. If the total number of Restaurants opened by
NRE in 1997 pursuant to the TRA is less than thirteen, the Opportunity Cost
Payment will be the sum of (a) $150,000, plus (b) $75,000 times the difference
between thirteen and the number of Restaurants actually opened by NRE in 1997.
(For example, if only ten restaurants are opened, the Opportunity Cost Payment
will be $375,000, which is the sum of (i)) $150,000, plus (ii) $75,000 x
(13-10=3) = $225,000.)
In addition, NRE agrees to prepare and submit to BKC annual
development proposals, supported by all required documentation, and to apply for
franchises for new restaurants to be opened in the years 1998-2001 at the levels
specified in the Pro Forma for each of those years. BKC is not currently
granting any approvals needed for such development, and has no express or
implied obligation to grant such approvals for any or all of those new
restaurants. However, if NRE is granted those approvals by BKC, NRE will be
obligated to execute a target reservation agreement for those proposed
restaurants and to make an Opportunity Cost Payment in each of those years, on
the same basis as in 1997, to the extent that NRE fails to open at least 80% of
the number of restaurants projected for any such year.
3
<PAGE>
5. Acquisitions. The exception financial approval to be granted to NRE
pursuant to this Agreement will not apply to any acquisitions of existing
franchised restaurants. As to any and all future applications by Parent or any
of the Franchisees to obtain additional franchises, whether through development
of new restaurants or acquisition of existing restaurants, BKC will have sole
discretion to grant or withhold approval of such application, and BKC's right of
first refusal under the Franchise Agreements will apply to all proposed
acquisitions. Parent and the Franchisees acknowledge that no applications for
future acquisitions will be approved unless Parent and the Franchisees meet
BKC's then-current minimum standards for Expansion Approval. In addition, BKC
has the right to withhold approval for acquisitions by the Parent and/or the
Franchisees unless Parent and the Franchisees use their best efforts to perform
of the development obligations described in this Agreement.
Additionally, in the event that Parent or any of the Franchisees or
any Affiliate seeks BKC's approval (as required under the Franchise Agreements)
in connection with any proposed acquisition of existing franchised restaurants,
Parent and the Franchisees hereby agree to fully indemnify BKC against any
claims by the person(s) from whom Parent or the Franchisees are seeking to
acquire the restaurants in the event BKC does not approve the acquisition,
provided that BKC determines that Parent and/or the Franchisees do not meet the
then-current standards of BKC applicable to Parent and the Franchisees in
connection with approval for acquisitions.
6. Financial Covenants.
a. Use of Proceeds; Remaining Debt. Parent shall use, or shall cause
the Franchisees to use, the proceeds of the Offerings to pay outstanding
indebtedness of Parent and the Franchisees, all as listed and described on
Schedule 6A-1 attached hereto. Within 30 days following the date of this
Agreement, Parent shall provide to BKC confirmation and such evidence as BKC may
reasonably request that proceeds have been applied as required hereby. Parent
and the Franchisees represent that, after the application of the proceeds as
provided in this Paragraph, the only remaining indebtedness of Parent or any of
the Franchisees for borrowed money, or on account of deposits (other than in the
ordinary course of business), or evidenced by notes, bonds, debentures or
similar obligations (collectively, the "Remaining Debt") will be as set forth in
Schedule 6A-2.
b. Payment of Obligations. Each of Parent and the Franchisees will
pay and perform all of its indebtedness and obligations promptly and in
accordance with the terms thereof, except where the failure to pay any
indebtedness or obligation (other than to BKC) could not reasonably be expected
to have, individually or in the aggregate, a "Material Adverse Effect."
For purposes of this Agreement, "Material Adverse Effect"
means any material adverse effect on (i) the consolidated business, properties,
condition (financial or
4
<PAGE>
otherwise) or operations, present or prospective, of Parent and the Franchisees,
or (ii) the ability of Parent or any of the Franchisees timely to perform any of
its material obligations, specifically including all of its obligations to BKC
and BKC's affiliates, or (iii) the legality, validity, binding nature or
enforceablility of any agreement to which Parent or any Franchisee and BKC (or
an affiliate of BKC) are parties.
c. Provisions of Debt Agreements. All future debt agreements of
Parent or any Franchisee, including without limitation the agreements relating
to the Senior Notes, shall require that BKC be given written notice of any
default simultaneously with Parent and/or the Franchisee. Parent and the
Franchisees shall use their best efforts to amend existing debt agreements to
include a similar provision, and will not use any existing credit facility
unless and until the agreements therefor are amended to include such a
provision.
d. Future Debt. Neither Parent nor any of the Franchisees will
incur, create or permit to exist any indebtedness for borrowed money, or on
account of deposits (other than in the ordinary course of business), or
evidenced by notes, bonds, debentures or similar obligations, without promptly
notifying BKC in writing. Parent and the Franchisees agree to provide BKC,
within thirty days following the date of this Agreement, and thereafter
quarterly in connection with the submissions required by Paragraph 6(h), with an
updated Schedule 6E to this Agreement. Schedule 6E shall accurately describe the
principal terms of any indebtedness disclosed thereon and any security interest
granted by the Parent or any Franchisee in connection with such indebtedness.
e. Guarantees Restricted. Neither Parent nor any of the Franchisees
shall guarantee or otherwise become responsible for indebtedness or other
obligations of any other person, contingent or otherwise, other than in the
ordinary course of business, without promptly notifying BKC. Any guarantees of
the type described in this Paragraph 6.c shall be set forth on Schedule 6E to
this Agreement, which Schedule shall be updated quarterly in connection with the
submissions required by Paragraph 6.h.
f. Dividends and Prepayments Restricted. Neither Parent nor any of
the Franchisees shall:
(1) declare or pay any dividends in cash on any shares of its
capital stock of any class, except for dividends payable to holders of the
Senior Preferred after December 2001; or
(2) make any other cash payment or distribution, directly or
indirectly, in respect of its capital stock.
g. Transactions with Affiliates. Neither Parent nor any Franchisee
shall continue or enter into any transaction (including the furnishing of goods
or services) with, or make any loan or advance to, or investment in, an
Affiliate (as defined below), except (1) in the
5
<PAGE>
ordinary course of business as presently conducted, and (2) on terms and
conditions no less favorable to it that would be obtained in a comparable arm's
length transaction with a person who is not an Affiliate, and (3) if such
transaction, loan, advance or investment could not reasonably be expected to
have a Material Adverse Effect (as defined in Paragraph 6.b). Parent and
Franchisee represent that, as of the date of this Agreement, there are no
agreements or arrangements currently in effect that would not meet the standard
set forth in this Paragraph 6.g, except as described on Schedule 6G. Within
thirty days after the date of this Agreement, and thereafter upon the written
request of BKC, Parent shall provide BKC with a list of agreements and
arrangements between Parent, any Franchisee, and their respective affiliates.
For purposes of this Agreement, the term "Affiliate," when
used with reference to any person, shall mean (a) any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such person, and (b) any spouse, immediate family member or other
relative who has the same principal residence as any person described in clause
(a) above, and (c) any trust in which any such persons described in clause (a)
or (b) above has a beneficial interest, and (d) any corporation or other
organization of which any such persons described collectively own 30% or more of
the equity of such entity. The aggregate legal or beneficial ownership or voting
control of twenty percent (20%) or more of the ownership or voting interests of
a person shall be deemed to be a controlling interest for purposes of this
definition.
h. Quarterly Submissions. Parent and the Franchisees agree to submit
to BKC within 45 days after the end of each of the first three fiscal quarters
of each year "Financial Statements" certified by the Parent's Chief Financial
Officer as having been prepared in compliance with generally accepted accounting
principles, and a "Compliance Certificate," as those terms are defined below.
Such Financial Statements shall be internally prepared and shall reflect
performance for the quarter and the fiscal year to date. In addition, Parent and
the Franchisees shall submit to BKC within 90 days after the end of each fiscal
year Financial Statements accompanied by an independent certified public
accountant's opinion and a Compliance Certificate.
As used in this Agreement, "Financial Statements" means consolidated
financial statements of the Parent and its subsidiaries, including consolidated
balance sheets and related consolidated statements of income, shareholders'
equity and cash flows of Parent and its consolidated subsidiaries, prepared in
accordance with generally accepted accounting principles.
As used in this Agreement, a "Compliance Certificate" is a statement
by the Chief Financial Officer of each of Parent and NRE, in form acceptable to
BKC, based on his or her review of the provisions of this Operating Agreement
and other agreements in effect with BKC, and certifying that, during the quarter
just ended and continuing through the time of submission of the Compliance
Certificate to BKC, neither Parent or any Franchisee was or is in default of any
provision of this Operating Agreement or in default of any debt agreement, or,
if such a default has occurred or is occurring, disclosing with respect to each
such default its nature,
6
<PAGE>
circumstances, time of occurrence, and actions taken or planned to cure or
ameliorate such default.
In addition to the required quarterly submissions pursuant to this
Paragraph, the Parent and Franchisees (a) shall notify BKC promptly in writing
if any event occurs or if any circumstances exist that, alone or together with
other events or circumstances, will or may reasonably be expected to have a
Material Adverse Effect, as defined in this Agreement, and (b) shall notify BKC
promptly in writing of any material changes to financial statements or pro
formas submitted to BKC and on the basis of which BKC has granted or is
evaluating the potential grant of expansion approvals for restaurants that have
not been opened or acquired.
7. Securities Issues. Parent and the Franchisees each represent and
agree that:
a. Compliance with BKC Requirements. They will comply with all of
BKC's then-current requirements with respect to Parent and/or the Franchisees in
connection with any future offerings of debt or equity securities. Without
limiting the foregoing, in addition to BKC's then-current requirements
applicable to BKC's franchisees and their owners generally, the requirements
applicable to Parent and the Franchisees will include the following: immediate
written notice to BKC of any proposed securities offering (which notice in any
event shall be no later than the time when a proposed letter of intent,
memorandum of understanding or similar document is exchanged with any person
respecting the underwriting or placement of securities of Parent or any of the
Franchisees); submission, before or simultaneously with submission to the SEC,
of registration statements and/or prospectuses to BKC for review in connection
with trademark usage, inclusion of disclaimers, and otherwise; the execution by
the Owners (as defined in the Franchise Agreements) and by the underwriters, if
any, of certificates required by BKC; and the execution of an indemnity of BKC,
its affiliates, agents, attorneys and employees, by the Parent, the Franchisees,
and Owners, against any liability arising from or in connection with the
offering. BKC's then-current general requirements for offerings of equity
securities shall also apply to offerings of debt securities by the Parent and
the Franchisees unless and until separate requirements are articulated by BKC
for debt and equity securities offerings.
b. Submission to BKC. Parent shall simultaneously file with the SEC
and BKC all reports and other documents required to be filed by Parent pursuant
to the Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder as and when due.
c. Registration Rights; Secondary Offerings. No registration rights
with respect to any of their debt or equity securities have been granted by the
Parent or any of the Franchisees, except as described on Schedule 7C. Each of
the Parent and the Franchisees agrees that it will not grant additional
registration rights or modify any registration rights previously granted without
the prior written consent of BKC, which may be withheld in BKC's sole
discretion. Each of the Parent and the Franchisees further agrees that if it is
required to effect a registration pursuant to any registration rights previously
granted, then, in connection with any
7
<PAGE>
secondary offering of securities pursuant to such registration, it shall comply
with BKC's then-current requirements, policies and procedures in connection with
such offering and, without limiting the foregoing, shall indemnify BKC from
liability arising from or in connection with the Offering, in the same manner as
would be required in connection with an offering of securities by the Parent or
the Franchisees.
8. BKC Expenses. Parent and the Franchisees have, by separate letter,
confirmed their agreement to pay BKC for certain of BKC's internal and external
costs in connection with its review of the proposed Recapitalization and
documentation of conditions for exception financial approval as outlined above.
9. Incorporation Into Franchise Agreements; Term. The terms and conditions
of Paragraphs 2, 3, 10 and this Paragraph of this Operating Agreement are
incorporated by reference into each of the Franchise Agreements and will be a
part of each franchise agreement subsequently executed by Parent, any
Franchisee, or any affiliate. The Parties may execute a separate "Supplemental
Agreement" incorporating the terms of each such Paragraphs in which case such
Supplemental Agreement, as it may be amended from time to time, will be
incorporated by reference into each of the Franchise Agreements and will be a
part of each franchise agreement subsequently executed by Parent, any
Franchisee, or any affiliate.
In the event and to the extent that any provision of this Agreement
conflicts with or is inconsistent with any of the terms and conditions of the
Franchise Agreements, the terms and conditions of this Agreement shall be
controlling, provided that a lesser restriction imposed by this Agreement shall
not be deemed to be in conflict with or inconsistent with a greater restriction
imposed by the Franchise Agreements.
Unless otherwise agreed in writing by all of the parties, this
Agreement shall continue in force and effect through _____________, 2008;
provided, however, that provisions of this Agreement incorporated into the
Franchise Agreements and subsequent franchise agreements shall continue in
effect for the respective terms of those agreements.
10. Miscellaneous.
a. Joint and Several Liability. The obligations of Parent and each
of the Franchisees under this Agreement are joint and several. The joint and
several liability of Parent and each Franchisee under this Agreement will not be
affected by compromises or settlement agreements between BKC and Parent or any
Franchisee, the assignment or other transfer by any Franchisee of its rights
under any or all of the Franchise Agreements or Leases or any subsequent
assignment or other transfer of any of those rights, the waiver or deferral of
performance by BKC with respect to any provisions of any of the Franchise
Agreements, Leases or any other agreement between BKC and any of the
Franchisees, or by any agreement of BKC to (i) renew, extend, accelerate or
otherwise change the time for payment of, or other terms
8
<PAGE>
relating to, any indebtedness, (ii) accept partial payment or performance of
obligations, (iii) take and hold security of the payment of any indebtedness,
and exchange, enforce, waive and release any such security.
b. Interpretation. The introduction shall be considered a part of
this Agreement. Paragraph captions are used only for convenience and are in no
way to be construed as part of this Agreement or as a limitation of the scope of
the particular paragraphs to which they refer. Words of any gender used in this
Agreement shall include any other gender, and words in the singular shall
include the plural where the context requires.
c. Non-Waiver. The failure of BKC to exercise any right or option
given to it under this Agreement, or to insist upon strict compliance by Parent
or any Franchisee with the terms and conditions of this Agreement shall not
constitute a waiver of any terms or conditions of this Agreement with respect to
any other or subsequent breach, nor a waiver by BKC of is right at any time
thereafter to require exact and strict compliance with the terms and conditions
of this Agreement. The rights or remedies set forth in this Agreement are in
addition to any other rights or remedies which may be granted by law.
d. Severability. The parties agree that if any provision of this
Agreement may be construed in two ways, one of which would render the provision
illegal or otherwise voidable or unenforceable and the other of which would
render the provision valid and enforceable, such provision shall have the
meaning which renders it valid and enforceable. The language of all provisions
of this Agreement shall be construed according to its fair meaning and not
strictly against any party. In event any court shall determine that any
provision in this Agreement is not enforceable as written, the parties agree
that the provision shall be amended so that it is enforceable to the fullest
extent permissible under the laws of the jurisdiction in which enforcement is
sought. The provisions of this agreement are severable and this Agreement shall
be interpreted and enforced as if all completely invalid or unenforceable
provisions were not contained in the Agreement, and partially valid and
enforceable provisions shall be enforced to the extend that they are valid and
enforceable.
e. Modification. This Agreement may be modified or amended only by a
written document executed by BKC, Parent and each Franchisee.
f. Binding Effect. This Agreement shall be binding upon the parties
and their successors or assigns.
g. Governing Law; Venue. This Agreement shall be governed by the
laws of the State of Florida and, except as otherwise provide herein, shall be
binding upon and inure to the benefit of Parent and each Franchisee and their
respective successors, heirs and assigns, and shall be binding upon and inure to
the benefit of BKC and its successors and assigns, upon delivery to and
execution by BKC in Miami, Florida. In the event any case or controversy, in law
or in equity, arises either directly or indirectly, under or in connection with
this Agreement,
9
<PAGE>
or any of the Franchise Agreements or Leases, the venue and exclusive proper
forum in which to adjudicate such case or controversy shall be in the United
States District Court for the Southern District of Florida or, if such court
lacks jurisdiction, the 11th Judicial Court (or its successor) in and for Dade
County, Florida.
h. Effective Date; Execution. This Agreement shall be effective on
the date identified in the first paragraph upon its execution and delivery by
all parties to this Agreement. This Agreement may be executed in counterpart
signature pages.
The parties execute this Agreement intending to be legally bound.
AMERIKING, INC.
By: ___________________________
President
Attest:________________________
Secretary
NATIONAL RESTAURANT ENTERPRISES, INC.
By: ___________________________
President
Attest:________________________
Secretary
AMERIKING COLORADO CORPORATION I
By: ___________________________
President
Attest:________________________
Secretary
10
<PAGE>
AMERIKING TENNESSEE CORPORATION I
By: ___________________________
President
Attest:________________________
Secretary
AMERIKING VIRGINIA CORPORATION I
By: ___________________________
President
Attest:________________________
Secretary
AMERIKING CINCINNATI CORPORATION I
By: ___________________________
President
Attest:________________________
Secretary
AMERIKING ILLINOIS CORPORATION I
By:___________________________
President
Attest:________________________
Secretary
BURGER KING CORPORATION
By:____________________________
President
Attest:________________________
Assistant Secretary
11
<PAGE>
SCHEDULE 1
AmeriKing Colorado Corporation I
AmeriKing Tennessee Corporation I
AmeriKing Virginia Corporation I
AmeriKing Cincinnati Corporation I
AmeriKing Illinois Corporation I
12
<PAGE>
AMERIKING, INC.
CALCULATION OF EARNINGS PER COMMON SHARE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
August 17, 1994
Fiscal Fiscal To
1996 1995 December 31, 1994
-------- ------------- ------------------
<S> <C> <C> <C>
Income before extraordinary item and dividends $(2,942) $ 902 $ 241
Extraordinary item (5,055) - -
Earnings available to stockholders (7,997) 902 241
Dividends
Preferred Stock (450) (450) (122)
Senior Preferred Stock (303) - -
Amortization of issuance costs (10) - -
------- ------- -------
Earnings available for common stockholders $(8,761) $ 452 $ 119
Weighted average number of shares outstanding 865.59 863.29 863.29
Fully diluted weighted average number of shares 972.29 969.99 969.99
outstanding
Net income per common share before extraordinary item $ (4.28) $ 0.52 $ 0.14
(weighted average)
Net income per common share before extraordinary item (3.81) 0.47 0.12
(fully diluted)
Extraordinary item (weighted average) (5.84) 0.00 0.00
Extraordinary item (fully diluted) (5.20) 0.00 0.00
Net income per common share (weighted average) (10.12) 0.52 0.14
Net income per common share (fully diluted) (9.01) 0.47 0.12
TOTAL SHARES
------------------------------------------
FISCAL 1996
DAYS WEIGHTED AVERAGE
TOTAL OUTSTANDING SHARES
SHARES FOR FISCAL 1996 OUTSTANDING
Weighted average number of common shares:
Original shares (post split) 863.29 365 863.29
Common stock units 30.00 28 2.30
------- ------- -------
Total 893.29 865.59
Fully diluted weighted average number of common
shares:
Original shares (post split) 969.99 365 969.99
Common stock units 30.00 28 2.30
------- ------- -------
Total 999.99 972.29
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERIKING, INC
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
Fiscal 1995 Fiscal 1996
-------------------- ----------------------
W/O PIK With PIK W/O PIK With PIK
Dividends Dividends Dividends Dividends
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
EARNINGS
Income before income taxes and extraordinary $ 1,727 $ 4,025 ($4,498) ($4,498)
item
Interest expense 8,323 11,642 11,983 11,629
Amortization of deferred financing costs 567 548 883 548
Portion of rents representative of interest 3,445 4,629 4,370 4,736
factor
Preferred stock PIK dividends 4,350 4,350
------- ------- -------- --------
Total earnings $14,062 $25,204 $ 12,738 $ 16,765
======= ======= ======== ========
FIXED CHARGES
Interest expense $ 8,323 $11,652 $ 11,983 $ 11,629
Amortization of deferred financing costs 567 548 883 548
Portion of rents representative of interest 3,445 4,629 4,370 4,736
factor
Preferred stock PIK dividends 4,350 4,350
------- ------- -------- --------
Total fixed charges $12,335 $21,179 $ 17,236 $ 21,263
======= ======= ======== ========
RATIO OF EARNINGS TO FIXED CHARGES 1.14x 1.19x 0.74x 0.79x
======= ========= ========= =========
INSUFFICIENT EARNINGS TO COVER FIXED $ 4,498 $ 4,498
CHARGES ======== ========
</TABLE>
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Lawrence E. Jaro, Joel D. Aaseby and A. Richard Caputo, Jr., and each of them,
the true and lawful attorneys-in-fact and agents of the undersigned, with full
power of substitution and resubstitution, for and in the name, place and stead
of the undersigned to sign any and all reports to be filed by AmeriKing, Inc.
pursuant to the Securities Exchange of Act of 1934 (including other documents in
connection therewith), with the Securities and Exchange Commission, and hereby
grants to such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as the undersigned might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, or their or his substitutes, may lawfully do or
cause to be done by virtue hereof.
This Power of Attorney may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Power of Attorney to produce or account for
more than one such counterpart. This Power of Attorney shall expire upon the
performance of any other necessary, requisite or proper acts as referred to
herein, unless earlier exercised, revoked or extended by Company in writing.
<TABLE>
<CAPTION>
Signature Title
<S> <C>
Chairman and Chief Executive
- -------------------------------------- Officer(Principal Executive Officer)
Lawrence E. Jaro
Vice Chairman
- --------------------------------------
William C. Osborn
Director and Chief Operating Officer
- --------------------------------------
Gary W. Hubert
Chief Financial Officer and Corporate
- -------------------------------------- Secretary (Principal Financial
Joel D. Aaseby Officer)
Director and Vice President
- --------------------------------------
A. Richard Caputo, Jr.
Director
John W. Jordan II
Director
- --------------------------------------
Thomas H. Quinn
Director
- --------------------------------------
David W. Zalaznick
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the fiscal
1996 Consolidated Fiancial Statements of Ameriking, Inc. and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-30-1996
<PERIOD-END> DEC-30-1996
<CASH> 5,259
<SECURITIES> 0
<RECEIVABLES> 828
<ALLOWANCES> 0
<INVENTORY> 1,667
<CURRENT-ASSETS> 9,530
<PP&E> 46,488
<DEPRECIATION> 9,723
<TOTAL-ASSETS> 155,037
<CURRENT-LIABILITIES> 16,471
<BONDS> 107,830
30,000
0
<COMMON> 9
<OTHER-SE> 424
<TOTAL-LIABILITY-AND-EQUITY> 155,037
<SALES> 203,753
<TOTAL-REVENUES> 203,753
<CGS> 66,071
<TOTAL-COSTS> 181,306
<OTHER-EXPENSES> 13,334
<LOSS-PROVISION> 1,628
<INTEREST-EXPENSE> 11,983
<INCOME-PRETAX> (4,498)
<INCOME-TAX> (1,556)
<INCOME-CONTINUING> (2,942)
<DISCONTINUED> 0
<EXTRAORDINARY> (5,055)
<CHANGES> 0
<NET-INCOME> (7,997)
<EPS-PRIMARY> (10.12)
<EPS-DILUTED> (9.01)
</TABLE>
