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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 1997
REGISTRATION NO. 333-25205
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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APPLE SOUTH, INC.
APPLE SOUTH FINANCING I
(Exact name of registrant as specified in its charter)
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<S> <C>
GEORGIA 59-2778983
DELAWARE FEIN APPLIED FOR
(State or other jurisdiction of incorporation or
organization) (I.R.S. Employer Identification Number)
</TABLE>
HANCOCK AT WASHINGTON
MADISON, GEORGIA 30650
(706) 342-4552
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
ERICH J. BOOTH
TREASURER AND CHIEF FINANCIAL OFFICER
APPLE SOUTH, INC.
HANCOCK AT WASHINGTON
MADISON, GEORGIA 30650
(706) 342-4552
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
LARRY D. LEDBETTER
KILPATRICK STOCKTON LLP
1100 PEACHTREE STREET, SUITE 2800
ATLANTA, GEORGIA 30309
(404)815-6500
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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THE COMPANY HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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PROSPECTUS
2,300,000 SECURITIES
APPLE SOUTH FINANCING I
$3.50 TERM CONVERTIBLE SECURITIES, SERIES A ("TECONS-SM-")
(LIQUIDATION PREFERENCE $50 PER SECURITY) GUARANTEED TO THE EXTENT SET FORTH
HEREIN BY, AND CONVERTIBLE INTO COMMON STOCK OF,
APPLE SOUTH, INC.
The $3.50 Term Convertible Securities, Series A (the "TECONS"), liquidation
preference $50 per security, offered for resale hereby were issued by Apple
South Financing I, a statutory business trust created under the laws of the
State of Delaware ("Apple South Financing" or the "Trust"). These TECONS
represent preferred undivided beneficial interests in the assets of the Trust.
The TECONS were issued and sold (the "Original Offering") on March 11, 1997 and
March 18, 1997 (the "Original Offering Date") to certain initial purchasers (the
"Initial Purchasers") and were simultaneously sold by the Initial Purchasers in
transactions exempt from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"), in the United States to persons
reasonably believed by the Initial Purchasers to be qualified institutional
buyers as defined in Rule 144A under the Securities Act and outside the United
States to non-U.S. persons in offshore transactions in reliance on Regulation S
under the Securities Act.
Apple South, Inc., a Georgia corporation ("Apple South" or the "Company"),
owns all the common securities (the "Trust Common Securities" and, together with
the TECONS, the "Trust Securities"), representing undivided beneficial interests
in the assets of Apple South Financing. Apple South Financing exists for the
sole purpose of issuing the TECONS and Trust Common Securities and investing the
proceeds thereof in 7% Convertible Subordinated Debentures due March 1, 2027
(the "Convertible Debentures") of Apple South in an aggregate principal amount
equal to the aggregate liquidation amount of the Trust Securities. The
Convertible Debentures are unsecured obligations of Apple South and are
subordinate and junior in right of payment to certain other indebtedness of
Apple South as described herein. Upon an event of default under the Declaration
(as defined herein), the holders of TECONS will have a preference over the
holders of the Trust Common Securities with respect to payment in respect of
distributions and payments upon redemption, liquidation and otherwise.
The Company will use its best efforts to list the TECONS on the Nasdaq
National Market as soon as reasonably possible after the date of this
Prospectus. The TECONS (and the Convertible Debentures and the securities
issuable upon conversion) in respect of which this Prospectus is being delivered
(the "Offered Securities") may be offered and sold from time to time by the
holders thereof named herein or in a supplement hereto (collectively, the
"Selling Holders") pursuant to this Prospectus as supplemented. The Offered
Securities may be sold by the Selling Holders from time to time directly to
purchasers or through agents, underwriters or dealers.
(CONTINUED ON FOLLOWING PAGE)
SEE "SAFE HARBOR STATEMENT" AND "RISK FACTORS", COMMENCING ON PAGE 11, FOR A
DESCRIPTION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
May 22, 1997
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(CONTINUED FROM PRECEDING PAGE)
See "Plan of Distribution" and "Selling Holders." If required, the names of any
such agents or underwriters involved in the sale of the Offered Securities and
the applicable agent's commission, dealer's purchase price or underwriter's
discount, if any, will be set forth in an accompanying supplement to this
Prospectus (the "Prospectus Supplement"). The Selling Holders will receive all
of the net proceeds from the sale of the Offered Securities and will pay all
underwriting discounts and selling commissions, if any, applicable to any such
sale. The Company is responsible for payment of all other expenses incident to
the offer and sale of the Offered Securities. The Selling Holders and any
broker-dealers, agents or underwriters which participate in the distribution of
the Offered Securities may be deemed to be "underwriters" within the meaning of
the Securities Act, and any commission received by them and any profit on the
resale of the Offered Securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. See "Plan of
Distribution" for a description of indemnification arrangements.
Holders of the TECONS are entitled to receive cumulative cash distributions
at an annual rate of $3.50 per TECONS accumulating from March 11, 1997 and
payable quarterly in arrears on March 1, June 1, September 1 and December 1 of
each year, commencing June 1, 1997 ("Distributions"). The payment of
Distributions out of money held by Apple South Financing and payments on
liquidations of Apple South Financing or the redemption of TECONS, as set forth
below, are guaranteed by Apple South (the "Guarantee") to the extent described
herein. The Guarantee covers payments of Distributions and other payments on the
TECONS only if and to the extent that Apple South Financing has funds available
therefor, which will not be the case unless Apple South has made a payment of
interest or principal or other payments on the Convertible Debentures held by
Apple South Financing as its sole assets. The Guarantee, when taken together
with the obligations of Apple South under the Convertible Debentures and the
Indenture (as defined herein) and its obligations under the Declaration,
including its liabilities to pay costs, expenses, debts and obligations of Apple
South Financing (other than with respect to the Trust Securities), provides a
full and unconditional guarantee of amounts due on the TECONS. See "Risk
Factors--Rights Under the Guarantee."
The obligations of Apple South under the Guarantee are subordinate and
junior in right of payment to all other liabilities of Apple South and rank PARI
PASSU with the most senior preferred stock issued, from time to time, if any, by
Apple South. The obligations of Apple South under the Convertible Debentures are
subordinate and junior in right of payment to all present and future Senior
Indebtedness (as defined in the Indenture) of Apple South. The Convertible
Debentures purchased by the Trust may be subsequently distributed PRO RATA to
holders of the TECONS and Trust Common Securities in connection with the
dissolution of the Trust upon the occurrence of certain events.
Each TECONS is convertible in the manner described herein at the option of
the holder, at any time prior to the Conversion Expiration Date (as defined
herein), into common shares, $0.01 par value, of Apple South ("Apple South
Common Stock"), at the initial rate of 3.3801 shares of Apple South Common Stock
for each TECONS (equivalent to an initial conversion price of $14.793 per share
of Apple South Common Stock), subject to adjustment in certain circumstances.
See "Description of the TECONS-- Conversion Rights." The last reported bid price
of Apple South Common Stock, which is reported under the symbol "APSO" on the
Nasdaq National Market, on May 19, 1997, was $14.375 per share.
The Distribution rate and the Distribution payment date and other payment
dates for the TECONS will correspond to the interest rate and interest payment
date and other payment dates for the Convertible Debentures, which will be the
sole assets of the Trust. As a result, if principal or interest is not paid on
the Convertible Debentures, no amounts will be paid on the TECONS. If Apple
South does not make principal or interest payments on the Convertible
Debentures, the Trust will not have sufficient funds to make Distributions on
the TECONS, in which event the Guarantee will not apply to such Distributions
until the Trust has sufficient funds available therefor.
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So long as Apple South shall not be in default in the payment of interest on
the Convertible Debentures, Apple South has the right to defer payments of
interest on the Convertible Debentures from time to time for successive periods
(each, an "Extension Period") by extending the interest payment period on the
Convertible Debentures at any time for up to 20 consecutive quarters. If
interest payments are so deferred, Distributions to holders of the TECONS will
also be deferred. During such Extension Period, Distributions will continue to
accumulate with interest thereon (to the extent permitted by applicable law) at
the Distribution rate, compounded quarterly, and during any Extension Period,
holders of TECONS will be required to include deferred interest income in their
gross income for U.S. federal income tax purposes in advance of receipt of the
cash Distributions with respect to such deferred interest payments. There could
be multiple Extension Periods of varying lengths throughout the term of the
Convertible Debentures. See "Risk Factors--Option to Extend Interest Payment
Period," "Description of the TECONS-- Distributions," "Description of the
Convertible Debentures--Option to Extend Interest Payment Period" and "Certain
Federal Tax Consequences--Original Issue Discount."
The Convertible Debentures are redeemable by Apple South, in whole or in
part, from time to time, on or after March 3, 2000, at the prices set forth
herein (the "Redemption Price"), plus accrued and unpaid interest thereon to the
date fixed for redemption, including Compound and Additional Interest (as
defined herein). In addition, in certain circumstances upon the occurrence of a
Special Event (as defined herein) the Convertible Debentures may be redeemed by
Apple South at 100% of the principal amount thereof, plus accrued and unpaid
interest thereon. If Apple South redeems the Convertible Debentures, the Trust
will redeem Trust Securities having an aggregate liquidation amount equal to the
aggregate principal amount of the Convertible Debentures so redeemed. See
"Description of the TECONS-- Mandatory Redemption." The outstanding TECONS will
be redeemed upon maturity and repayment of the Convertible Debentures after
notice to the holders. The Convertible Debentures mature on March 1, 2027.
Upon the occurrence of a Special Event arising from a change in law or a
change in legal interpretation, unless the Convertible Debentures are redeemed
in the limited circumstances described herein, the Trust may be dissolved (with
the consent of Apple South), with the result that, after satisfaction of
liabilities to creditors, the Convertible Debentures would be distributed to the
holders of the TECONS, on a PRO RATA basis, in lieu of any cash Distribution.
Accordingly, prospective purchasers of TECONS are also making an investment
decision with regard to the Convertible Debentures and should carefully review
all the information regarding the Convertible Debentures contained in this
Prospectus. See "Risk Factors--Special Event Distribution; Tax Event
Distribution"; "Description of the TECONS--Special Event Distribution." If Apple
South declines to consent to such dissolution and Distribution, Apple South may
incur an obligation to pay Additional Interest (as defined herein). See
"Description of the Convertible Debentures--Additional Interest."
In the event of the involuntary or voluntary dissolution, winding up or
termination of the Trust, after satisfaction of liabilities to creditors, the
holders of the TECONS will be entitled to receive for each TECONS a liquidation
amount of $50 plus accumulated and unpaid Distributions thereon (including
interest thereon) to the date of payment, unless, in connection with such
dissolution in the case of a Special Event, the Convertible Debentures are
distributed to the holders of the TECONS. See "Description of the
TECONS--Liquidation Distribution Upon Dissolution."
AVAILABLE INFORMATION
Apple South is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"), most of which it files
electronically under the Commission's EDGAR system. These materials can be
inspected and copied at the public reference facilities of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the Commission's regional offices located at: Seven World Trade Center,
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13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of these materials may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of that Web site is http://www.sec.gov. Apple South
Common Stock, $.01 par value per share, is quoted on the Nasdaq National Market.
Reports, proxy statements and other information concerning Apple South may be
inspected at the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
No separate financial statements of the Trust have been included herein. The
Company does not consider that such financial statements would be material to
holders of TECONS because (i) all of the voting securities of the Trust will be
owned, directly or indirectly, by the Company, a reporting company under the
Exchange Act, (ii) the Trust has no independent operations and exists for the
sole purpose of issuing securities representing undivided beneficial interests
in the assets of the Trust and investing the proceeds thereof in the Convertible
Debentures issued by the Company and (iii) the obligations of the Trust under
the Trust Securities are fully and unconditionally guaranteed by the Company
pursuant to the Guarantee, when taken together with the Company's obligations
under the Convertible Debentures, the Indenture and the Declaration, including
its obligations under the Indenture to pay costs, expenses, debts and
liabilities of the Trust (other than with respect to the Trust Securities). See
"Description of the Convertible Debentures" and "Description of the Guarantee."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Apple South hereby incorporates by reference in this Prospectus the
following documents:
(a) Apple South's Annual Report on Form 10-K for the fiscal year ended
December 29, 1996;
(b) Apple South's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 30, 1997;
(c) Apple South's Amendment to Quarterly Report on Form 10-QA for the
fiscal quarter ended March 30, 1997;
(d) Apple South's Current Reports on Form 8-K filed with the Commission
on February 10, 1997 and February 24, 1997;
(e) Apple South's registration statement on Form 8-A, as amended; and
(f) All documents filed by Apple South with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and before the termination of the offering of the TECONS
hereby.
Any statement incorporated herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
Apple South will provide without charge to each recipient of this
Prospectus, upon written or oral request of such recipient, a copy of any or all
of the documents incorporated herein by reference (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
the document that this Prospectus incorporates by reference). Requests should be
directed to Erich J. Booth, Chief Financial Officer and Treasurer, Apple South,
Inc., Hancock at Washington, Madison, Georgia 30650, telephone number (706)
342-4552.
4
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED HEREIN BY
REFERENCE. UNLESS OTHERWISE NOTED, THE INFORMATION IN THIS PROSPECTUS WITH
RESPECT TO SHARES OF APPLE SOUTH COMMON STOCK REFLECTS STOCK DIVIDENDS OF
ONE-HALF SHARE FOR EACH SHARE OUTSTANDING ON NOVEMBER 2, 1992, ONE-HALF SHARE
FOR EACH SHARE OUTSTANDING ON JANUARY 29, 1993, ONE-HALF SHARE FOR EACH SHARE
OUTSTANDING ON AUGUST 30, 1993 AND ONE-HALF SHARE FOR EACH SHARE OUTSTANDING ON
JUNE 1, 1994. IN NOVEMBER 1995, APPLE SOUTH MERGED WITH DF&R RESTAURANTS, INC.
("DF&R") IN A TRANSACTION ACCOUNTED FOR AS A POOLING OF INTERESTS AND,
ACCORDINGLY, ALL FINANCIAL AND OTHER INFORMATION CONCERNING APPLE SOUTH IN THIS
PROSPECTUS INCLUDES DF&R FOR ALL PERIODS UNLESS OTHERWISE INDICATED. REFERENCES
IN THIS PROSPECTUS TO THE "COMPANY" OR "APPLE SOUTH" INCLUDE APPLE SOUTH, INC.
AND ITS SUBSIDIARIES UNLESS THE CONTEXT INDICATES OTHERWISE. SEE "SAFE HARBOR
STATEMENT" AND "RISK FACTORS" FOR A DESCRIPTION OF CERTAIN RISK FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THE COMPANY
Apple South is a rapidly growing, multi-concept restaurant operating
company. Since its inception in 1986, Apple South has increased its
profitability and size through the efficient management of restaurant operations
and through a series of strategic restaurant openings and acquisitions. Over the
last five fiscal years, restaurant sales have increased at a compound annual
growth rate of 37%, and restaurant margins have increased from 12.2% in 1991 to
15.7% in 1996.
At May 1, 1997, Apple South operated 354 casual dining restaurants,
consisting of 238 restaurants operating under the name "Applebee's Neighborhood
Grill & Bar," 69 "Don Pablo's" restaurants featuring traditional Mexican and
Tex-Mex dishes, 10 "Harrigan's" restaurants offering traditional classics such
as mesquite-smoked prime rib, hickory-grilled steaks and chicken, 16
"McCormick's" or "McCormick & Schmick's" upper-end casual seafood restaurants,
and 21 "Hops Grill & Bar" casual dining restaurants that feature an on-premise
micro-brewery. Apple South acquired the McCormick & Schmick's restaurants on
March 3, 1997, and the Hops Grill & Bar restaurants on March 13, 1997. For the
year ended December 29, 1996, Apple South's restaurant sales were $546 million.
Each Apple South restaurant concept is established as an entrepreneurial
operating division and functions on a decentralized basis with individual
recruiting, training, marketing, accounting and restaurant operations. Each
division is supported by various centralized functions such as human resources,
finance, treasury and capital formation. This multi-concept strategy allows the
Company to reach a broad customer base through specialized restaurant market
segments. By operating restaurant concepts as separate divisions, the Company
protects each concept's individuality, but allows each division to leverage the
best practices of other divisions.
As a franchisee of Applebee's International, Inc. (the "Franchisor"), Apple
South holds the exclusive development rights for Applebee's restaurants in all
or part of 22 states in the South, Mid-Atlantic and Midwest regions of the
United States. Apple South opened its first Applebee's restaurant in Greenville,
South Carolina in 1986 and is currently the largest Applebee's operator. In
November 1995, Apple South merged with DF&R, which operates Don Pablo's and
Harrigan's restaurants on a proprietary basis. The Don Pablo's restaurants are
concentrated in Texas and the Midwest region, while Harrigan's restaurants are
located in Texas, Oklahoma and New Mexico. In early 1997 Apple South acquired
the McCormick & Schmick's seafood restaurant group, located in the West-Coast
region and Washington, D.C., and Hops Grill & Bar, a casual dining restaurant
group featuring on-premises microbreweries, located primarily in Florida.
Apple South's growth strategy includes:
- expanding existing restaurant concepts;
- acquiring new restaurant concepts; and
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- leveraging Company-wide expertise and resources across concepts to improve
the effectiveness of existing restaurants while maintaining concept
integrity and individuality.
Apple South expects to open a total of 70 restaurants in 1997, including at
least 34 in the Applebee's division and 25 in the Don Pablo's division. Apple
South expects to open nine restaurants in the Hops Grill & Bar division and two
restaurants in the McCormick & Schmick's division in 1997. Through May 21, 1997,
Apple South has opened 15 new restaurants. Expansion efforts during the next few
years will be focused on the development of additional Applebee's restaurants in
Apple South's existing development territories and Don Pablo's restaurants in
the Midwest, Mid-Atlantic, Southeast and Northeast. In 1996, Apple South closed
its Tomato Rumba's division and is holding those assets for redeployment. In
April 1997, Apple South sold its ten franchised Hardee's fast-food hamburger
restaurants for $2.5 million.
The Company's principal executive offices are located at Hancock at
Washington, Madison, Georgia 30650, and its telephone number is (706) 342-4552.
------------------------
Applebee's Neighborhood Grill & Bar-Registered Trademark- and
Applebee's-Registered Trademark- are registered trademarks of Applebee's
International, Inc. Don Pablo's-Registered Trademark- is a registered trademark
of DF&R Ohio, Inc., a Company subsidiary. Hops Grill & Bar
Microbrewery-Registered Trademark- is a registered trademark recently purchased
by the Company from Hops Restaurants, Inc. McCormick &
Schmick's-Registered Trademark- and McCormick's-Registered Trademark- are
registered trademarks of McCormick & Schmick Restaurants, Inc., a Company
subsidiary. Hardee's-Registered Trademark- is a registered trademark of Imasco,
Ltd.
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THE OFFERING
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Securities Offered.............. 2,300,000 $3.50 Term Convertible Securities, Series A
("TECONS" or "Trust Preferred Securities").
The Issuer...................... Apple South Financing I, a Delaware business trust. The
sole assets of the Trust will consist of the 7%
Convertible Subordinated Debentures due March 1, 2027 (the
"Convertible Debentures") of Apple South.
Guarantor....................... Apple South, Inc., a Georgia corporation.
Distributions................... Distributions on the TECONS accumulate from March 11, 1997
and are payable at an annual rate of $3.50 per TECONS.
Subject to the Distribution deferral provisions described
below, distributions will be payable quarterly in arrears
on each March 1, June 1, September 1 and December 1,
commencing June 1, 1997. Because distributions on the
TECONS constitute interest for U.S. federal income tax
purposes, corporate holders thereof will not be entitled
to a dividends-received deduction.
Distribution Deferral The ability of the Trust to pay distributions on the
Provisions.................... TECONS is solely dependent on the receipt of interest
payments from Apple South on the Convertible Debentures.
So long as Apple South shall not be in default in the
payment of interest on the Convertible Debentures, Apple
South has the right to defer payments of interest on the
Convertible Debentures for successive Extension Periods
not exceeding 20 consecutive quarters for each such
period. Quarterly Distributions on the TECONS would be
deferred by the Trust (but would continue to accumulate
quarterly and would accrue interest) until the end of any
such Extension Period. Upon the termination of an
Extension Period, payment is due on all accrued and unpaid
amounts on the Convertible Debentures and upon such
payment, the Trust would be required to pay all
accumulated and unpaid Distributions. Apple South will
give notice of its deferral of an interest payment to the
Trust no later than ten business days prior to the related
record date (unless the Institutional Trustee (as defined
herein) shall be the sole holder of the Convertible Deben-
tures, in which case notice will be given no later than
one business day prior to the related record date). See
"Risk Factors--Option to Extend Interest Payment Period,"
"Description of the TECONS-- Distributions" and
"Description of the Convertible Debentures-- Option to
Extend Interest Payment Period." If a deferral of an
interest payment occurs, the holders of the TECONS will
continue to accrue income for U.S. federal income tax
purposes in advance of any corresponding cash
distribution. See "Risk Factors--Option to Extend Interest
Payment Period" and "Certain Federal Tax
Consequences--Original Issue Discount."
Rights Upon Deferral of
Distribution.................. During any period in which interest payments on the
Convertible Debentures are deferred, interest will accrue
on the Convertible Debentures (compounded quarterly) and
quarterly Distributions
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will continue to accumulate with interest thereon at the
Distribution rate, compounded quarterly. Apple South has
agreed, among other things, not to declare or pay any
dividend on its capital stock during any Extension Period.
See "Risk Factors--Option to Extend Interest Payment
Period" and "Description of the Convertible
Debentures--Option to Extend Interest Payment Period."
Conversion Rights............... Each TECONS is convertible at any time prior to the close
of business on March 1, 2027 (or, in the case of TECONS
called for redemption, prior to the close of business on
the Business Day prior to the TECONS redemption date) at
the option of the holder into shares of Apple South Common
Stock, at the initial conversion rate of 3.3801 shares of
Apple South Common Stock for each TECONS (equivalent to a
conversion price of $14.793 per share of Apple South
Common Stock), subject to adjustment in certain
circumstances. The last reported bid price of Apple South
Common Stock on the Nasdaq National Market on May 19,
1997, was $14.375 per share. In connection with any
conversion of a TECONS, the Conversion Agent (as defined
herein) will exchange such TECONS for the appropriate
principal amount of the Convertible Debentures held by the
Trust and immediately convert such Convertible Debentures
into Apple South Common Stock. No fractional shares of
Apple South Common Stock will be issued as a result of
conversion, but in lieu thereof such fractional interest
will be paid by Apple South in cash. See "Description of
the TECONS--Conversion Rights."
Liquidation Preference.......... In the event of any liquidation of the Trust, holders will
be entitled to receive $50 per TECONS plus an amount equal
to any accumulated and unpaid Distributions thereon to the
date of payment, unless Convertible Debentures are
distributed to such holders. See "Description of the
TECONS--Liquidation Distribution Upon Dissolution."
Redemption...................... The Convertible Debentures will be redeemable for cash, at
the option of Apple South, in whole or in part, from time
to time on or after March 3, 2000, at the prices specified
herein plus accrued and unpaid interest thereon to the
date fixed for redemption, including Compound and
Additional Interest. Upon any redemption of the
Convertible Debentures and after notice to the holders,
the Trust will redeem TECONS having an aggregate
liquidation amount equal to the aggregate principal amount
of the Convertible Debentures so redeemed. The TECONS will
not have a stated maturity date, although they will be
subject to mandatory redemption upon the repayment of the
Convertible Debentures at their stated maturity, March 1,
2027, upon acceleration, earlier redemption or otherwise.
See "Description of the TECONS--Mandatory Redemption" and
"Description of the Convertible Debentures--Redemption at
the Option of Apple South."
Guarantee....................... Apple South will irrevocably and unconditionally
guarantee, on a subordinated basis and to the extent set
forth herein, the payment in full of (i) distributions on
the TECONS to the extent the Trust
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has funds available therefor, (ii) the amount payable upon
redemption of the TECONS to the extent the Trust has funds
available therefor and (iii) generally, the liquidation
preference of the TECONS to the extent the Trust has
assets available for distribution to holders of TECONS.
The Guarantee will be unsecured and will be subordinate
and junior in right of payment to all other liabilities of
Apple South and will rank PARI PASSU in right of payment
with the most senior preferred stock issued, from time to
time, if any, by Apple South.
Voting Rights................... Generally, holders of the TECONS will not have any voting
rights. However, if an Indenture Event of Default (as
defined herein) occurs and is continuing, the holders of
25% of the aggregate liquidation amount of the TECONS may
direct the Institutional Trustee to declare the principal
of and interest on the Convertible Debentures immediately
due and payable. If (i) the Institutional Trustee fails to
enforce its rights under the Convertible Debentures or
(ii) Apple South defaults under the Guarantee with respect
to the TECONS, a record holder of the TECONS may, to the
fullest extent permitted by law, institute a legal
proceeding directly against Apple South to enforce the
Institutional Trustee's rights without first instituting
any legal proceeding against the Institutional Trustee.
See "Description of the TECONS--Voting Rights."
Special Event Distribution; Tax
Event Redemption.............. Upon the occurrence of a Special Event, except in certain
limited circumstances, Apple South may cause the Trust to
be dissolved and, after satisfaction of liabilities to
creditors, cause the Convertible Debentures to be
distributed to the holders of the TECONS. In the case of a
Tax Event, Apple South may also elect to cause the TECONS
to remain outstanding and pay Additional Interest, if any,
on the Convertible Debentures. In certain circumstances
upon the occurrence of a Tax Event, the Convertible
Debentures may be redeemed by Apple South at 100% of the
principal amount thereof plus accrued and unpaid interest
thereon. See "Description of the TECONS--Special Event
Distribution."
Convertible Subordinated
Debentures of Apple South..... The Convertible Debentures will mature on March 1, 2027,
and will bear interest at the rate of 7% per annum,
payable quarterly in arrears. So long as Apple South shall
not be in default in the payment of interest on the
Convertible Debentures, Apple South has the right to defer
payments of interest on the Convertible Debentures from
time to time for successive periods not exceeding 20
consecutive quarters for each such period; PROVIDED, that
no such period shall extend beyond the stated maturity
date of the Convertible Debentures. Prior to the
termination of any Extension Period of less than 20
consecutive quarters, Apple South may further defer
interest payments provided the Extension Period, as
further extended, does not exceed 20 consecutive quarters
and does not extend beyond the stated maturity date of the
Convertible Debentures. During any Extension Period no
interest shall be due, but
</TABLE>
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<TABLE>
<S> <C>
such interest shall continue to accrue and compound
quarterly. Upon the termination of the Extension Period,
payment is due on all accrued and unpaid amounts. After
the payment of all amounts then due, Apple South may
commence a new Extension Period, subject to the conditions
of this paragraph. During an Extension Period, Apple South
will be prohibited from paying dividends on any of its
capital stock and making certain other restricted pay-
ments until quarterly interest payments are resumed and
all amounts due on the Convertible Debentures are made
current. The payment of the principal of and interest on
the Convertible Debentures will be subordinated in right
of payment to all Senior Indebtedness of Apple South and
may not be made if an Event of Default has occurred and is
continuing under the Senior Indenture (as defined in the
Indenture). As of March 30, 1997, Apple South had $250
million of Senior Indebtedness (as defined in the
Indenture) outstanding. The Indenture, under which the
Convertible Debentures will be issued, does not limit the
aggregate amount of Senior Indebtedness that may be issued
by Apple South. The Convertible Debentures will have
provisions with respect to interest, optional redemption
and conversion into Apple South Common Stock and certain
other terms substantially similar or analogous to those of
the TECONS. See "Description of the Convertible
Debentures" and "Risk Factors--Ranking of Subordinate
Obligations Under the Guarantee and Convertible
Debentures."
Book-Entry; Delivery and Form... TECONS sold in reliance on Rule 144A are represented by a
single permanent global TECONS certificate registered in
the name of a nominee of The Depository Trust Company
("DTC"). See "Description of the TECONS--The Global
TECONS." TECONS sold in offshore transactions in reliance
on Regulation S under the Securities Act will be
represented by a single, permanent global TECONS in
definitive, fully registered form deposited with the
Institutional Trustee, as custodian for, and registered in
the name of, DTC for the accounts of Morgan Guaranty Trust
Company of New York, Brussels office, as operator of the
Euroclear System ("Euroclear"), and Cedel Bank, S.A.
("Cedel"). TECONS resold under this Prospectus will be
represented by a single permanent global TECONS
certificate registered in the name of a nominee of DTC.
See "Description of the TECONS--Book-Entry; Delivery and
Form." Institutional Accredited Investors who are not
Qualified Institutional Buyers and who do not purchase
TECONS under this Prospectus will receive certificates for
the TECONS owned by them, which cannot thereby be traded
through the facilities of DTC, except in connection with a
transfer to a Qualified Institutional Buyer or a transfer
pursuant to Regulation S. See "Description of the
TECONS--Book-Entry; Delivery and Form."
</TABLE>
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SAFE HARBOR STATEMENT
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information so long as those statements are identified as
forward-looking and are accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from those discussed in the statement. Apple South desires to take
advantage of the "safe-harbor" provisions of the Act. Certain information,
particularly information regarding future economic performance and finances and
plans and objectives of management contained, or incorporated by reference, in
this Prospectus, is forward-looking. In some cases, information regarding
certain important factors that could cause actual results to differ materially
from any such forward-looking statement appear together with such statement.
Also, the following factors, in addition to other possible factors not listed,
could affect Apple South's actual results and cause such results to differ from
those expressed in forward-looking statements:
RISKS ASSOCIATED WITH RECENT ACQUISITION
As it has done in connection with Apple South's prior acquisitions, in
connection with Apple South's recent acquisition of Hops Grill & Bar the
Franchisor is currently reviewing information provided by Apple South addressing
whether the menu and method of operations of Hops Grill & Bar in specific
geographic areas are similar to Applebee's. If it were determined that the Hops
Grill & Bar concept has a menu and method of operations similar to Applebee's,
Apple South could be required to modify the Hops Grill & Bar menu or method of
operations, or to take other actions which could adversely affect Apple South's
operations.
GROWTH STRATEGY
The Company's Applebee's division operates its restaurants as a franchisee
of Applebee's International, Inc. Based on its current development schedule,
Apple South expects to substantially complete the development of its existing
Applebee's restaurant territory within four to six years. Apple South's current
strategy does not include obtaining additional development territory from the
Franchisor or acquiring territory from another Applebee's franchisee. When the
Applebee's territory is fully developed, Apple South's continued expansion will
be solely dependent upon the success of its Don Pablo's concept, the McCormick &
Schmick concept and the Hops Grill & Bar concept, and such other concepts as
Apple South may acquire or develop. The successful growth of these concepts will
be dependent, among other things, upon Apple South's ability to manage the
development and growth of a multi-concept company.
FRANCHISE MATTERS
Apple South has entered into development agreements with the Franchisor
which provide the Company's Applebee's division with the exclusive right to open
Applebee's restaurants within a designated territory. In addition, each
restaurant is operated pursuant to a franchise agreement with the Franchisor.
These agreements contain a number of restrictions and obligations on the part of
Apple South, including the obligation to develop a significant number of new
restaurants over the next four years, and the failure to meet these requirements
could result in the termination of one or more franchise or development
agreements and financial penalties. The long-term success of the restaurants in
the Applebee's division depends, in large part, on the overall success of the
Applebee's restaurant system. Accordingly, Apple South's success will depend, in
part, on the successful operation of the Applebee's restaurants owned by the
Franchisor and other franchisees, as well as on the financial condition,
management, marketing and innovative abilities of the Franchisor. Any event that
creates adverse publicity involving Applebee's restaurants may adversely affect
Apple South regardless of whether such event involves its restaurants.
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NECESSITY OF ADDITIONAL FINANCING
From the net proceeds from the sale of the Convertible Debentures, along
with operating cash flow and existing credit facilities, Apple South has the
capital required for its planned development of additional restaurants and the
exercise of purchase options under existing leases through the third quarter of
1998. However, Apple South will require financing in addition to its existing
credit facilities to carry out its expansion plans beyond that time. Although
management believes that such financing will be available, Apple South does not
have any commitment for additional financing.
FACTORS AFFECTING THE RESTAURANT INDUSTRY
The casual dining segment of the restaurant industry is expected to remain
intensely competitive with respect to price, service, location and the type and
quality of food. Each of Apple South's restaurants competes directly or
indirectly with locally-owned restaurants as well as regional and national
chains, and several of Apple South's significant competitors are larger or more
diversified and have substantially greater resources than Apple South. It also
is anticipated that growth in the industry will result in continuing competition
for available restaurant sites as well as continued competition in attracting
and retaining qualified management level operating personnel. The restaurant
business often is affected by changes in consumer tastes, national, regional or
local economic conditions, demographic trends, weather, traffic patterns, and
the type, number and location of competing restaurants. In addition, factors
such as inflation and increased food, labor and benefits costs may adversely
affect the restaurant industry in general and Apple South's restaurants in
particular.
REGULATION
Each of Apple South's restaurants is subject to extensive federal, state and
local laws and regulations governing health, sanitation, minimum wage and
minimum hour requirements, safety and the sale of alcoholic beverages. The
selection of new restaurant sites is affected by federal, state and local laws
and regulations regarding environmental matters, zoning and land use and the
sale of alcoholic beverages. The failure to receive or retain, or a delay in
obtaining, a liquor license in a particular location could adversely affect or
cause Apple South to terminate its operations at that location. In the past,
none of these laws and regulations has had a significant negative effect on
operations, nor has Apple South had significant difficulty in obtaining
necessary licenses and approvals. More stringent and varied requirements
(particularly at the local level), however, may result in increases in the cost
and time required for opening new restaurants, and difficulties in obtaining
necessary licenses or permits could cause delays in or cancellations of new
restaurant openings.
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RISK FACTORS
The following are factors relating to the TECONS offered hereby that
prospective purchasers should consider in evaluating an investment.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND CONVERTIBLE
DEBENTURES
The obligations of Apple South under the Guarantee are subordinate and
junior in right of payment to all liabilities of Apple South and PARI PASSU in
right of payment with the most senior preferred stock issued, from time to time,
if any, by Apple South. The obligations of Apple South under the Convertible
Debentures are subordinate and junior in right of payment to all present and
future Senior Indebtedness of Apple South. No payment of principal (including
redemption payments, if any), premium, if any, or interest on the Convertible
Debentures may be made if (i) any Senior Indebtedness of Apple South is not paid
when due and any applicable grace period with respect to such default has ended
with such default not having been cured or waived or ceasing to exist, (ii) the
maturity of any Senior Indebtedness has been accelerated because of a default or
(iii) an Event of Default has occurred and is continuing under the Senior
Indenture, permitting the holders of securities issued thereunder to accelerate
the maturity thereof or demand payment in full. As of March 30, 1997, Apple
South had $250 million of Senior Indebtedness outstanding. There are no terms in
the TECONS, the Convertible Debentures or the Guarantee that limit the ability
of Apple South to incur additional indebtedness, including indebtedness that
ranks senior to the Convertible Debentures and the Guarantee, or to grant
security interests to secure outstanding or new indebtedness. See "Description
of the Guarantee" and "Description of the Convertible Debentures--
Subordination."
RIGHTS UNDER THE GUARANTEE
The Guarantee will be qualified as an indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). The Institutional Trustee
will act as indenture trustee under the Guarantee for the purposes of compliance
with the provisions of the Trust Indenture Act (the "Guarantee Trustee"). The
Guarantee Trustee will hold the Guarantee for the benefit of the holders of the
TECONS.
Under the Guarantee, Apple South guarantees the holders of the TECONS the
payment of (i) any accumulated and unpaid Distributions that are required to be
paid on the TECONS, to the extent the Trust has funds available therefor; (ii)
the Redemption Price, including all accumulated and unpaid distributions with
respect to TECONS called for redemption by the Trust, to the extent the Trust
has funds available therefor; and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Trust (other than in connection
with the distribution of Convertible Debentures to the holders of TECONS or the
conversion of all the TECONS), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid Distributions on the TECONS to the
date of the payment to the extent the Trust has funds available therefor or (b)
the amount of assets of the Trust remaining available for distribution to
holders of the TECONS in liquidation of the Trust. The holders of a majority in
liquidation amount of the TECONS have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee. In addition, any record holder of TECONS
may institute a legal proceeding directly against Apple South to enforce the
Guarantee without first instituting a legal proceeding against the Trust, the
Guarantee Trustee or any other person or entity if (i) the Institutional Trustee
fails to enforce its rights under the Convertible Debentures, or (ii) Apple
South defaults under the Guarantee with respect to the TECONS. If Apple South
were to default on its obligation to pay amounts payable on the Convertible
Debentures, the Trust would lack available funds for the payment of
Distributions or amounts payable on redemption of the TECONS or otherwise, and,
in such event, holders of the TECONS would not be able to rely upon the
Guarantee for payment of such amounts. Instead, holders of the TECONS would rely
on the enforcement (i) by the Institutional Trustee of its rights as registered
holder of the Convertible Debentures against Apple South pursuant to the terms
of the Convertible
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Debentures or (ii) by a holder of its rights of direct action against Apple
South to enforce payments on the Convertible Debentures. See "Description of the
Guarantee" and "Description of the Convertible Debentures." The Declaration
provides that each holder of TECONS, by acceptance thereof, agrees to the
provisions of the Guarantee, including the subordination provisions thereof, and
the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TECONS
If (i) Apple South Financing fails to pay Distributions in full on the
TECONS (other than pursuant to a deferral) or (ii) a Declaration Event of
Default (as defined herein) occurs and is continuing, then the holders of TECONS
would rely on the enforcement by the Institutional Trustee of its rights as a
holder of the Convertible Debentures against Apple South. In addition, the
holders of a majority in liquidation amount of the TECONS will have the right to
direct the time, method, and place of conducting any proceeding for any remedy
available to the Institutional Trustee or to direct the exercise of any trust or
power conferred upon the Institutional Trustee under the Declaration, including
the right to direct the Institutional Trustee to exercise the remedies available
to it as a holder of the Convertible Debentures. If the Institutional Trustee
fails to enforce its rights under the Convertible Debentures, a holder of
TECONS, to the fullest extent permitted by law, may institute a legal proceeding
directly against Apple South to enforce the Institutional Trustee's rights under
the Convertible Debentures without first instituting any legal proceeding
against the Institutional Trustee or any other person or entity. Notwithstanding
the foregoing, if a Declaration Event of Default has occurred and is continuing
and such event is attributable to the failure of Apple South to pay interest or
principal on the Convertible Debentures on the date such interest or principal
is otherwise payable (or in the case of redemption, on the redemption date),
then the registered holder of the TECONS may directly institute a proceeding for
enforcement of payment to such holder of the principal of or interest on the
Convertible Debentures having a principal amount equal to the aggregate
liquidation amount of the TECONS of such holder (a "Direct Action") on or after
the respective due date specified in the Convertible Debentures. In connection
with such Direct Action, Apple South will be subrogated to the rights of such
holders of TECONS under the Declaration to the extent of any payment made by
Apple South to such holder of TECONS in such Direct Action. The holders of
TECONS will not be able to exercise any other remedy available to the holders of
the Convertible Debentures. See "Description of the TECONS--Declaration Events
of Default."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as Apple South shall not be in default in the payment of interest on
the Convertible Debentures, Apple South has the right under the Indenture to
defer payments of interest on the Convertible Debentures from time to time for
successive periods not exceeding 20 consecutive quarters for each such period,
PROVIDED that no such period shall extend beyond the stated maturity of the
Convertible Debentures. As a consequence of such an extension, quarterly
Distributions on the TECONS would be deferred (but despite such deferral would
continue to accumulate with interest thereon at the distribution rate,
compounded quarterly) by the Trust during any such Extension Period. During any
Extension Period and until quarterly interest payments are resumed and all
amounts due on the Convertible Debentures are made current, (a) Apple South
shall not declare or pay dividends on, or make a distribution with respect to,
or redeem, purchase or acquire, or make a liquidation payment with respect to,
any of its capital stock (other than (i) purchases or acquisitions of shares of
Apple South Common Stock in connection with the satisfaction by Apple South of
its obligations under any employee benefit plans, (ii) as a result of a
reclassification of Apple South capital stock or the exchange or conversion of
one class or series of Apple South capital stock for another class or series of
Apple South capital stock, (iii) the purchase of fractional interests in shares
of Apple South capital stock pursuant to the conversion or exchange provisions
of such Apple South capital stock or the security being converted or exchanged
or (iv) purchases or acquisitions of shares of Apple South Common Stock to be
used in connection with acquisitions of Apple South Common Stock by shareholders
pursuant to Apple South's dividend reinvestment plan), (b) Apple South shall not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt
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securities issued by Apple South that rank PARI PASSU with or junior to the
Convertible Debentures and (c) Apple South shall not make any guarantee payments
with respect to the foregoing (other than pursuant to the Guarantee). Prior to
the termination of any such Extension Period of less than 20 consecutive
quarters, Apple South may further defer interest payments provided the Extension
Period, as further extended, does not exceed 20 consecutive quarters and does
not extend beyond the stated maturity date of the Convertible Debentures. During
any Extension Period no interest shall be due, but such interest shall continue
to accrue and compound quarterly. Upon the termination of any Extension Period,
payment is due on all accrued and unpaid amounts. After the payment of all
amounts then due, Apple South may commence a new Extension Period, subject to
the conditions of this paragraph. See "Description of the TECONS--Distributions"
and "Description of the Convertible Debentures--Option to Extend Interest
Payment Period."
Should Apple South exercise its right to defer payments of interest by
extending the interest payment period, each holder of TECONS will continue to
accrue income (as original issue discount ("OID")) in respect of the deferred
and compounded interest allocable to its TECONS for U.S. federal income tax
purposes, which interest will be allocated, but not distributed, to holders of
record of TECONS. As a result, each such holder of TECONS will recognize income
for U.S. federal income tax purposes in advance of the receipt of cash and will
not receive the cash from Apple South Financing related to such
income if such holder disposes of its TECONS prior to the record date for the
date on which Distributions of such amounts are made. Apple South has no current
intention of exercising its right to defer payments of interest by extending the
interest payment period of the Convertible Debentures. However, should Apple
South determine to exercise such right in the future, the market price of the
TECONS is likely to be affected. A holder that disposes of its TECONS during an
Extension Period, therefore, might not receive the same return on its investment
as a holder that continues to hold its TECONS. In addition, as a result of the
existence of the right of Apple South to defer interest payments, the market
price of the TECONS (which represent an undivided beneficial interest in the
Convertible Debentures) may be more volatile than other securities on which OID
accrues that do not have such rights. See "Certain Federal Tax
Consequences--Original Issue Discount."
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of President Clinton's Fiscal 1998 Budget
Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") that, among other things, would (i) treat as equity for U.S.
federal income tax purposes certain debt instruments with a maximum term of more
than 15 years and (ii) disallow interest deductions on certain convertible debt
instruments or defer interest deductions on certain debt instruments issued with
original issue discount. The Proposed Legislation is proposed to be effective
for debt instruments issued on or after the date on which the first
Congressional committee action is taken.
It is expected that if the Proposed Legislation were enacted, such
legislation would not apply to the Convertible Debentures since they would be
issued prior to the date of any "Congressional action." However, there can be no
assurances that the effective date guidance contained in the Proposed
Legislation will be incorporated in the legislation, if enacted, or that other
legislation enacted after the date hereof will not otherwise adversely affect
the tax treatment of the Convertible Debentures. If legislation were enacted
that adversely affects the tax treatment of the Convertible Debentures, there
could be a distribution of the Convertible Debentures to holders of the TECONS
or, in certain circumstances, the redemption of the Convertible Debentures by
Apple South and the distribution by the Trustee of the resulting cash in
redemption of the TECONS. See "--Special Event Distribution; Tax Event
Distribution" below and "Description of the TECONS--Special Event Distribution."
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SPECIAL EVENT DISTRIBUTION; TAX EVENT DISTRIBUTION
Upon the occurrence of a Special Event, Apple South Financing could be
dissolved (with the consent of Apple South), except in the limited circumstance
described below, with the result that the Convertible Debentures would be
distributed to the holders of the Trust Securities in connection with the
liquidation of the Trust. In certain circumstances, Apple South would have the
right to redeem the Convertible Debentures, in whole or in part, in lieu of a
distribution of the Convertible Debentures by the Trust; in which event the
Trust would redeem the Trust Securities on a PRO RATA basis to the same extent
as the Convertible Debentures are redeemed by Apple South. See "Description of
the TECONS--Special Event Distribution."
Under current U.S. federal income tax law, a distribution of Convertible
Debentures upon the dissolution of Apple South Financing should not be a taxable
event to holders of the TECONS. Upon occurrence of a Special Event, however, a
dissolution of Apple South Financing in which holders of the TECONS receive cash
would be a taxable event to such holders. See "Certain Federal Tax
Consequences--Receipt of Convertible Debentures or Cash Upon Liquidation of
Apple South Financing."
There can be no assurance as to the market prices for the Convertible
Debentures or the Convertible Debentures that may be distributed in exchange for
TECONS if a dissolution or liquidation of the Trust were to occur. Accordingly,
the TECONS that an investor may purchase, whether pursuant to the offer made
hereby or in the secondary market, or the Convertible Debentures that a holder
of TECONS may receive on dissolution and liquidation of the Trust, may trade at
a discount to the price that the investor paid to purchase the TECONS offered
hereby. Because holders of TECONS may receive Convertible Debentures upon the
occurrence of a Special Event, prospective purchasers of TECONS are also making
an investment decision with regard to the Convertible Debentures and should
carefully review all the information regarding the Convertible Debentures
contained herein. See "Description of the TECONS-- Special Event Distribution"
and "Description of the Convertible Debentures--General."
LIMITED VOTING RIGHTS
Holders of TECONS will have limited voting rights and will not be entitled
to vote to appoint, remove or replace, or to increase or decrease the number of,
Apple South Trustees, which voting rights are vested exclusively in the holder
of the Trust Common Securities. See "Description of the TECONS--Voting Rights."
TRADING PRICE
The TECONS may trade at a price that does not fully reflect the value of
accrued but unpaid interest with respect to the underlying Convertible
Debentures. A holder who disposes of TECONS between record dates for payments of
Distributions thereon will be required to include accrued but unpaid interest on
the Convertible Debentures through the date of disposition in income as ordinary
income (i.e., OID), and to add such amount to the adjusted tax basis in the
holder's PRO RATA share of the underlying Convertible Debentures deemed disposed
of. To the extent the selling price is less than the holder's adjusted tax basis
(which will include, in the form of OID, all accrued but unpaid interest), a
holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for U.S. federal
income tax purposes. See "Certain Federal Tax Consequences--Original Issue
Discount" and "--Sales of TECONS."
PUBLIC MARKET FOR TECONS
Apple South intends to list the TECONS on the Nasdaq National Market. The
TECONS may trade at a discount from their initial offering price, however,
depending upon prevailing interest rates, the market for similar securities and
other factors. The Initial Purchasers have informed Apple South that they
currently intend to make a market in the TECONS. However, they are not obligated
to do so, and any such market making may be discontinued at any time without
notice. See "Plan of Distribution."
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RECENT DEVELOPMENTS
MCCORMICK & SCHMICK'S
In keeping with its multi-concept strategy, on March 3, 1997 Apple South
acquired McCormick & Schmick's, one of the nation's largest upper-end casual
seafood restaurant groups. As of February 7, 1997, McCormick & Schmick's had 16
restaurants in Oregon, Washington, California, Colorado and the District of
Columbia. Apple South paid $53 million for this acquisition, of which
approximately $50 million was paid in cash and the remainder in Apple South
Common Stock. Apple South assumed approximately $15 million in debt in
connection with the acquisition.
The first McCormick & Schmick's restaurant was acquired in 1972 by
co-founders William McCormick and Doug Schmick. Both founders continue to manage
the restaurant group and will remain as senior management following the
acquisition by Apple South.
McCormick & Schmick's restaurants offer fine, fresh seafood and outstanding
service in an elegant yet informal setting. The restaurants' master chefs
develop menu offerings which emphasize distinctive seafood and also feature
meat, poultry, salads and pasta. Menus vary daily based on fresh product
availability and price, and usually feature over 85 items. The restaurants serve
both lunch and dinner, with the cost of a typical meal, including beverages, of
$10.00 to $15.00 for lunch and $25.00 to $30.00 for dinner. The bar at each
restaurant features selections of premium liquors and an extensive wine list.
Sales of alcoholic beverages accounted for approximately 30% of McCormick &
Schmick's total sales during the year ended January 4, 1997.
The design of a McCormick & Schmick's restaurant varies from a traditional
fish house design in a historic setting to a more contemporary dinner house and
brew pub concept. The restaurants have an elegant ambiance created through the
use of brass, rich wood, stained glass, linens and candlelight. McCormick &
Schmick's restaurants range in size from 6,000 to 14,000 square feet with dining
capacities for 130 to 290 customers.
HOPS GRILL & BAR
On March 13, 1997, Apple South acquired Hops Grill & Bar, which, as of
February 7, 1997, operated 19 full-service, casual dining restaurants featuring
an on-premise microbrewery. The purchase price for Hops Grill & Bar was $31.5
million, which was paid equally in cash and Apple South Common Stock. In
addition, Apple South assumed approximately $26.5 million of debt.
The first Hops Grill & Bar restaurant was opened in Clearwater, Florida in
1989. Each restaurant offers a diverse menu of popular foods, freshly prepared
in a display kitchen with a strict commitment to quality. The restaurants seek
to heighten customers' sense of value by offering generous portions at moderate
prices. Hops Grill & Bar restaurants feature an American-style menu that
includes top choice steaks and prime rib, smoked baby back ribs, fresh fish,
chicken and pasta dishes, deluxe burgers and sandwiches, hand-tossed salads with
homemade dressings, appetizers, soups and desserts. The menu offers separate
selections for children. The cost of a typical meal, including beverages,
currently ranges from $6.00 to $9.00 per person for lunch and $13.00 to $15.00
per person for dinner.
As a complement to its menu, each Hops Grill & Bar restaurant offers
lager-style beers and ales that are brewed on-premises. The restaurants utilize
their original recipes to brew four distinctive lager-style beers and ales:
Clearwater Light, Lightning Bold Gold, Hammerhead Red and A-1 Ale. An
observation microbrewery at each restaurant allows customers to view the entire
brewing process. The brewed beers are served in a frozen glass mug and, except
for one non-alcoholic beer, are the only beers served. Full bar service is also
available at each restaurant. Sales of alcoholic beverages accounted for
approximately 18% of the total sales (with beer constituting 10% of total sales)
during 1996. Clearwater Light, Lightning Bold Gold and Hammerhead Red are
trademarks recently purchased by the Company from Hops Restaurants, Inc.
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Hops Grill & Bar restaurants range in size from approximately 5,000 to 7,300
square feet. The on-premise brewing equipment is an integral aspect of the
design, enhancing the ambiance of the restaurant and creating a dramatic visual
effect. The observation microbreweries in the restaurants occupy from 450 to 750
square feet. The restaurant dining and bar areas seat from 160 to 240 customers.
The cost of developing and opening a Hops Grill & Bar restaurant averaged
approximately $1.4 million in 1996, excluding land costs and including
approximately $160,000 in microbrewery equipment.
An operating partner program is a key element of the Hops Grill & Bar
development strategy. Under this program, each operating partner acquires a 10%
interest in the restaurants developed within a specified geographic area. Each
operating partner is an experienced restaurant operator who can provide local
market knowledge and management. Five of the Hops Grill & Bar restaurants
currently have an operating partner whose interest will remain in place after
the acquisition by Apple South. Apple South expects that Hops Grill & Bar will
continue this program following the acquisition. Hops Grill & Bar intends to
open nine restaurants in 1997.
USE OF PROCEEDS
The Selling Holders will receive all of the proceeds from the sale of the
Offered Securities. Neither Apple South nor the Trust will receive any proceeds
from the sale of the Offered Securities.
RATIO OF EARNINGS TO FIXED CHARGES AND OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS.
The following table sets forth the ratio of earnings to fixed charges for
the company for the periods indicated. The Company did not have any preferred
stock dividends in any of the periods indicated, and, therefore, the ratio of
earnings to combined fixed charges and preferred stock dividends for each of the
periods indicated was equal to the ratio of earnings to fixed charges for such
period.
<TABLE>
<CAPTION>
YEAR ENDED QUARTER ENDED
----------------------------------------------------------------------------------- ------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 29, MARCH 31, MARCH 30,
1992 1993 1994 1995 1996 1996 1997
--------------- --------------- --------------- --------------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of
earnings to
fixed
charges(5)..... 2.99x 4.53x 5.04x 3.83x 1.92x (1.57)x 2.67x
</TABLE>
The ratio of earnings to fixed charges was computed by dividing earnings by
fixed charges. Earnings represent income from continuing operations before
income taxes and fixed charges, net of capitalized interest. Fixed charges
consist of interest expense before reduction for capitalized interest, debt
amortization costs and one-third (the portion deemed representative of the
interest factor) of total restaurant lease payments. As a result of the asset
revaluation charge of $19.8 million in the first quarter of 1996, earnings were
insufficient to cover fixed charges by $8.6 million. The ratio of earnings to
fixed charges excluding the asset revaluation charge would have been 4.31 for
the first quarter of 1996. The ratio of earnings to fixed charges excluding the
merger and asset revaluation charges would have been 4.67x and 3.44x for 1995
and 1996, respectively.
18
<PAGE>
APPLE SOUTH FINANCING I
Apple South Financing is a statutory business trust continued under Delaware
law pursuant to (i) an amended and restated declaration of trust dated as of
March 11, 1997 (the "Declaration") entered into among Apple South as sponsor
(the "Sponsor"), and the trustees of Apple South Financing (the "Apple South
Trustees") and the holders, from time to time, of the Trust Securities, and (ii)
the filing of a certificate of trust with the Secretary of State of the State of
Delaware on February 18, 1997. The Declaration will be qualified as an indenture
under the Trust Indenture Act. Upon issuance of the TECONS, the purchasers
thereof owned all of the TECONS. See "Description of the TECONS--Book-Entry;
Delivery and Form" and "--The Global TECONS." Apple South acquired all of the
Trust Common Securities which have an aggregate liquidation amount equal to 1%
of the total capital of Apple South Financing. Apple South Financing exists for
the exclusive purposes of (i) issuing the Trust Securities representing
undivided beneficial interests in the assets of the Trust, (ii) investing the
gross proceeds of the Trust Securities in the Convertible Debentures and (iii)
engaging in only those other activities necessary or incidental thereto.
Pursuant to the Declaration, the number of Apple South Trustees is initially
five. Three of the Apple South Trustees (the "Regular Trustees") are persons who
are employees or officers of or who are affiliated with Apple South. The fourth
trustee is a financial institution that maintains its principal place of
business in the state of Delaware (the "Delaware Trustee"). Initially, First
Union Bank of Delaware is acting as Delaware Trustee. The fifth trustee is a
financial institution that is unaffiliated with Apple South and serves as
institutional trustee under the Declaration and as indenture trustee for the
purposes of compliance with the provisions of the Trust Indenture Act (the
"Institutional Trustee"). First Union National Bank of Georgia is and will be
the Institutional Trustee until removed or replaced by the holder of the Trust
Common Securities. For the purposes of compliance with the provisions of the
Trust Indenture Act, First Union National Bank of Georgia acts as trustee (the
"Guarantee Trustee") under the Guarantee and as Indenture Trustee under the
Indenture. See "Description of the Guarantee" and "Description of the
TECONS--Voting Rights."
The Institutional Trustee holds title to the Convertible Debentures for the
benefit of the holders of the Trust Securities, and the Institutional Trustee
has the power to exercise all rights, powers and privileges under the Indenture
as the holder of the Convertible Debentures. The Institutional Trustee will make
payments of Distributions and payments on liquidation, redemption and otherwise
to the holders of the Trust Securities out of funds received in payments of
principal, premium, if any, and interest on the Convertible Debentures. The
Guarantee Trustee holds the Guarantee for the benefit of the holders of the
TECONS. Apple South, as the direct holder of all the Trust Common Securities,
has the right to appoint, remove or replace any Apple South Trustee and to
increase or decrease the number of Apple South Trustees. Apple South will pay
all fees and expenses related to Apple South Financing and the offering of the
Trust Securities. See "Description of the Convertible
Debentures--Miscellaneous."
The rights of the holders of the TECONS, including economic rights, rights
to information and voting rights, are set forth in the Declaration and the
Delaware Business Trust Act (the "Trust Act"). See "Description of the TECONS."
The financial statements of the Trust will be consolidated with Apple
South's financial statements, and in the event that the Trust obtains an
exemption from the periodic reporting requirements of the Exchange Act pursuant
to the Commission's Staff Accounting Bulletin 53, the Trust will not file
separate financial statements under the Exchange Act and the Company's future
filings under the Exchange Act will (i) present the Trust's securities as a
separate line item on the balance sheet entitled "Apple South-- Obligated
Mandatorily Redeemable Preferred Securities of Subsidiary Trust holding solely
Convertible Subordinated Debentures"; (ii) state in a footnote to the financial
statements that the sole assets of the Trust are the Convertible Debentures with
an aggregate principal amount of $116,161,500, which bear interest at the rate
of 7% per annum and mature on March 1, 2027; (iii) include in an audited
footnote to
19
<PAGE>
the financial statements disclosure that (A) the Trust is wholly-owned; (B) the
sole assets of the Trust are the Convertible Debentures with an aggregate
principal amount of $116,161,500, which bear interest at the rate of 7% per
annum and mature on March 1, 2027; and (C) the Guarantee, when taken together
with the Company's obligations under the Convertible Debentures and the
Indenture and its obligations under the Declaration, including its liabilities
to pay costs, expenses, debts and obligations of the Trust, constitutes a full
and unconditional guarantee by the Company of the Trust's obligations under the
TECONS.
The place of business and the telephone number of the Trust are the
principal executive offices and telephone number of Apple South. See "Prospectus
Summary--The Company."
DESCRIPTION OF THE TECONS
The TECONS were issued pursuant to the terms of the Declaration. The terms
of the TECONS include those stated in the Declaration and those made part of the
Declaration by the Trust Indenture Act. The following summary of the material
terms and provisions of the TECONS is subject to, and qualified in its entirety
by reference to, the Declaration, the Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue on behalf of the
Trust the Trust Securities, which represent undivided beneficial interests in
the assets of the Trust. All of the Trust Common Securities are owned by Apple
South. The Trust Common Securities rank PARI PASSU, and payments will be made
thereon on a PRO RATA basis, with the TECONS, except that upon the occurrence
and during the continuance of a Declaration Event of Default, the rights of the
holders of the Trust Common Securities to receive payment of periodic
Distributions and payments upon liquidation, redemption and otherwise will be
subordinated to the rights of the holders of the TECONS. The Declaration does
not permit the issuance by the Trust of any securities other than the Trust
Securities or the incurrence of any indebtedness by the Trust. Pursuant to the
Declaration, the Institutional Trustee holds the Convertible Debentures
purchased by the Trust for the benefit of the holders of the Trust Securities.
The payment of Distributions out of money held by the Trust, and payments upon
redemption of the TECONS or liquidation of the Trust, are guaranteed by Apple
South to the extent described under "Description of the Guarantee." The
Guarantee does not cover payment of Distributions when the Trust does not have
sufficient available funds to pay such Distributions. In such event, the remedy
of a holder of TECONS is to vote to direct the Institutional Trustee to enforce
the Institutional Trustee's rights under the Convertible Debentures except in
the limited circumstances in which the holder may take Direct Action or
otherwise enforce the Institutional Trustee's rights. See "--Voting Rights" and
"--Declaration Events of Default."
DISTRIBUTIONS
Distributions on the TECONS are fixed at an annual rate of $3.50.
Distributions in arrears for more than one quarter will accrue interest thereon
at the Distribution rate, compounded quarterly. The term "Distribution" as used
herein includes any such interest payable unless otherwise stated. The amount of
Distributions payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months, and, for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 30-day month.
Distributions on the TECONS will be cumulative, will accumulate from March
11, 1997, and will be payable quarterly in arrears on March 1, June 1, September
1 and December 1 of each year, commencing June 1, 1997, when, as and if
available for payment. Distributions will be made by the Institutional Trustee,
except as otherwise described below.
20
<PAGE>
If use of this registration statement for resales is suspended for any time
during the two-year period after the effective date, then additional interest
(in addition to amounts otherwise due on the TECONS) will accrue at an annual
rate of 0.50% on the TECONS during the period use is so suspended.
So long as Apple South shall not be in default in the payment of interest on
the Convertible Debentures, Apple South has the right under the Indenture to
defer payments of interest on the Convertible Debentures by extending the
interest payment period from time to time on the Convertible Debentures, which,
if exercised, would defer quarterly Distributions on the TECONS (though such
distributions would continue to accumulate with interest thereon at the
Distribution rate, compounded quarterly, since interest would continue to accrue
on the Convertible Debentures) during any such Extension Period. Such right to
extend the interest payment period for the Convertible Debentures is limited to
a period not exceeding 20 consecutive quarters and such period may not extend
beyond the maturity of the Convertible Debentures. In the event that Apple South
exercises this right, then (a) Apple South shall not declare or pay dividends
on, make distributions with respect to, or redeem, purchase or acquire, or make
a liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of Apple South Common Stock in connection
with the satisfaction by Apple South of its obligations under any employee
benefits plans, (ii) as a result of a reclassification of Apple South capital
stock or the exchange or conversion of one class or series of Apple South
capital stock for another class or series of Apple South capital stock or (iii)
the purchase of fractional interests in shares of Apple South capital stock
pursuant to the conversion or exchange provisions of such Apple South capital
stock or the security being converted or exchanged or (iv) purchases or
acquisitions of shares of Apple South Common Stock to be used in connection with
acquisitions of Apple South Common Stock by shareholders pursuant to a dividend
reinvestment plan), (b) Apple South shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem, any debt
securities issued by Apple South that rank PARI PASSU with or junior to the
Convertible Debentures and (c) Apple South shall not make any guarantee payments
with respect to the foregoing (other than pursuant to the Guarantee). Prior to
the termination of any such Extension Period, Apple South may further extend the
Extension Period; PROVIDED, that such Extension Period, together with all such
previous and further extensions, may not exceed 20 consecutive quarters or
extend beyond the maturity of the Convertible Debentures. Upon the termination
of any Extension Period and the payment of all amounts then due, Apple South may
commence a new Extension Period, subject to the above requirements. See
"Description of the Convertible Debentures--Interest" and "--Option to Extend
Interest Payment Period." If Distributions are deferred, the deferred
Distributions and accrued interest thereon shall be paid to holders of record of
the TECONS as they appear on the books and records of the Trust on the record
date next following the termination of such deferral period.
Distributions on the TECONS must be paid on the dates payable to the extent
that the Trust has funds available for the payment of such Distributions. The
Trust's funds available for Distribution to the holders of TECONS will be
limited to payments received from Apple South on the Convertible Debentures. See
"Description of the Convertible Debentures." The payment of Distributions out of
money held by the Trust is guaranteed by Apple South to the extent set forth
under "Description of the Guarantee."
Distributions on the TECONS will be payable to the holders thereof as they
appear on the books and records of the Trust on the relevant record dates,
which, as long as TECONS remain in book-entry form, will be one Business Day (as
defined below) prior to the relevant payment dates. Such Distributions will be
paid through the Institutional Trustee who will hold amounts received in respect
of the Convertible Debentures for the benefit of the holders of the Trust
Securities. Subject to any applicable laws and regulations and the provisions of
the Declaration, each such payment will be made as described under "--The Global
TECONS". In the event that the TECONS do not continue to remain in book-entry
only form, the relevant record dates for the TECONS shall conform to the rules
of any securities exchange on which the TECONS are listed and, if none, the
Regular Trustees shall have the right to select relevant record dates, which
shall be more than one Business Day prior to the relevant payment dates. In the
event that any date on which Distributions are to be made on the TECONS is not a
Business Day, then payment
21
<PAGE>
of the Distributions payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such record date. A "Business Day" shall mean any day other than Saturday,
Sunday or any other day on which banking institutions in New York City, or
Atlanta, Georgia are permitted or required by any applicable law to close.
CONVERSION RIGHTS
GENERAL
The TECONS will be convertible at any time beginning prior to the close of
business on March 1, 2027 (or in the case of TECONS called for redemption, prior
to the close of business on the Business Day prior to the Redemption Date) (the
"Conversion Expiration Date"), at the option of the holders thereof and in the
manner described below, into shares of Apple South Common Stock at an initial
conversion rate of 3.3801 shares of Apple South Common Stock for each TECONS
(equivalent to a conversion price of $14.793 per share of Apple South Common
Stock (the "Initial Conversion Price")), subject to adjustment as described
under "--Conversion Price Adjustments--General" and "--Conversion Price
Adjustments-- Fundamental Change."
If a TECONS is surrendered for conversion after the close of business on any
regular record date for payment of a Distribution and before the opening of
business on the corresponding Distribution payment date, then, notwithstanding
such conversion, the Distribution payable on such Distribution payment date will
be paid in cash to the person in whose name the TECONS is registered at the
close of business on such record date, and (other than a TECONS or a portion of
a TECONS called for redemption on a date occurring after such record date and on
or prior to such Distribution payment date) when so surrendered for conversion,
the TECONS must be accompanied by payment of an amount equal to the Distribution
payable on such Distribution payment date.
The terms of the TECONS provide that a holder of a TECONS wishing to
exercise its conversion right shall surrender such TECONS, together with an
irrevocable conversion notice, to the Institutional Trustee, as conversion agent
(the "Conversion Agent"), which shall, on behalf of such holder, exchange such
TECONS for a portion of the Convertible Debentures and immediately convert an
equivalent amount of Convertible Debentures into Apple South Common Stock.
Holders may obtain copies of the required form of the conversion notice from the
Conversion Agent. So long as a book-entry system for the TECONS is in effect,
however, procedures for converting the TECONS in book-entry form into shares of
Apple South Common Stock will differ, as described under "--The Global TECONS".
No fractional shares of Apple South Common Stock will be issued as a result
of conversion, but in lieu thereof such fractional interest will be paid by
Apple South in cash based on the current market price per share of Apple South
Common Stock on the date such TECONS are surrendered for conversion.
CONVERSION PRICE ADJUSTMENTS--GENERAL
The Initial Conversion Price is subject to adjustment (under formulae set
forth in the Indenture) in certain events, including:
(i) the issuance of Apple South Common Stock as a dividend or
distribution on Apple South Common Stock;
(ii) certain subdivisions and combinations of Apple South Common Stock;
(iii) the issuance to all holders of Apple South Common Stock of certain
rights or warrants to purchase Apple South Common Stock at less than the
then current market price;
22
<PAGE>
(iv) the distribution to all holders of Apple South Common Stock of (A)
equity securities of Apple South (other than Apple South Common Stock), (B)
evidences of indebtedness of Apple South and/or (C) other assets (including
securities, but excluding (1) any rights or warrants referred to in clause
(iii) above, (2) any rights or warrants to acquire any capital stock of any
entity other than Apple South, (3) any dividends or distributions in
connection with the liquidation, dissolution or winding-up of Apple South,
(4) any dividends payable solely in cash that may from time to time be fixed
by the Board of Directors of Apple South and (5) any dividends or
distributions referred to in clause (i) above);
(v) distributions to all holders of Apple South Common Stock, consisting
of cash, excluding (a) any cash dividends on Apple South Common Stock to the
extent that the aggregate cash dividends per share of Apple South Common
Stock in any consecutive 12-month period do not exceed the greater of (x)
the amount per share of Apple South Common Stock of the cash dividends paid
on Apple South Common Stock in the immediately preceding 12-month period, to
the extent that such dividends for the immediately preceding 12-month period
did not require any adjustment of the conversion price pursuant to this
clause (v) (as adjusted to reflect subdivisions or combinations of Apple
South Common Stock), and (y) 15% of the average of the daily Closing Price
(as defined in the Indenture) of Apple South Common Stock for the ten
consecutive Trading Days (as defined in the Indenture) immediately prior to
the date of declaration of such dividend, and (b) any dividend or
distribution in connection with the liquidation, dissolution or winding up
of Apple South or a redemption of any rights issued under a rights
agreement; PROVIDED, HOWEVER, that no adjustment shall be made pursuant to
this clause (v) if such distribution would otherwise constitute a
Fundamental Change (as defined below) and be reflected in a resulting
adjustment described below; and
(vi) payment in respect of a tender or exchange offer by Apple South or
any subsidiary of Apple South for Apple South Common Stock to the extent
that the cash and value of any other consideration included in such payment
per share of Apple South Common Stock exceed (by more than 10%, with any
smaller excess being disregarded in computing the adjustment provided
hereby) the first reported sale price per share of Apple South Common Stock
on the Trading Day next succeeding the Expiration Time (as defined in the
Indenture) for such tender or exchange offer.
If any adjustment is required to be made as set forth in clause (v) above as
a result of a distribution which is a dividend described in subclause (a) of
clause (v) above, such adjustment would be based upon the amount by which such
distribution exceeds the amount of the dividend permitted to be excluded
pursuant to such subclause (a) of clause (v). If an adjustment is required to be
made as set forth in clause (v) above as a result of a distribution which is not
such a dividend, such adjustment would be based upon the full amount of such
distribution. If an adjustment is required to be made as set forth in clause
(vi) above, such adjustment would be calculated based upon the amount by which
the aggregate consideration paid for the Apple South Common Stock acquired in
the tender or exchange offer exceeds 110% of the value of such shares based on
the first reported sale price of Apple South Common Stock on the Trading Day
next succeeding the Expiration Time. In lieu of making such a conversion price
adjustment in the case of certain dividends or distributions, Apple South may
provide that upon the conversion of the TECONS the holder converting such TECONS
will receive, in addition to the Apple South Common Stock to which such holder
is entitled, the cash, securities or other property which such holder would have
received if such holder had, immediately prior to the record date for such
dividend or distribution, converted its TECONS into Apple South Common Stock.
No adjustment in the conversion price will be required unless the adjustment
would require a change of at least 1% in the conversion price then in effect;
PROVIDED, HOWEVER, that any adjustment that would otherwise be required to be
made shall be carried forward and taken into account in any subsequent
adjustment.
Apple South from time to time may, to the extent permitted by law, reduce
the conversion price by any amount for any period of at least 20 Business Days
(as defined in the Indenture), in which case Apple
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<PAGE>
South shall give at least 15 days' notice of such reduction. In particular,
Apple South may, at its option, make such reduction in the conversion price, in
addition to those set forth above, as Apple South deems advisable to avoid or
diminish any income tax to holder of Apple South Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for tax purposes or for any other reasons. See "Certain Federal
Tax Consequences--Adjustment of Conversion Price."
CONVERSION PRICE ADJUSTMENTS--FUNDAMENTAL CHANGE
In the event that Apple South shall be a party to any transaction or series
of transactions constituting a Fundamental Change, including, without
limitation, (i) any recapitalization or reclassification of Apple South Common
Stock (other than a change in par value or as a result of a subdivision or
combination of Apple South Common Stock); (ii) any consolidation or merger of
Apple South with or into another corporation as a result of which holders of
Apple South Common Stock shall be entitled to receive securities or other
property or assets (including cash) with respect to or in exchange for Apple
South Common Stock (other than a merger which does not result in a
reclassification, conversion, exchange or cancellation of the outstanding Apple
South Common Stock); (iii) any sale or transfer of all or substantially all of
the assets of Apple South; or (iv) any compulsory share exchange, pursuant to
any of which holders of Apple South Common Stock shall be entitled to receive
other securities, cash or other property, then appropriate provision shall be
made so that the holder of each TECONS then outstanding shall have the right
thereafter to convert such TECONS only into (x) if any such transaction does not
constitute a Common Stock Fundamental Change (as defined below), the kind and
amount of the securities, cash or other property that would have been receivable
upon such recapitalization, reclassification, consolidation, merger, sale,
transfer or share exchange by a holder of the number of shares of Apple South
Common Stock issuable upon conversion of such TECON immediately prior to such
recapitalization, reclassification, consolidation, merger, sale, transfer or
share exchange, after, in the case of a Non-Stock Fundamental Change (as defined
below), giving effect to any adjustment in the conversion price in accordance
with clause (i) of the following paragraph, and (y) if any such transaction
constitutes a Common Stock Fundamental Change, shares of common stock of the
kind received by holders of Apple South Common Stock as a result of such Common
Stock Fundamental Change in an amount determined in accordance with clause (ii)
of the following paragraph. The company formed by such consolidation or
resulting from such merger or which acquires such assets or which acquires the
Apple South Common Stock, as the case may be, shall enter into a supplemental
indenture with the Indenture Trustee, satisfactory in form to the Indenture
Trustee and executed and delivered to the Indenture Trustee, the provisions of
which shall establish such right. Such supplemental indenture shall provide for
adjustments which, for events subsequent to the effective date of such
supplemental indenture, shall be as nearly equivalent as practical to the
relevant adjustments provided for in the preceding paragraphs and in this
paragraph.
Notwithstanding any other provision in the preceding paragraphs, if any
Fundamental Change occurs, the conversion price in effect will be adjusted
immediately after that Fundamental Change as follows:
(i) in the case of a Non-Stock Fundamental Change, the conversion price
per share of Apple South Common Stock immediately following such Non-Stock
Fundamental Change will be the lower of (A) the conversion price in effect
immediately prior to such Non-Stock Fundamental Change, but after giving
effect to any other prior adjustments effected pursuant to the preceding
paragraphs, and (B) the result obtained by multiplying the greater of the
Applicable Price (as defined below) or the then applicable Reference Market
Price (as defined below) by a fraction of which the numerator will be 100
and the denominator of which will be an amount based on the date such
Non-Stock Fundamental Change occurs. For the 12-month period beginning March
1, 1997, the denominator will be 107.00, and the denominator will decrease
by 0.875 during each successive 12-month period; PROVIDED, that the
denominator shall in no event be less than 100.0.
(ii) in the case of a Common Stock Fundamental Change, the conversion
price per share of Apple South Common Stock immediately following the Common
Stock Fundamental Change will be
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<PAGE>
the conversion price in effect immediately prior to the Common Stock
Fundamental Change, but after giving effect to any other prior adjustments
effected pursuant to the preceding paragraphs, multiplied by a fraction, the
numerator of which is the Purchaser Stock Price (as defined below) and the
denominator of which is the Applicable Price; PROVIDED, HOWEVER, that in the
event of a Common Stock Fundamental Change in which (A) 100% of the value of
the consideration received by a holder of Apple South Common Stock (subject
to certain limited exceptions) is shares of common stock of the successor,
acquirer or other third party (and cash, if any, paid with respect to any
fractional interests in the shares of common stock resulting from the Common
Stock Fundamental Change) and (B) all of the Apple South Common Stock
(subject to certain limited exceptions) shall have been exchanged for,
converted into, or acquired for, shares of common stock (and cash, if any,
with respect to fractional interests) of the successor, acquirer or other
third party, the conversion price per share of Apple South Common Stock
immediately following the Common Stock Fundamental Change shall be the
conversion price in effect immediately prior to the Common Stock Fundamental
Change divided by the number of shares of common stock of the successor,
acquirer, or other third party received by a holder of one share of Apple
South Common Stock as a result of the Common Stock Fundamental Change.
The foregoing conversion price adjustments are designed, in "Fundamental
Change" transactions where all or substantially all of the Apple South Common
Stock is converted into securities, cash or property and not more than 50% of
the value received by the holders of Apple South Common Stock consists of stock
listed or admitted for listing subject to notice of issuance on a national
securities exchange or quoted on the Nasdaq National Market of the Nasdaq Stock
Market, Inc. (a "Non-Stock Fundamental Change," as defined herein), to increase
the securities, cash or property into which each TECONS is convertible.
In a Non-Stock Fundamental Change transaction where the initial value
received per share of Apple South Common Stock (measured as described in the
definition of Applicable Price below) is lower than the then-applicable
conversion price of the TECONS but greater than or equal to the Reference Market
Price (as defined herein), the conversion price will be adjusted as described
above with the effect that each TECONS will be convertible into securities, cash
or property of the same type received by the holders of Apple South Common Stock
in such transaction but in an amount per TECONS equal to the amount indicated as
the denominator as of the date of such transaction as set forth in clause (i)
above with respect to conversion prices for Non-Stock Fundamental Changes.
In a Non-Stock Fundamental change transaction where the initial value
received per share of Apple South Common Stock (measured as described in the
definition of Applicable Price below) is lower than both the conversion price of
a TECONS and the Reference Market Price, the conversion price will be adjusted
as described above but calculated as though such initial value had been the
Reference Market Price.
In a Fundamental Change transaction where all or substantially all the Apple
South Common Stock is converted into securities, cash or property and more than
50% of the value received by the holders of Apple South Common Stock (subject to
certain limited exceptions) consists of listed or Nasdaq National Market traded
common stock (a "Common Stock Fundamental Change," as defined herein), the
foregoing adjustments are designed to provide in effect that (a) where Apple
South Common Stock is converted partly into such common stock and partly into
other securities, cash or property, each TECONS will be convertible solely into
a number of shares of such common stock determined so that the initial value of
such shares (measured as described in the definition of Purchaser Stock Price
below) equals the value of the shares of Apple South Common Stock into which
such TECONS was convertible immediately before the transaction (measured as
aforesaid) and (b) where Apple South Common Stock is converted solely into such
common stock, each TECONS will be convertible into the same number of shares of
such common stock receivable by a holder of the number of shares of Apple South
Common Stock into which such TECONS was convertible immediately before such
transaction.
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In determining the amount and type of consideration received by a holder of
Apple South Common Stock in the event of a Fundamental Change, consideration
received by a holder of Apple South Common Stock pursuant to a statutory right
of appraisal will be disregarded.
"Applicable Price" means (i) in the event of a Non-Stock Fundamental Change
in which the holders of Apple South Common Stock receive only cash, the amount
of cash receivable by a holder of one share of Apple South Common Stock and (ii)
in the event of any other Fundamental Change, the average of the Closing Prices
(as defined in the Indenture) for one share of Apple South Common Stock during
the ten Trading Days immediately prior to the record date for the determination
of the holders of Apple South Common Stock entitled to receive cash, securities,
property or other assets in connection with such Fundamental Change or, if there
is no such record date, prior to the date on which the holders of the Apple
South Common Stock will have the right to receive such cash, securities,
property or other assets.
"Common Stock Fundamental Change" means any Fundamental Change in which more
than 50% of the value (as determined in good faith by Apple South's Board of
Directors) of the consideration received by holders of Apple South Common Stock
(subject to certain limited exceptions) pursuant to such transaction consists of
shares of common stock that, for the ten consecutive Trading Days immediately
prior to such Fundamental Change has been admitted for listing or admitted for
listing subject to notice of issuance on a national securities exchange or
quoted on the Nasdaq National Market, PROVIDED, HOWEVER, that a Fundamental
Change will not be a Common Stock Fundamental Change unless either (i) Apple
South continues to exist after the occurrence of such Fundamental Change and the
outstanding TECONS continue to exist as outstanding TECONS, or (ii) the
outstanding TECONS continue to exist as TECONS and are convertible into shares
of common stock of the successor to Apple South.
"Fundamental Change" means the occurrence of any transaction or event or
series of transactions or events pursuant to which all or substantially all of
the Apple South Common Stock is exchanged for, converted into, acquired for or
constitutes solely the right to receive cash, securities, property or other
assets (whether by means of an exchange offer, liquidation, tender offer,
consolidated, merger, combination, reclassification, recapitalization or
otherwise); PROVIDED, HOWEVER, in the case of a plan involving more than one
such transaction or event, for purposes of adjustment of the conversion price,
such Fundamental Change will be deemed to have occurred when substantially all
of the Apple South Common Stock has been exchanged for, converted into or
acquired for or constitutes solely the right to receive cash, securities,
property or other assets, but the adjustment shall be based upon the
consideration that the holders of Apple South Common Stock received in the
transaction or event as a result of which more than 50% of the Apple South
Common Stock shall have been exchanged for, converted into or acquired for or
shall constitute solely the right to receive such cash, securities, properties
or other assets.
"Non-Stock Fundamental Change" means any Fundamental Change other than a
Common Stock Fundamental Change.
"Purchaser Stock Price" means, with respect to any Common Stock Fundamental
Change, the average of the closing prices for one share of common stock received
by holders of Apple South Common Stock in such Common Stock Fundamental Change
during the ten Trading Days immediately prior to the record date for the
determination of the holders of Apple South Common Stock entitled to receive
such shares of common stock or, if there is no such record date, prior to the
date upon which the holders of Apple South Common Stock shall have the right to
receive such shares of common stock.
"Reference Market Price" will initially mean $8.08 (which unless otherwise
specified in this Prospectus will be 66.67% of the last reported bid price per
share of Apple South Common Stock on the Nasdaq National Market on March 5,
1997) and, in the event of any adjustment to the conversion price other than as
a result of a Fundamental Change, the Reference Market Price will also be
adjusted so that the ratio of the Reference Market Price to the conversion price
after giving effect to any adjustment will always be the same as the ratio of
the initial Reference Market Price to the Initial Conversion Price of the
TECONS.
Conversions of the TECONS may be effected by delivering them to the office
or agency of Apple South maintained for such purpose in the Borough of
Manhattan, The City of New York.
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Conversion price adjustments may, in certain circumstances, result in
constructive distributions that could be taxable as dividends under the Internal
Revenue Code of 1986, as amended (the "Code"), to holders of TECONS or to
holders of Apple South Common Stock issued upon conversion thereof. See "Certain
Federal Tax Consequences--Adjustment of Conversion Price."
No adjustment in the conversion price will be required unless the adjustment
would require a change of at least 1% in the conversion price then in effect;
PROVIDED, HOWEVER, that any adjustment that would otherwise be required to be
made shall be carried forward and taken into account in any subsequent
adjustment.
MANDATORY REDEMPTION
The Convertible Debentures will mature on March 1, 2027, and may be
redeemed, in whole or in part, at any time on or after March 3, 2000, or at any
time in certain circumstances upon the occurrence of a Special Event. Upon the
repayment of the Convertible Debentures, whether at maturity or upon redemption,
the proceeds from such repayment or payment shall simultaneously be applied to
redeem Trust Securities having an aggregate liquidation amount equal to the
aggregate principal amount of the Convertible Debentures so repaid or redeemed
at the appropriate Redemption Price plus accrued interest to the date fixed for
redemption (including Compound and Additional Interest); PROVIDED, that holders
of Trust Securities shall be given not less than 30 nor more than 60 days notice
of such redemption. See "Description of the Convertible Debentures--Redemption
at the Option of Apple South." In the event that fewer than all of the
outstanding TECONS are to be redeemed, the TECONS will be redeemed PRO RATA as
described under "--The Global TECONS".
SPECIAL EVENT DISTRIBUTION
"Tax Event" means that the Regular Trustees shall have received an opinion
of a nationally recognized independent tax counsel experienced in such matters
(a "Dissolution Tax Opinion") to the effect that on or after the date of this
Prospectus, as a result of (a) any amendment to, clarification of, or change
(including any announced prospective change) in the laws, or any regulations
thereunder, of the U.S. or any political subdivision or taxing authority thereof
or therein, (b) any judicial decision, official administrative pronouncement,
ruling, regulatory procedure, notice or announcement, including any notice or
announcement of intent to adopt such procedures or regulations (an
"Administrative Action") or (c) any amendment to, clarification of, or change in
the official position or the interpretation of such Administrative Action or
judicial decision that differs from the theretofore generally accepted position,
in each case, by any legislative body, court, governmental authority or
regulatory body, irrespective of the manner in which such amendment,
clarification or change is made known, which amendment, clarification, or change
is effective or such pronouncement or decision is announced, in each case, on or
after, the date of this Prospectus, there is the creation by such change in tax
law of more than an insubstantial risk that (i) the Trust is or will be subject
to U.S. federal income tax with respect to income accrued or received on the
Convertible Debentures, (ii) the Trust is, or will be, subject to more than a de
minimis amount of taxes, duties or other governmental charges, or (iii) interest
paid in cash by Apple South to the Trust on the Convertible Debentures is not,
or will not be, deductible, in whole or in part, by Apple South for U.S. federal
income tax purposes. Notwithstanding the foregoing, a Tax Event shall not
include any change in tax law that requires Apple South for U.S. federal income
tax purposes to defer taking a deduction for any original issue discount ("OID")
that accrues with respect to the Convertible Debentures until the interest
payment related to such OID is paid by Apple South in cash; PROVIDED, that such
change in tax law does not create more than an insubstantial risk that Apple
South will be prevented from taking a deduction for OID accruing with respect to
the Convertible Debentures at a date that is no later than the date the interest
payment related to such OID is actually paid by Apple South in cash.
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"Investment Company Event" means that the Regular Trustees shall have
received an opinion of a nationally recognized independent counsel to the effect
that, as a result of the occurrence of a change in law or regulation or a
written change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority on or after
the date of this Prospectus (a "Change in 1940 Act Law"), there is more than an
insubstantial risk that the Trust is or will be considered an "investment
company" which is required to be registered under the Investment Company Act of
1940, as amended (the "1940 Act").
If, at any time, a Tax Event or an Investment Company Event (each, as
defined above, a "Special Event") shall occur and be continuing, the Trust may
with the consent of Apple South, except in the limited circumstances described
below, be dissolved with the result that, after satisfaction of liabilities to
creditors, Convertible Debentures with an aggregate principal amount equal to
the aggregate stated liquidation amount of, with an interest rate identical to
the Distribution rate of, and accrued and unpaid interest equal to accumulated
and unpaid Distributions on, the Trust Securities, would be distributed to the
holders of the Trust Securities in liquidation of such holders' interests in the
Trust on a PRO RATA basis within 90 days following the occurrence of the Special
Event; PROVIDED, that such dissolution and distribution shall be conditioned on
(i) the Regular Trustees' receipt of an opinion of nationally recognized
independent tax counsel experienced in such matters (a "No Recognition
Opinion"), which opinion may rely on published revenue rulings of the Internal
Revenue Service, to the effect that the holders of the Trust Securities will not
recognize any gain or loss for U.S. federal income tax purposes as a result of
such dissolution and distribution of Convertible Debentures, (ii) Apple South or
the Trust being unable to avoid such Tax Event within such 90 day period by
taking some ministerial action or pursuing some other reasonable measure that
will have no adverse effect on the Trust, Apple South or the holders of the
Trust Securities and (iii) Apple South's prior written consent to such
dissolution and distribution. If Apple South declines to consent to the
dissolution and distribution, Apple South may incur an obligation to pay
Additional Interest. See "Description of the Convertible Debentures--Additional
Interest." Furthermore, if after receipt of a Dissolution Tax Opinion by the
Regular Trustees, the Regular Trustees shall have been informed by nationally
recognized independent tax counsel experienced in such matters that it cannot
deliver a No Recognition Opinion to the Trust, Apple South shall have the right,
upon not less than 30 nor more than 60 days notice, to redeem the Convertible
Debentures, in whole or in part, at 100% of the principal amount thereof plus
accrued and unpaid interest thereon to the date fixed for redemption, including
Compound Interest, for cash within 90 days following the occurrence of such Tax
Event. So long as the corresponding TECONS are outstanding, the proceeds from
any such redemption of the Convertible Debenture will be used to redeem TECONS;
PROVIDED, HOWEVER, that if at the time there is available to Apple South or the
Trust the opportunity to eliminate, within such 90 day period, the Tax Event by
taking some ministerial action, such as filing a form or making an election or
pursuing some other reasonable measure that has no adverse effect on the Trust,
Apple South or the holders of the Trust Securities, Apple South or the Trust
will pursue such measure in lieu of redemption.
After the date for any distribution of Convertible Debentures upon
dissolution of the Trust, (i) the TECONS will no longer be deemed to be
outstanding, (ii) the Depository (as defined herein) or its nominee, as the
record holder of the TECONS, will receive a registered global certificate or
certificates representing the Convertible Debentures to be delivered upon such
distribution, and (iii) any certificates representing TECONS not held by the
Depository or its nominee will be deemed to represent Convertible Debentures
having an aggregate principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the Distribution rate of, and
accrued and unpaid interest (including Compound and Additional Interest) equal
to accrued and unpaid Distributions on such TECONS until such certificates are
presented to Apple South or its agent for transfer or reissuance.
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REDEMPTION PROCEDURES FOR REDEMPTION BY THE TRUST
The Trust may not redeem fewer than all of the outstanding TECONS unless all
accumulated and unpaid Distributions have been paid on all TECONS for all
quarterly Distribution periods terminating on or prior to the date of
redemption.
If the Trust gives notice of redemption in respect of TECONS (which notice
will be irrevocable), then, by 12:00 noon New York City time on the redemption
date, PROVIDED, that Apple South has paid to the Institutional Trustee a
sufficient amount of cash in connection with the related redemption of the
Convertible Debentures, the Trust will (A), with respect to TECONS in book-entry
form, irrevocably deposit with the Depository funds sufficient to pay the
applicable Redemption Price plus accrued interest to the date fixed for
redemption, including Compound and Additional Interest, and will give the
Depository irrevocable instructions and authority to pay the Redemption Price
and such interest to the holders of the TECONS and (B), with respect to TECONS
issued in definitive form, pay the Redemption Price and such interest to the
holders of such TECONS by check mailed to the address of the relevant holder
appearing on the books and records of the Trust on the redemption date. If
notice of redemption shall have been given and funds deposited as required,
then, immediately prior to the close of business on the date of such deposit,
Distributions will cease to accrue and all rights of holders of such TECONS so
called for redemption will cease, except the right of the holders of such TECONS
to receive the Redemption Price and such interest, but without additional
interest on such Redemption Price. In the event that any date fixed for
redemption of TECONS is not a Business Day, then payment of the Redemption Price
payable on such date will be made on the next succeeding day that is a Business
Day (without any interest or other payment in respect of any such delay) except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day, in each case with the same force
and effect as if made on such date fixed for redemption. In the event that
payment of the Redemption Price in respect of TECONS is improperly withheld or
refused and not paid either by the Trust or by Apple South pursuant to the
Guarantee, distributions on such TECONS will continue to accrue at the then
applicable rate from the original redemption date to the date of payment, in
which case the actual payment date will be considered the date fixed for
redemption for purposes of calculating the Redemption Price.
In the event that fewer than all of the outstanding TECONS are to be
redeemed, the TECONS will be redeemed as described under "--The Global TECONS."
Subject to the foregoing and applicable law (including, without limitation,
U.S. federal securities laws), Apple South or its subsidiaries may at any time,
and from time to time, purchase outstanding TECONS by tender, in the open market
or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the then holders
of the TECONS will be entitled to receive out of the assets of the Trust, after
satisfaction of liabilities to creditors, distributions in an amount equal to
the aggregate of the stated liquidation amount of $50 per TECONS plus
accumulated and unpaid Distributions thereon to the date of payment (the
"Liquidation Distribution"), unless, in connection with such Liquidation,
Convertible Debentures in an aggregate stated principal amount equal to the
aggregate stated liquidation amount of, with an interest rate identical to the
Distribution rate of, and accrued and unpaid interest equal to accumulated and
unpaid Distributions on, the TECONS have been distributed on a PRO RATA basis to
the holders of the TECONS.
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the TECONS shall be paid on a PRO RATA basis. The holders of the Trust
Common Securities will be entitled to receive distributions upon any such
dissolution PRO RATA with the
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holders of the TECONS, except that if a Declaration Event of Default has
occurred and is continuing, the TECONS shall have a preference over the Trust
Common Securities with regard to such distributions.
Pursuant to the Declaration, the Trust shall dissolve (i) on March 1, 2027,
the expiration of the term of the Trust, (ii) upon the bankruptcy of Apple South
or the holder of the Trust Common Securities, (iii) upon the filing of a
certificate of dissolution or its equivalent with respect to the holder of the
Trust Common Securities or Apple South, the filing of a certificate of
cancellation with respect to the Trust after obtaining the consent of the
holders of at least a majority in liquidation amount of the Trust Securities
affected thereby voting together as a single class to file such certificate of
cancellation, and after having satisfied liabilities of creditors (whether by
payment or reasonable provision for payment), or the revocation of the charter
of the holder of the Trust Common Securities or Apple South and the expiration
of 90 days after the date of revocation without a reinstatement thereof, (iv)
upon the distribution of Convertible Debentures upon the occurrence of a Special
Event, (v) upon the entry of a decree of a judicial dissolution of the holder of
the Trust Common Securities, Apple South or the Trust, (vi) upon the redemption
of all the Trust Securities or (vii) upon the distribution of Apple South Common
Stock to all holders of TECONS upon conversion of all outstanding TECONS.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"); PROVIDED, that pursuant to the
Declaration, the holder of the Trust Common Securities will be deemed to have
waived any Declaration Event of Default with respect to the Trust Common
Securities until all Declaration Events of Default with respect to the TECONS
have been cured, waived or otherwise eliminated. Until such Declaration Events
of Default with respect to the TECONS have been so cured, waived, or otherwise
eliminated, the Institutional Trustee will be deemed to be acting solely on
behalf of the holders of the TECONS and only the holders of the TECONS will have
the right to direct the Institutional Trustee with respect to certain matters
under the Declaration, and therefore the Indenture. If the Institutional Trustee
fails to enforce its rights under the Convertible Debentures, any holder of
TECONS may, to the fullest extent permitted by law, institute a legal proceeding
against Apple South to enforce the Institutional Trustee's rights under the
Convertible Debentures. Notwithstanding the foregoing, if a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of Apple South to pay interest or principal on the Convertible
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, the redemption date), Apple South acknowledges that then
a holder of TECONS may institute a Direct Action for payment on or after the
respective due date specified in the Convertible Debentures. In connection with
such Direct Action, Apple South will be subrogated to the rights of such holders
of TECONS under the Declaration to the extent of any payment made by Apple South
to such holder of TECONS in such Direct Action. The holders of TECONS will not
be able to exercise directly any other remedy available to the holders of the
Convertible Debentures.
Upon the occurrence of a Declaration Event of Default, the Institutional
Trustee as the sole holder of the Convertible Debentures will have the right
under the Indenture to declare the principal of and interest on the Convertible
Debentures to be immediately due and payable. Apple South and the Trust are each
required to file annually with the Institutional Trustee an officer's
certificate as to its compliance with all conditions and covenants under the
Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Indenture Act and as otherwise
required by law and the Declaration, the holders of the TECONS have no voting
rights.
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Subject to the requirement of the Institutional Trustee obtaining a tax
opinion in certain circumstances set forth in the last sentence of the next
paragraph, the holders of a majority in aggregate liquidation amount of the
TECONS have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Institutional Trustee, or direct the
exercise of any trust or power conferred upon the Institutional Trustee under
the Declaration, including the right to direct the Institutional Trustee, as a
holder of the Convertible Debentures, to (i) exercise the remedies available
under the Indenture with respect to the Convertible Debentures, (ii) waive any
past Indenture Event of Default that is waivable under Section 4.13 of the
Indenture, or (iii) exercise any right to rescind or annul a declaration that
the principal of all the Convertible Debentures shall be due and payable;
PROVIDED, HOWEVER, that if an Indenture Event of Default has occurred and is
continuing then, the holders of 25% of the aggregate liquidation amount of the
TECONS may direct the Institutional Trustee to declare the principal of and
interest on the Convertible Debentures immediately due and payable; PROVIDED,
FURTHER, that where a consent or action under the Indenture would require the
consent or act of holders of more than a majority in principal amount of the
Convertible Debentures (a "Super-Majority") affected thereby, only the holders
of at least such Super-Majority in aggregate liquidation amount of the TECONS
may direct the Institutional Trustee to give such consent or take such action.
The Institutional Trustee shall notify all holders of the TECONS of any
notice of default received from the Debt Trustee with respect to the Convertible
Debentures. Except with respect to directing the time, method and place of
conducting a proceeding for a remedy, the Institutional Trustee shall not take
any of the actions described in clauses (i), (ii) or (iii) above unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect that,
as a result of such action, the Trust will not be classified as other than a
grantor trust for U.S. federal income tax purposes.
In the event the consent of the Institutional Trustee, as the holder of the
Convertible Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Institutional
Trustee shall request the direction of the holders of the Trust Securities with
respect to such amendment, modification or termination and shall vote with
respect to such amendment, modification or termination as directed by a majority
in liquidation amount of the Trust Securities voting together as a single class;
PROVIDED, HOWEVER, that where a consent under the Indenture would require the
consent of a Super-Majority, the Institutional Trustee may only give such
consent at the direction of the holders of at least the proportion in
liquidation amount of the Trust Securities which the relevant Super-Majority
represents of the aggregate principal amount of the Convertible Debentures
outstanding. The Institutional Trustee shall be under no obligation to take any
such action in accordance with the directions of the holders of the Trust
Securities unless the Institutional Trustee has obtained an opinion of tax
counsel to the effect that for the purposes of U.S. federal income tax, the
Trust will not be classified as other than a grantor trust.
A waiver of an Indenture Event of Default by the Institutional Trustee at
the direction of the holders of the TECONS will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of TECONS may be given at a
separate meeting of holders of TECONS convened for such purpose, at a meeting of
all of the holders of Trust Securities or pursuant to written consent. The
Regular Trustees will cause a notice of any meeting at which holders of TECONS
are entitled to vote, or of any matter upon which action by written consent of
such holders is to be taken, to be mailed to each holder of record of TECONS.
Each such notice will include a statement setting forth the following
information: (i) the date of such meeting or the date by which such action is to
be taken; (ii) a description of any resolution proposed for adoption at such
meeting on which such holders are entitled to vote or of such matter upon which
written consent is sought; and (iii) instructions for the delivery of proxies or
consents. No vote or consent of the holders of TECONS will be required for the
Trust to redeem and cancel TECONS or distribute Convertible Debentures in
accordance with the Declaration.
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Notwithstanding that holders of TECONS are entitled to vote or consent under
any of the circumstances described above, any of the TECONS that are owned at
such time by Apple South or any entity directly or indirectly controlling or
controlled by, or under direct common control with, Apple South, shall not be
entitled to vote or consent and shall, for purposes of such vote or consent, be
treated as if such TECONS were not outstanding.
The procedures by which holders of TECONS in book entry form may exercise
their voting rights are described in "--The Global TECONS."
Holders of the TECONS have no rights to appoint or remove the Apple South
Trustees, who may be appointed, removed or replaced solely by Apple South as the
holder of all of the Trust Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular
Trustees (and in certain circumstances the Institutional Trustee), PROVIDED,
that if any proposed amendment provides for, or the Regular Trustees otherwise
propose to effect, (i) any action that would adversely affect the powers,
preferences or special rights of the Trust Securities, whether by way of
amendment to the Declaration or otherwise or (ii) the dissolution, winding-up or
termination of the Trust other than pursuant to the terms of the Declaration,
then the holders of the Trust Securities voting together as a single class will
be entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of at least a majority in
liquidation amount of the Trust Securities affected thereby; PROVIDED, that if
any amendment or proposal referred to in clause (i) above would adversely affect
only the TECONS or the Trust Common Securities, then only the affected class
will be entitled to vote on such amendment or proposal and such amendment or
proposal shall not be effective except with the approval of a majority in
liquidation amount of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of U.S. federal income taxation as other than a
grantor trust, (ii) reduce or otherwise adversely affect the powers of the
Institutional Trustee or (iii) cause the Trust to be deemed an "investment
company" which is required to be registered under the 1940 Act.
PROPOSED TAX LEGISLATION
On February 6, 1997, as a part of President Clinton's Fiscal 1998 Budget
Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") that, among other things, would (i) treat as equity for U.S.
federal income tax purposes certain debt instruments with a maximum term of more
than 15 years and (ii) disallow interest deductions on certain convertible debt
instruments or defer interest deductions on certain debt instruments issued with
OID. The Proposed Legislation is proposed to be effective for debt instruments
issued on or after the date on which the first Congressional committee action is
taken.
It is expected that if the Proposed Legislation were enacted, such
legislation would not apply to the Convertible Debentures since they would be
issued prior to the date of any "Congressional action." However, there can be no
assurances that the effective date guidance contained in the Proposed
Legislation will be incorporated in the legislation, if enacted, or that other
legislation enacted after the date hereof will not otherwise adversely affect
the tax treatment of the Convertible Debentures.
If the Proposed Legislation or any similar legislation changed the tax
treatment of the Convertible Debentures and the TECONS, the U.S. federal income
tax consequences of the purchase, ownership and disposition of the TECONS would
differ from those described herein. If legislation were enacted that would
constitute a Tax Event, there could be a distribution of the Convertible
Debentures to holders of the TECONS or, in certain circumstances, at Apple
South's option, redemption of the Convertible Debentures
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by Apple South. There can be no assurances as to whether or in what form the
Proposed Legislation may be enacted into law or whether other legislation will
be enacted that otherwise adversely affects the tax treatment of the Convertible
Debentures and the TECONS. The discussion herein assumes that the Proposed
Legislation, if enacted, will not apply to the Convertible Debentures or the
TECONS.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other body, except as
described below or as otherwise described in the Declaration. The Trust may,
with the consent of the Regular Trustees and without the consent of the holders
of the Trust Securities, consolidate, amalgamate, merge with or into, or be
replaced by a trust organized as such under the laws of any State; PROVIDED,
that (i) such successor entity either (x) expressly assumes all of the
obligations of the Trust under the Trust Securities or (y) substitutes for the
TECONS other securities having substantially the same terms as the TECONS (the
"Successor Securities"), so long as the Successor Securities rank the same as
the TECONS rank with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) Apple South expressly acknowledges a trustee of
such successor entity possessing the same powers and duties as the Institutional
Trustee as the holder of the Convertible Debentures, (iii) the TECONS or any
Successor Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or with another
organization on which the TECONS are then listed or quoted, (iv) such merger,
consolidation, amalgamation or replacement does not cause the TECONS (including
any Successor Securities) to be downgraded by any nationally recognized
statistical rating organization, (v) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and privileges of
the holders of the Trust Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity), (vi) such successor entity has a purpose
substantially identical to that of the Trust, (vii) prior to such merger,
consolidation, amalgamation or replacement, Apple South has received an opinion
of a nationally recognized independent counsel to the Trust experienced in such
matters to the effect that, (A) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and privileges of
the holders of the Trust Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity), (B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor such successor entity will be
required to register as an investment company under the 1940 Act and (C)
following such merger, consolidation, amalgamation or replacement, the Trust (or
the Successor Entity) will continue to be classified as a grantor trust for U.S.
federal income tax purposes, and (viii) Apple South guarantees the obligations
of such successor entity under the Successor Securities at least to the extent
provided by the Guarantee and the Trust Common Securities Guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in liquidation amount of the Trust Securities, consolidate,
amalgamate, merge with or into or be replaced by any other entity or permit any
other entity to consolidate, amalgamate, merge with or into or replace it, if
such consolidation, amalgamation, merger or replacement would cause the Trust or
the Successor Entity to be classified as other than a grantor trust for U.S.
federal income tax purposes.
BOOK-ENTRY; DELIVERY AND FORM
RESALES UNDER REGULATION S AND RULE 144A
The following describes the delivery and form of TECONS in connection with
the Original Offering and transactions in TECONS which are not being or have not
been resold under this Prospectus.
The certificates representing the TECONS are issued in fully registered
form. TECONS resold in offshore transactions in reliance on Regulation S under
the Securities Act are initially represented by a single, temporary global
TECONS in definitive, fully registered form (the "Temporary Regulation S Global
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TECONS") which is deposited with the Institutional Trustee as custodian for DTC
and registered in the name of a nominee of DTC for the accounts of Euroclear and
Cedel. The Temporary Regulation S Global TECONS is exchangeable for a single,
permanent global TECONS (the "Permanent Regulation S Global TECONS", and,
together with the Temporary Regulation S Global TECONS, the "Regulation S Global
TECONS") on or after April 20, 1997. Prior to April 20 1997, beneficial
interests in the Temporary Regulation S Global TECONS may only be held through
Euroclear or Cedel, and any resale or other transfer of such interests to U.S.
persons shall not be permitted during such period unless such resale or transfer
is made pursuant to Rule 144A or Regulation S and in accordance with the
certification requirements described below.
TECONS resold in reliance on Rule 144A are represented by a single,
permanent global TECONS in definitive, fully registered form (the "Restricted
Global TECONS") which is deposited with the Institutional Trustee as custodian
for DTC and registered in the name of a nominee of DTC. The Restricted Global
TECONS and the Temporary Regulation S Global TECONS (and any TECONS issued in
exchange therefor) are subject to certain restrictions on transfer set forth
therein and bear a restrictive legend. Prior to April 20, 1997, a beneficial
interest in the Temporary Regulation S Global TECONS may be transferred to a
person who takes delivery in the form of an interest in the Restricted Global
TECONS only upon receipt by the Trustee of a written certification from the
transferor to the effect that such transfer is being made to a person who the
transferor reasonably believes is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and
in accordance with any applicable securities laws of any state of the United
States or any other jurisdiction. Beneficial interests in the Restricted Global
TECONS may be transferred to a person who takes delivery in the form of an
interest in the Regulation S Global TECONS whether before, on or after April 20,
1997, only upon receipt by the Trustee of a written certification to the effect
that such transfer is being made in accordance with Regulation S under the
Securities Act. After the TECONS have been registered and resold under the
Securities Act, all certification requirements with respect to the TECONS will
cease.
RESALES UNDER THIS PROSPECTUS
TECONS resold under the Registration Statement of which this Prospectus
forms a part will be represented by a single, permanent global TECONS in
definitive, fully registered form (the "Unrestricted Global TECONS" and with the
Regulation S Global TECONS and the Restricted Global TECONS, the "Global
TECONS") which is deposited with the Institutional Trustee as custodian for DTC
and registered in the name of a nominee of DTC.
Upon each sale by a Selling Holder of TECONS (or the Convertible Debentures
or shares of Apple South Common Stock into which the TECONS or Convertible
Debentures, as the case may be, may be converted) offered hereby, such Selling
Holder will be required to deliver a notice (the "Notice") of such sale to the
Institutional Trustee and the Company. The Notice will, among other things,
identify the sale as a sale pursuant to the Registration Statement of which this
Prospectus forms a part, certify that the prospectus delivery requirements, if
any, of the Securities Act have been satisfied, and certify that the Selling
Holder and the number of TECONS (or Convertible Debentures or shares of Apple
South Common Stock, as the case may be) are identified in the Prospectus in
accordance with the applicable rules and gegulations under the Securities Act. A
copy of the Notice is included herein in Appendix A. Additional copies may be
requested from the Company, Attention: Erich J. Booth, Hancock at Washington,
Madison, Georgia 30650, telephone number (706) 342-4552.
Upon receipt by the Institutional Trustee of the Notice relating to a sale
of TECONS, an appropriate adjustment will be made to reflect a decrease in the
principal amount of the Restricted Global TECONS or the Regulation S Global
TECONS, as the case may be, or the cancellation of a TECONS in certificated form
upon the transfer thereof, and a corresponding increase in the principal amount
of the Unrestricted Global TECONS.
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The TECONS resold in reliance on Rule 144A are currently eligible for
trading in the PORTAL market of the National Association of Securities Dealers,
Inc. TECONS resold pursuant to the Registration Statement of which this
Prospectus forms a part are not expected to remain eligible for trading through
the PORTAL System. Apple South does not intend to apply for listing of the
TECONS on any securities exchange or for inclusion of the TECONS on any
automated quotation system.
TRANSFERS BETWEEN GLOBAL SECURITIES
Any beneficial interest in one of the Global TECONS that is transferred to a
person who takes delivery in the form of an interest in one of the other Global
TECONS, will, upon transfer, cease to be an interest in such Global TECONS and
become an interest in another Global TECONS, and, accordingly, will thereafter
be subject to all transfer restrictions, if any, and other procedures applicable
to beneficial interests in such other Global TECONS for as long as it remains
such an interest. Except in the limited circumstances described under "The
Global TECONS," owners of beneficial interests in Global TECONS will not be
entitled to receive physical delivery of certificated TECONS. The TECONS are not
issuable in bearer form.
RESALES TO INSTITUTIONAL ACCREDITED INVESTORS
TECONS which are not resold under the Registration Statement of which this
Prospectus is a part, but which are transferred to Institutional Accredited
Investors who are not qualified institutional buyers ("Non-Global Purchasers")
will be issued in registered certificated form ("Regulation D TECONS"). Upon the
transfer of Regulation D TECONS held by a Non-Global Purchaser either to a
qualified institutional buyer, in accordance with Regulation S or as a Selling
Holder under this Prospectus, such Regulation D TECONS will, unless the relevant
Global TECONS has previously been exchanged in whole for certificated TECONS, be
exchanged for an interest in a Global TECONS.
THE GLOBAL TECONS
Upon the issuance of the Global TECONS, DTC or its custodian credited, on
its internal system, the respective principal amount of the individual
beneficial interests represented by such Global TECONS to the accounts of
persons who have accounts with such depository. Such accounts initially were
designated by or on behalf of the Initial Purchasers. Ownership of beneficial
interests in the Global TECONS is limited to persons who have accounts with DTC
("Participants") or person who hold interests through Participants. Ownership of
beneficial interests in the Global TECONS is shown on, and the transfer of that
ownership is effected only through, records maintained by DTC or its nominee
(with respect to interests of Participants) and the records of Participants
(with respect to interests of persons other than Participants). Qualified
institutional buyers may hold their interests in the Global TECONS directly
through DTC if they are Participants in such system, or indirectly through
organizations which are Participants in such system.
Investors may hold their interests in the Regulation S Global TECONS
directly through Cedel or Euroclear, if they are Participants in such systems,
or indirectly through organizations that are Participants in such systems.
Beginning April 20, 1997 (but not earlier), investors may also hold such
interests through organizations other than Cedel or Euroclear that are
Participants in the DTC system. Cedel and Euroclear hold interests in the
Regulation S Global TECONS on behalf of their Participants through DTC.
So long as DTC, or its nominee, is the registered owner or holder of the
Global TECONS, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the TECONS represented by such Global TECONS for all
purposes under the Trust Agreement and the TECONS. No beneficial owner of an
interest in the Global TECONS will be able to transfer that interest except in
accordance with DTC's applicable procedures and, if applicable, those of
Euroclear and Cedel.
Payments of the principal of, and interest on, the Global TECONS will be
made to DTC or its nominee, as the case may be, as the registered owner thereof.
None of the Company, the Trust or any
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paying agent have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in the
Global TECONS or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of the Global TECONS will credit Participants'
accounts with payments in accounts proportionate to their respective beneficial
interests in the principal amount of the Global TECONS as shown on the records
of DTC or its nominee. The Company also expects that payments by Participants to
owners of beneficial interests in the Global TECONS held through such
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in the name of nominees for such customers. Such payments will be the
responsibility of such Participants.
Transfers between Participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. If a holder
requires physical delivery of a certificated TECONS for any reason, including to
sell TECONS to persons in states which require such delivery of such TECONS or
to pledge such TECONS, such holder must transfer its interest in the Global
TECONS in accordance with the normal procedures of DTC. Transfers between
Participants in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of TECONS (including the presentation of TECONS for exchange
as described below) only at the direction of one or more Participants to whose
accounts the DTC interests in the Global TECONS is credited and only in respect
of such portion of the aggregate liquidation amount of TECONS as to which such
participant or Participants has or have given such direction.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the Global TECONS as represented
by a global certificate.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). DTC holds securities that
Participants deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the Nasdaq National Market, the American Stock Exchange,
Inc., and the National Association of Securities Dealers, Inc. Access to the DTC
system is also available to others, such as securities brokers and dealers,
banks and trust companies that clear transactions through or maintain a direct
or indirect custodial relationship with a Direct Participant either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
Conversion and redemption notices shall be sent to DTC or its nominee. If
less than all of the TECONS of a Direct Participant are being converted or
redeemed, DTC or such nominee will reduce the amount of the interest of each
Direct Participant in such TECONS in accordance with its normal procedures.
Although voting with respect to the TECONS is limited, in those cases where
a vote is required, neither DTC nor its nominee will itself consent or vote with
respect to TECONS. Under its usual procedures, DTC would mail an Omnibus Proxy
to the Trust as soon as possible after the record date. The
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Omnibus Proxy assigns consenting or voting rights to those Direct Participants
to whose accounts the TECONS are credited on the record date (identified in a
listing attached to the Omnibus Proxy). Apple South and the Trust believe that
the arrangements among DTC, Direct and Indirect Participants, and beneficial
owners of TECONS will enable the beneficial owners to exercise rights equivalent
in substance to the rights that can be directly exercised by a holder of a
beneficial interest in the Trust.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures in
order to facilitate transfers of interests in the Global TECONS among
Participants of DTC, Euroclear and Cedel, they are under no obligation to
perform or continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Institutional Trustee will
have any responsibility for the performance by DTC, Euroclear or Cedel or their
respective Participants or indirect Participants of their respective obligations
under the rules and procedures governing their operations. If DTC discontinues
being the Depository and a successor Depository is not obtained, certificates
for the TECONS are required to be printed and delivered. Additionally, the
Regular Trustees (with the consent of Apple South) may decide to discontinue use
of the system of book-entry transfers through DTC (or any successor Depository)
with respect to the TECONS. In that event, certificates for the TECONS will be
printed and delivered.
The information in this section concerning DTC, Euroclear and Cedel and
DTC's book-entry system has been obtained from sources that Apple South and the
Trust believe to be reliable, but neither Apple South nor the Trust takes
responsibility for the accuracy thereof.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with respect
to the Trust Securities and after the curing of any defaults that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care as
a prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provisions, the Institutional Trustee is under no obligation to
exercise any of the powers vested in it by the Declaration at the request of any
holder of TECONS, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities which might be incurred thereby. The holders of
TECONS will not be required to offer such indemnity in the event such holders,
by exercising their voting rights, direct the Institutional Trustee to take any
action it is empowered to take under the Declaration following a Declaration
Event of Default. The Institutional Trustee also serves as trustee under the
Guarantee and the Indenture.
CONVERSION AGENT AND PAYING AGENT
The Institutional Trustee shall act as Conversion Agent. In addition, for
TECONS in certificated form and TECONS that do not remain in book-entry form,
the following provisions would apply:
The Institutional Trustee will act as paying agent and may designate an
additional or substitute paying agent at any time. Registration of transfers
of TECONS will be effected without charge by or on behalf of the Trust, but
upon payment (with the giving of such indemnity as the Trust or Apple South
may require) in respect of any tax or other government charges that may be
imposed in relation to it. The Trust will not be required to register or
cause to be registered the transfer of TECONS after such TECONS have been
called for redemption.
INSTITUTIONAL TRUSTEE
Apple South may maintain banking and other commercial relationships with the
Institutional Trustee and its affiliates in the ordinary course of business, and
the Institutional Trustee may own TECONS.
GOVERNING LAW
The Declaration and the TECONS are governed by, and construed in accordance
with, the internal laws of the State of Delaware.
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MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be required to register as an "investment
company" under the 1940 Act or characterized as other than a grantor trust for
U.S. federal income tax purposes. Apple South is authorized and directed to
conduct its affairs so that the Convertible Debentures will be treated as
indebtedness of Apple South for U.S. federal income tax purposes. In this
connection, Apple South and the Regular Trustees are authorized to take any
action, not inconsistent with applicable law, the certificate of trust of the
Trust or the certificate of incorporation of Apple South, that each of Apple
South and the Regular Trustees determine in their discretion to be necessary or
desirable to achieve such end, as long as such action does not adversely affect
the interests of the holders of the TECONS or vary the terms thereof.
Holders of the TECONS have no preemptive or similar rights.
DESCRIPTION OF THE GUARANTEE
Pursuant to the Guarantee, Apple South irrevocably and unconditionally
agrees, to the extent set forth therein, to pay in full, to the holders of the
TECONS issued by the Trust, the Guarantee Payments (as defined below) (except to
the extent paid by the Trust), as and when due, regardless of any defense, right
of set-off or counterclaim which the Trust may have or assert. The following
payments with respect to TECONS to the extent not paid by the Trust (the
"Guarantee Payments"), will be subject to the TECONS Guarantee thereon (without
duplication): (i) any accrued and unpaid distributions which are required to be
paid on such TECONS, to the extent the Trust shall have funds available
therefor; (ii) the Redemption Price, which will not be lower than the
liquidation amount, and all accrued and unpaid Distributions, to the extent the
Trust has funds available therefor with respect to any TECONS called for
redemption by the Trust and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Trust (other than in connection with the
distribution of Convertible Debentures to the holders of TECONS or the
conversion of all of the TECONS), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid Distributions on such TECONS to
the date of payment, to the extent the Trust has funds available therefor and
(b) the amount of assets of the Trust remaining available for distribution to
holders of such TECONS in liquidation of the Trust. Apple South's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by Apple South to the holders of TECONS or by causing the Trust to pay
such amounts to such holders. The Guarantee will be qualified as an indenture
under the Trust Indenture Act. The Institutional Trustee will act as indenture
trustee under the Guarantee (the "Guarantee Trustee"). The terms of the
Guarantee are those set forth in such Guarantee and those made part of such
Guarantee by the Trust Indenture Act. The Guarantee is held by the Guarantee
Trustee for the benefit of the holders of the TECONS.
Apple South has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the Trust with respect to the Trust Common
Securities (the "Trust Common Securities Guarantee") to the same extent as under
the Guarantee, except that upon an event of default under the Indenture, holders
of TECONS shall have priority over holders of Trust Common Securities with
respect to distributions and payments on liquidation, redemption or otherwise.
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DESCRIPTION OF THE CONVERTIBLE DEBENTURES
Set forth below is a description of the specific terms of the Convertible
Debentures in which the Trust invested the proceeds from the issuance and sale
of the Trust Securities. The following description is subject to, and is
qualified in its entirety by reference to, the description in the Indenture,
dated as of March 6, 1997 (the "Indenture"), between Apple South and First Union
National Bank of Georgia, as Trustee (the "Debt Trustee"). Certain capitalized
terms used herein are defined in the Indenture.
Under certain circumstances involving the dissolution of the Trust following
the occurrence of a Special Event, Convertible Debentures may be distributed to
the holders of the Trust Securities in liquidation of the Trust. See
"Description of the TECONS--Special Event Distribution."
GENERAL
The Convertible Debentures are issued as unsecured debt under the Indenture.
The Convertible Debentures are limited in aggregate principal amount to
approximately $116,161,500, such amount being the sum of the aggregate stated
liquidation of the TECONS and the capital contributed by Apple South in exchange
for the Trust Common Securities (the "Apple South Payment").
The Convertible Debentures are not subject to a sinking fund provision. The
entire principal amount of the Convertible Debentures will mature and become due
and payable, together with any accrued and unpaid interest thereon, including
Compound and Additional Interest, if any, on March 1, 2027.
If Convertible Debentures are distributed to holders of TECONS in
liquidation of such holders' interests in the Trust, such Convertible Debentures
will initially be issued as a Global Security (as defined herein). As described
herein, under certain limited circumstances, Convertible Debentures may be
issued in certificated form in exchange for a Global Security. See "Book-Entry
and Settlement" below. In the event that Convertible Debentures are issued in
certificated form, such Convertible Debentures will be in denominations of $50
and integral multiples thereof and may be transferred or exchanged at the
offices described below. Payments on Convertible Debentures issued as a Global
Security will be made to DTC, a successor Depository or, in the event that no
depository is used, to a paying agent for the Convertible Debentures. In the
event Convertible Debentures are issued in certificated form, principal and
interest will be payable, the transfer of the Convertible Debentures will be
registrable and Convertible Debentures will be exchangeable for Convertible
Debentures of other denominations of a like aggregate principal amount at the
corporate trust office of the Institutional Trustee in New York, New York;
PROVIDED, that payment of interest may be made at the option of Apple South by
check mailed to the address of the holder entitled thereto or by wire transfer
to an account appropriately designated by the holder entitled thereto.
Notwithstanding the foregoing, so long as the holder of any Convertible
Debentures is the Institutional Trustee, the payment of principal and interest
on the Convertible Debentures held by the Institutional Trustee will be made at
such place and to such account as may be designated by the Institutional
Trustee.
SUBORDINATION
The Indenture provides that the Convertible Debentures are subordinated and
junior in right of payment to all Senior Indebtedness of Apple South. No payment
of principal (including redemption payments), premium, if any, or interest on
the Convertible Debentures may be made (i) if any Senior Indebtedness of Apple
South is not paid when due and any applicable grace period with respect to such
default has ended and such default has not been cured or waived or ceased to
exist or (ii) if the maturity of any Senior Indebtedness of Apple South has been
accelerated because of a default. Upon any distribution of assets of Apple South
to creditors upon any dissolution, winding-up, liquidation or reorganization,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or
other proceedings, all principal, premium, if any, and interest due or to become
due on all Senior Indebtedness of Apple South must be paid in full before the
holders of Convertible Debentures are entitled to receive or retain any payment.
Until satisfaction of all claims of all Senior Indebtedness then outstanding,
the rights of the
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holders of the Convertible Debentures will be subrogated to the rights of the
holders of such Senior Indebtedness of Apple South to receive payments or
distributions applicable to Senior Indebtedness until all amounts owing on the
Convertible Debentures are paid in full.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by Apple South.
REDEMPTION AT THE OPTION OF APPLE SOUTH
Apple South has the right to redeem the Convertible Debentures, in whole or
in part, from time to time, on or after March 3, 2000, upon not less than 30 nor
more than 60 days notice, at the following prices (expressed as percentages of
the principal amount of the Convertible Debentures) together with accrued and
unpaid interest, including Compound and Additional Interest to, but excluding,
the redemption date, if redeemed during the 12-month period beginning March 1:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- --------------------------------------------------------------------------------- -----------
<S> <C>
2000............................................................................. 104.375%
2001............................................................................. 103.500
2002............................................................................. 102.625
2003............................................................................. 101.750
2004............................................................................. 100.875
</TABLE>
and 100% if redeemed on or after March 1, 2005.
If Convertible Debentures are redeemed on any March 1, June 1, September 1,
or December 1, accrued and unpaid interest shall be payable to holders of record
on the relevant record date.
Apple South also has the right to redeem the Convertible Debentures in
certain circumstances upon the occurrence of a Special Event as described under
"Description of the TECONS--Special Event Distribution; Tax Event Redemption,"
and, depending on the specific circumstances, any such redemption may be at 100%
of the principal amount thereof together with accrued and unpaid interest
(including Compound and Additional Interest) to the redemption date.
So long as the corresponding TECONS are outstanding, the proceeds from the
redemption of any of the Convertible Debentures will be used to redeem TECONS.
INTEREST
Each Convertible Debenture bears interest at the rate of 7% per annum from
the first date of original issuance, payable quarterly in arrears on March 1,
June 1, September 1 and December 1 of each year (each an "Interest Payment
Date"), commencing June 1, 1997, to the person in whose name such Convertible
Debenture is registered, subject to certain exceptions, at the close of business
on the Business Day next preceding such Interest Payment Date. In the event that
the Convertible Debentures are not in book-entry only form, Apple South shall
have the right to select record dates, which shall be more than one Business Day
prior to the Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is computed
will be computed on the basis of the actual number of days elapsed per 30-day
month. In the event that any date on which interest is payable on the
Convertible Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, then
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date.
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PROPOSED TAX LEGISLATION
Please refer to the discussion above under the heading "Description of the
TECONS--Proposed Tax Legislation."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as Apple South shall not be in default in the payment of interest on
the Convertible Debentures, Apple South has the right at any time and from time
to time, during the term of the Convertible Debentures to defer payments of
interest for successive periods not exceeding 20 consecutive quarters for each
such Extension Period, at the end of which Extension Period, Apple South shall
pay all interest then accrued and unpaid (including any Additional Interest)
together with interest thereon compounded quarterly at the rate specified for
the Convertible Debentures to the extent permitted by applicable law ("Compound
Interest"); PROVIDED, that during any such Extension Period, (a) Apple South
shall not declare or pay dividends on, make any distribution with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to any of
its capital stock (other than (i) purchases or acquisitions of shares of Apple
South Common Stock in connection with the satisfaction by Apple South of its
obligations under any employee benefit plans, (ii) as a result of a
reclassification of Apple South capital stock or the exchange or conversion of
one class or series of Apple South capital stock for another class or series of
Apple South capital stock, (iii) the purchase of fractional interests in shares
of Apple South capital stock pursuant to the conversion or exchange provisions
of such Apple South capital stock or the security being converted or exchanged
or (iv) purchases or acquisitions of shares of Apple South Common Stock to be
used in connection with acquisitions of Apple South Common Stock by shareholders
pursuant to Apple South's dividend reinvestment plan), (b) Apple South shall not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by Apple South that rank PARI
PASSU with or junior to the Convertible Debentures and (c) Apple South shall not
make any guarantee payments with respect to the foregoing (other than pursuant
to the Guarantee). Prior to the termination of any such Extension Period, Apple
South may further defer payments of interest by extending the interest payment
period; PROVIDED, HOWEVER, that such Extension Period, including all such
previous and further extensions, may not exceed 20 consecutive quarters or
extend beyond the maturity of the Convertible Debentures. Upon the termination
of any Extension Period and the payment of all amounts then due, Apple South may
commence a new Extension Period, subject to the terms set forth in this section.
No interest during an Extension Period, except at the end thereof, shall be due
and payable. Apple South has no present intention of exercising its right to
defer payments of interest by extending the interest payment period on the
Convertible Debentures. If the Institutional Trustee shall be the sole holder of
the Convertible Debentures, Apple South shall give the Regular Trustees, the
Institutional Trustee and the Indenture Trustee notice of its selection of such
Extension Period one Business Day prior to the earlier of (i) the date
distributions on the TECONS are payable or (ii) the date the Regular Trustees
are required to give notice to the Nasdaq National Market (or other applicable
self-regulatory organization) or to holders of the TECONS of the record date or
the date such distribution is payable. The Regular Trustees shall give notice of
Apple South's selection of such Extension Period to the holders of the TECONS.
If the Institutional Trustee shall not be the sole holder of the Convertible
Debentures, Apple South shall give the holders of the TECONS notice of its
selection of such Extension Period ten Business Days prior to the earlier of (i)
the Interest Payment Date or (ii) the date upon which Apple South is required to
give notice to the Nasdaq National Market (or other applicable self-regulatory
organization) or to holders of the Convertible Debentures of the record or
payment date of such related interest payment.
CONVERSION OF THE CONVERTIBLE DEBENTURES
The Convertible Debentures are convertible into Apple South Common Stock at
the option of the holders of the Convertible Debentures at any time prior to the
close of business on March 1, 2027 (or, in the case of Convertible Debentures
called for redemption, the close of business on the Business Day prior
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to the Redemption Date) at the Initial Conversion Price subject to the
conversion price adjustments described under "Description of the
TECONS--Conversion Rights." The Trust has agreed not to convert Convertible
Debentures held by it except pursuant to a notice of conversion delivered to the
Conversion Agent by a holder of TECONS. Upon surrender of a TECONS to the
Conversion Agent for conversion, the Trust will distribute Convertible
Debentures to the Conversion Agent on behalf of the holder of the TECONS so
converted, whereupon the Conversion Agent will convert such Convertible
Debentures to Apple South Common Stock on behalf of such holder. Apple South's
delivery to the holders of the Convertible Debentures (through the Conversion
Agent) of the fixed number of shares of Apple South Common Stock into which the
Convertible Debentures are convertible (together with the cash payment, if any,
in lieu of fractional shares) will be deemed to satisfy the obligation of Apple
South to pay the principal amount of the Convertible Debentures so converted,
and the accrued and unpaid interest thereon attributable to the period from the
last date to which interest has been paid or duly provided for; PROVIDED,
HOWEVER, that if any Convertible Debenture is converted after a record date for
payment of interest, the interest payable on the related interest payment date
with respect to such Convertible Debenture shall be paid to the Trust (which
will distribute such interest to the converting holder) or other holder of
Convertible Debentures, as the case may be, despite such conversion.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the U.S., or any other taxing authority, then, in any such
case, Apple South will pay as additional interest ("Additional Interest") such
additional amounts as shall be required so that the net amounts received and
retained by the Trust or the Institutional Trustee after paying any such taxes,
duties, assessments or other governmental charges will be not less than the
amounts the Trust or the Institutional Trustee would have received had no such
taxes, duties, assessments or other governmental charges been imposed.
INDENTURE EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default"
with respect to the Convertible Debentures:
(a) failure to pay principal of (or premium, if any, on) any Convertible
Debenture when due; (b) failure to pay interest on any Convertible
Debenture when due, continued for 30 days; (c) failure to perform any
other covenant or agreement of Apple South under the Indenture (other
than a covenant the performance of which is dealt with specifically
elsewhere in the Indenture), continued for 90 days after written notice
as provided in the Indenture; (d) certain events of bankruptcy,
insolvency or reorganization; and (e) the voluntary or involuntary
dissolution, winding-up or termination of the Trust, except in
connection with the distribution of Convertible Debentures to the
holders of Trust Securities in liquidation of the Trust, the redemption
of all of the Trust Securities.
If any Indenture Event of Default shall occur and be continuing, the
Institutional Trustee, as the holder of the Convertible Debentures, will have
the right to declare the principal of and the interest on the Convertible
Debentures (including any Compound Interest and Additional Interest, if any) and
any other amounts payable under the Indenture to be forthwith due and payable
and to enforce its other rights as a creditor with respect to the Convertible
Debentures. An Indenture Event of Default also constitutes a Declaration Event
of Default. The holders of TECONS in certain circumstances have the right to
direct the Institutional Trustee to exercise its rights as the holder of the
Convertible Debentures. See "Description of the TECONS--Declaration Events of
Default" and "--Voting Rights." Notwithstanding the foregoing, if an Event of
Default has occurred and is continuing and such event is attributable to the
failure of Apple South to pay interest or principal on the Convertible
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, the redemption date), Apple South
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acknowledges that then a holder of TECONS may institute a Direct Action for
payment on or after the respective due date specified in the Convertible
Debentures. Notwithstanding any payments made to such holder of TECONS by Apple
South in connection with a Direct Action, Apple South shall remain obligated to
pay the principal of or interest on the Convertible Debentures held by the Trust
or the Institutional Trustee, and Apple South shall be subrogated to the rights
of the holder of such TECONS with respect to payments on the TECONS to the
extent of any payments made by Apple South to such holder in any Direct Action.
The holders of TECONS will not be able to exercise directly any other remedy
available to the holders of the Convertible Debentures.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of TECONS in connection with the involuntary or
voluntary dissolution, winding-up or liquidation of the Trust as a result of the
occurrence of a Special Event, the Convertible Debentures will be issued (i) if
to owners of beneficial interests in the Global TECONS, in the form of one or
more global certificates (each, a "Global Security") registered in the name of
the Depository or its nominee or (ii) if to holders of certificated TECONS, in
registered form (each, a "Certificated Security"). Except under the limited
circumstances described below, Convertible Debentures represented by the Global
Security will not be exchangeable for, and will not otherwise be issuable as,
Convertible Debentures in definitive form. The Global Securities described above
may not be transferred except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or to a successor Depository or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided herein, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Convertible
Debentures in definitive form and will not be considered the holders (as defined
in the Indenture) thereof for any purpose under the Indenture and no Global
Security representing Convertible Debentures shall be exchangeable, except for
another Global Security of like denomination and tenor to be registered in the
name of the Depository or its nominee or to a successor Depository or its
nominee. Accordingly, each beneficial owner of an interest in a Global Security
must rely on the procedures of the Depository, or, if such person is not a
Participant, on the procedures of the Participant through which such person owns
its interest, to exercise any rights of a holder under the Indenture.
THE DEPOSITORY
If Convertible Debentures are distributed to holders of TECONS in
liquidation of such holders' interests in the Trust, DTC will act as Depository
for the Convertible Debentures. For a description of DTC and the specific terms
of the Depository arrangements, see "Description of the TECONS--The Global
TECONS." As of the date of this Prospectus, the description therein of DTC's
book-entry system and DTC's and Euroclear's and Cedel's practices as they relate
to purchases, transfers, notices and payments with respect to the TECONS apply
in all material respects to any debt obligations represented by one or more
Global Securities held by Apple South. Apple South may appoint a successor to
DTC or any successor Depository in the event DTC or such successor Depository is
unable or unwilling to continue as a Depository for the Global Securities.
None of Apple South, the Trust, the Institutional Trustee, any paying agent
and any other agent of Apple South or the Indenture Trustee has any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Security
for such Convertible Debentures or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
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DISCONTINUANCE OF THE DEPOSITORY'S SERVICES
A Global Security shall be exchangeable for Convertible Debentures
registered in the names of persons other than the Depository or its nominee only
if (i) the Depository notifies Apple South that it is unwilling or unable to
continue as a depository for such Global Security and no successor depository
shall have been appointed, (ii) the Depository, at any time, ceases to be a
clearing agency registered under the Exchange Act at which time the Depository
is required to be so registered to act as such depository and no successor
depository shall have been appointed, (iii) Apple South, in its sole discretion,
determines that such Global Security shall be so exchangeable or (iv) there
shall have occurred an Event of Default with respect to such Convertible
Debentures. Any Global Security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for Convertible Debentures registered in such
names as the Depository shall direct. It is expected that such instructions will
be based upon directions received by the Depository from its Participants with
respect to ownership of beneficial interests in such Global Security.
GOVERNING LAW
The Indenture and the Convertible Debentures are governed by, and construed
in accordance with, the internal laws of the State of New York.
MISCELLANEOUS
The Indenture provides that Apple South will pay all fees and expenses
related to (i) the offering of the Trust Securities and the Convertible
Debentures, (ii) the organization, maintenance and dissolution of the Trust,
(iii) the retention of the Apple South Trustees and (iv) the enforcement by the
Institutional Trustee of the rights of the holders of the TECONS. The payment of
such fees and expenses is fully and unconditionally guaranteed by Apple South.
Apple South has the right at all times to assign any of its respective
rights or obligations under the Indenture to a direct or indirect wholly-owned
subsidiary of Apple South; PROVIDED, that in the event of any such assignment,
Apple South remains liable for all of their respective obligations. Subject to
the foregoing, the Indenture is binding upon and inures to the benefit of the
parties thereto and their respective successors and assigns. The Indenture
provides that it may not otherwise be assigned by the parties thereto.
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EFFECT OF OBLIGATIONS UNDER THE
CONVERTIBLE DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
the Trust Securities evidencing undivided beneficial interests in the assets of
the Trust, and to invest the proceeds from such issuance and sale in the
Convertible Debentures.
As long as payments of interest and other payments are made when due on the
Convertible Debentures, such payments will be sufficient to cover distributions
and payments due on the Trust Securities because of the following factors: (i)
the aggregate principal amount of Convertible Debentures will be equal to the
sum of the aggregate stated liquidation amount of the Trust Securities; (ii) the
interest rate and the interest and other payment dates on the Convertible
Debentures will match the Distribution rate and Distribution and other payment
dates for the TECONS; (iii) Apple South shall pay, and the Trust shall not be
obligated to pay, directly or indirectly, all costs, expenses, debt and
obligations of the Trust (other than with respect to the Trust Securities); and
(iv) the Declaration further provides that the Apple South Trustees shall not
take or cause or permit the Trust to, among other things, engage in any activity
that is not consistent with the purposes of the Trust.
Payments of Distributions (to the extent funds therefor are available) and
other payments due on the TECONS (to the extent funds therefor are available)
are guaranteed by Apple South as and to the extent set forth under "Description
of the Guarantee." If Apple South does not make interest payments on the
Convertible Debentures purchased by the Trust, it is expected that the Trust
will not have sufficient funds to pay Distributions on the TECONS. The Guarantee
is a full guarantee on a subordinated basis with respect to the TECONS issued by
the Trust from the time of its issuance, but does not apply to any payment of
Distributions unless and until the Trust has sufficient funds for the payment of
such Distributions. The Guarantee covers the payment of Distributions and other
payments on the TECONS only if and to the extent that Apple South has made a
payment of interest or principal on the Convertible Debentures held by the Trust
as its sole asset. The Guarantee, when taken together with Apple South's
obligations under the Convertible Debentures, the Indenture and the Declaration,
including its obligations to pay costs, expenses, debts and liabilities of the
Trust (other than with respect to the Trust Securities), provides a full and
unconditional guarantee of amounts on the TECONS.
If Apple South fails to make interest or other payments on the Convertible
Debentures when due (taking account of any Extension Period), the Declaration
provides a mechanism whereby a holder of the TECONS, using the procedures
described in "Description of the TECONS--Voting Rights," may direct the
Institutional Trustee to enforce its rights under the Convertible Debentures.
Notwithstanding the foregoing, in such circumstances a holder of TECONS may
institute a Direct Action for payment on or after the respective due date
specified in the Convertible Debentures. In connection with such Direct Action,
Apple South will be subrogated to the rights of such holder of TECONS under the
Declaration to the extent of any payment made by Apple South to such holder of
TECONS in such Direct Action. Apple South, under the Guarantee, acknowledges
that the Guarantee Trustee shall enforce the Guarantee on behalf of the holders
of the TECONS. If Apple South fails to make payments under the Guarantee, the
Guarantee provides a mechanism whereby the holders of the TECONS may direct the
Guarantee Trustee to enforce its rights thereunder. Any holder of TECONS may
institute a legal proceeding directly against Apple South to enforce such
holder's right to receive payment under the Guarantee without first instituting
a legal proceeding against the Trust, the Guarantee Trustee, or any other person
or entity.
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CERTAIN FEDERAL TAX CONSEQUENCES
GENERAL
The following is a summary of certain of the material U.S. federal income
tax consequences of the purchase, ownership and disposition of TECONS. Unless
otherwise stated, this summary deals only with TECONS held as capital assets by
holders who purchase the TECONS upon original issuance ("Initial Holders") in
the Original Offering. It does not deal with special classes of holders such as
banks, thrifts, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, tax-exempt investors
or persons that will hold the TECONS as a position in a "straddle," as part of a
"synthetic security" or "hedge," as part of a "conversion transaction" or other
integrated investment, or as other than a capital asset. This summary also does
not address the tax consequences to persons that have a functional currency
other than the U.S. Dollar or the tax consequences to shareholders, partners or
beneficiaries of a holder of TECONS. Further, it does not include any
description of any alternative minimum tax consequences or the tax laws of any
state or local government or of any foreign government that may be applicable to
the TECONS. This summary is based on the Code, Treasury regulations thereunder
and administrative and judicial interpretations thereof, as of the date hereof,
all of which are subject to change, possibly on a retroactive basis.
CLASSIFICATION OF THE CONVERTIBLE DEBENTURES
Apple South intends to treat the Convertible Debentures as indebtedness of
Apple South under current law, and, by acceptance of a TECONS, each holder
covenants to treat the Convertible Debentures as indebtedness and the TECONS as
evidence of an indirect beneficial ownership interest in the Convertible
Debentures. No assurance can be given, however, that such position of Apple
South will not be challenged by the Internal Revenue Service (the "IRS"). The
remainder of this discussion assumes that the Convertible Debentures will be
classified for U.S. income tax purposes as indebtedness of Apple South.
CLASSIFICATION OF APPLE SOUTH FINANCING
In connection with the issuance of the TECONS in the Original Offering,
Kilpatrick Stockton LLP, tax counsel to Apple South and the Trust, rendered its
opinion generally to the effect that, under then current law and assuming full
compliance with the terms of the Declaration and the Indenture (and certain
other documents), and based on certain facts and assumptions contained in such
opinion, the Trust will be classified for U.S. federal income tax purposes as a
grantor trust and not as an association taxable as a corporation. Accordingly,
for U.S. federal income tax purposes, each holder of TECONS generally will be
considered the owner of an undivided interest in the Convertible Debentures, and
pursuant to its agreement to treat the Convertible Debentures as indebtedness,
each holder will be required to include in its gross income any OID accrued with
respect to its allocable share of those Convertible Debentures.
ORIGINAL ISSUE DISCOUNT
Corporate holders of TECONS will not be entitled to a dividends-received
deduction with respect to any income recognized with respect to the TECONS.
The Convertible Debentures are considered to have been issued with "original
issue discount" ("OID") and each holder of TECONS, including a taxpayer who
otherwise uses the cash method of accounting, is required to include its PRO
RATA share of original issue discount on the Convertible Debentures in income as
it accrues, in accordance with a constant yield method based on a compounding of
interest, before the receipt of cash distributions on the TECONS. Generally, all
of a TECONS holder's taxable interest income with respect to the Convertible
Debentures will be accounted for as OID and actual distributions of stated
interest will not be separately reported as taxable income. So long as the
interest payment period is not extended, cash distributions received by an
Initial Holder for any quarterly
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interest period will approximately equal the sum of the daily accruals of income
for such quarterly interest period.
The total amount of OID on the Convertible Debentures will equal the
difference between the "issue price" of the Convertible Debentures and their
"stated redemption price at maturity." Because Apple South has the right to
extend the interest payment period of the Convertible Debentures, all of the
stated interest payments on the Convertible Debentures will be includable in
determining their "stated redemption price at maturity." The "issue price" of
each $50.00 principal amount of Convertible Debentures will be equal to the
first price to the purchasers at which a substantial amount of the TECONS is
sold for cash, which is expected to be $50.00.
A TECONS holder's initial tax basis for its PRO RATA share of the
Convertible Debentures is equal to its PRO RATA share of their "issue price," as
defined above, and will be increased by OID accrued with respect to its PRO RATA
share of the Convertible Debentures, and reduced by the amount of cash
distributions with respect thereto.
A holder who disposes of the TECONS during an extended interest period may
suffer a loss because the market value of the TECONS will likely fall if Apple
South exercises its option to defer payments of interest on the Convertible
Debentures. Furthermore, the market value of the TECONS may not reflect the
accumulated distributions that will be paid at the end of the extended interest
period, and a holder who sells the TECONS during the extended interest period
will not receive from Apple South any cash related to the interest income the
holder accrued and included in its taxable income under the OID rules (because
that cash will be paid to the holder of record at the end of the extended
interest period).
RECEIPT OF CONVERTIBLE DEBENTURES OR CASH UPON LIQUIDATION OF APPLE SOUTH
FINANCING
Under certain circumstances, as described under the caption "Description of
the TECONS--Special Event Distribution; Tax Event Redemption," Convertible
Debentures may be distributed to holders in exchange for the TECONS and in
liquidation of the Trust. Under current law, such a distribution, for U.S.
federal income tax purposes, would be treated as a non-taxable event to each
holder, and each holder would receive an aggregate tax basis in the Convertible
Debentures equal to such holder's aggregate tax basis in its TECONS. A holder's
holding period in the Convertible Debentures so received in liquidation of the
Trust would include the period during which the TECONS were held by such holder.
If, however, the related special event is a Tax Event which results in the
Trust's being treated as an association taxable as a corporation, the
distribution would likely constitute a taxable event to holders of the TECONS.
Under certain circumstances described herein (see "Description of the
TECONS"), the Convertible Debentures may be redeemed for cash and the proceeds
of such redemption distributed to holders in redemption of their TECONS. Under
current law, such a redemption would, for U.S. federal income tax purposes,
constitute a taxable disposition of the redeemed TECONS, and a holder could
recognize gain or loss as if it sold such redeemed TECONS for cash. See "--Sales
of TECONS."
SALES OF TECONS
A holder that sells TECONS will recognize gain or loss equal to the
difference between its adjusted tax basis in the TECONS and the amount realized
on the sale of such TECONS. A holder's adjusted tax basis in the TECONS
generally will be its initial purchase price increased by OID previously
includable in such holder's gross income to the date of disposition, and
decreased by payments received on such TECONS. Subject to the discussion below
regarding accrued and unpaid interest, such gain or loss will be long-term
capital gain or loss if the TECONS have been held for more than one year.
The TECONS may trade at a price that does not accurately reflect the value
of accrued but unpaid interest with respect to the underlying Convertible
Debentures. A holder who disposes of his TECONS between record dates for
payments of Distributions thereon will be required to include as OID accrued but
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unpaid interest on the Convertible Debentures through the date of disposition in
income as ordinary income, and to add such amount to his adjusted tax basis in
his PRO RATA share of the underlying Convertible Debentures of which he is
deemed to have disposed. To the extent the selling price is less than the
holder's adjusted tax basis (which will include, in the form of OID, all accrued
but unpaid interest) a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for U.S. federal income tax purposes.
In the case of a holder of a TECONS who does not acquire the TECONS in the
Original Offering, the TECONS might have market discount, defined as the excess,
if any, of the original issue price of the TECONS (plus the sum of all accrued
OID with respect to the TECONS exceeding the sum of all distributions on the
TECONS) over the holder's initial tax basis in the TECONS. Gain on the sale of a
TECONS will constitute ordinary income to the holder to the extent that it does
not exceed accrued market discount on the TECONS. The market discount will
accrue ratably based on the number of days that the holder owns the TECONS
divided by the number of days from the holder's acquisition of the TECONS to the
maturity date of the TECONS. For purposes of these rules, certain DE MINIMIS
market discount will be disregarded.
CONVERSION OF TECONS TO APPLE SOUTH COMMON STOCK
A holder of TECONS will not recognize income, gain or loss upon the
conversion through the Conversion Agent, of Convertible Debentures into Apple
South Common Stock except to the extent of ordinary income recognized with
respect to accrued and unpaid interest on the Convertible Debentures at that
time. A holder of TECONS will, however, recognize gain upon the receipt of cash
in lieu of a fractional share of Apple South Common Stock equal to the amount of
cash received less such holder's tax basis in such fractional share. Such
holder's tax basis in the Apple South Common Stock received upon conversion
should generally be equal to such holder's tax basis in the TECONS delivered to
the Conversion Agent for exchange, plus the amount of interest income recognized
on the exchange, less the basis allocated to any fractional share for which cash
is received and such holder's holding period in the Apple South Common Stock
received upon conversion should generally begin on the date such holder acquired
the TECONS delivered to the Conversion Agent for exchange (except that the
holding period of the Common Stock deemed issued for accrued interest will begin
on the day following the date of conversion).
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under section 305 of the Code would treat
holders of TECONS as having received a constructive distribution from Apple
South in the event the conversion ratio of the Convertible Debentures were
adjusted if (i) as a result of such adjustment, the proportionate interest
(measured by the quantum of Apple South Common Stock into or for which the
Convertible Debentures are convertible or exchangeable) of the holders of the
TECONS in the assets or earnings and profits of Apple South were increased, and
(ii) the adjustment was not made pursuant to a bona fide, reasonable
anti-dilution formula. An adjustment in the conversion ratio would not be
considered made pursuant to such a formula if the adjustment was made to
compensate for certain taxable distributions with respect to the Apple South
Common Stock. Thus, under certain circumstances, a reduction in the conversion
price for the holders may result in deemed dividend income to holders to the
extent of the current or accumulated earnings and profits of Apple South.
Holders of the Convertible Debentures would be required to include their
allocable share of such deemed dividend in gross income, but will not receive
any cash related thereto.
PROPOSED TAX LEGISLATION
Please refer to the discussion above under the heading "Description of the
TECONS--Proposed Tax Legislation."
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UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the U.S., a
foreign corporation, a non-resident alien individual, a foreign partnership, or
a non-resident fiduciary of a foreign estate or trust.
As discussed above, the Company intends to take the position that the
Convertible Debentures will be classified for U.S. federal income tax purposes
as indebtedness of Apple South under current law; no assurance can be given,
however, that such position of the Company will not be challenged by the
Internal Revenue Service. See "--Classification of the Convertible Debentures."
Assuming that the Convertible Debentures are classified for U.S. federal
income tax purposes as indebtedness of Apple South, under present U.S. federal
income tax law: (i) payments by the Trust or any of its paying agents to any
holder of a TECONS who or which is a United States Alien Holder would not be
subject to U.S. federal withholding tax; PROVIDED, that, (a) the beneficial
owner of the TECONS does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of Apple South entitled to
vote, (b) the beneficial owner of the TECONS is not a controlled foreign
corporation that is related to Apple South through stock ownership, and (c)
either (A) the beneficial owner of the TECONS certifies to the Trust or its
agent, under penalties of perjury, that it is not a U.S. holder and provides its
name and address or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "Financial Institution"), and holds the TECONS in such
capacity, certifies to the Trust or its agent, under penalties of perjury, that
such statement has been received from the beneficial owner by it or by a
Financial Institution between it and the beneficial owner and furnishes the
Trust or its agent with a copy thereof; and (ii) a United States Alien Holder of
a TECONS generally would not be subject to U.S. federal withholding tax on any
gain realized upon the sale or other disposition of a TECONS.
However, a United States Alien Holder of a TECONS would be subject to U.S.
federal income tax on gain realized on the sale, exchange or other disposition
of the security if (i) the United States Alien Holder is an individual who is
present in the U.S. for 183 days or more in the taxable year of disposition, and
certain other conditions are satisfied; (ii) the gain is effectively connected
with the conduct by the United States Alien Holder of a trade or business in the
U.S. (in which case the branch profits tax may also apply if the United States
Alien Holder is a foreign corporation); or (iii) Apple South is or has been a
"United States real property holding corporation" within the meaning of section
897(c)(2) of the Code within the shorter of the United States Alien Holder's
holding period or the five year period ending on the date of the sale, exchange
or other disposition and certain other conditions are satisfied.
Apple South believes that it currently is and may continue to be treated as
a "United States real property holding corporation" within the meaning of
section 897(c)(2) of the Code. Should it be so treated, gain realized on a
disposition of TECONS by a United States Alien Holder that is deemed to have
beneficially owned an amount of TECONS which, on the day such TECONS were
acquired by the United States Alien Holder, had a fair market value greater than
the fair market value on that date of 5 percent of the Apple South Common Stock,
will be subject to U.S. federal income tax upon a disposition (including
possibly upon conversion) of such TECONS. Such a United States Alien Holder is,
therefore, urged to consult its tax advisor. A United States Alien Holder who is
not deemed to have beneficially owned an amount of TECONS which, on the day such
TECONS were acquired by the United States Alien Holder, had a fair market value
greater than the fair market value on that date of 5 percent of the Apple South
Common Stock, will not be subject to U.S. federal income tax subject to the
discussion in the following paragraph.
The preceding discussion with respect to the tax consequences to a United
States Alien Holder where Apple South is a United States real property holding
corporation assumes that Apple South Common Stock is and always will be
"regularly traded" on an established securities market (within the meaning of
Section 897(c)(3) of the Code and the temporary treasury regulations (the
"Temporary Regulations")
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issued pursuant thereto) at the time of disposition. However, it may be possible
to read the Temporary Regulations that define "regularly traded" for this
purpose as providing that Apple South Common Stock will not be "regularly
traded" for any calendar quarter during which 100 or fewer persons (treating
related persons as one person) in the aggregate own 50% or more of the Common
Stock. In the event that this interpretation is determined to be correct and if
Apple South is a United States real property holding corporation during the
relevant time period described in the preceding paragraph, a United States Alien
Holder (without regard to its ownership percentage of the TECONS) will be
subject to U.S. federal income tax with respect to gain realized on any sale or
other disposition of the TECONS that occurs within a calendar quarter during
which 50% or more of Apple South Common Stock is so owned as well as to a
withholding tax (generally at a rate of 10% of the cash proceeds). Any amount
withheld pursuant to such withholding tax will be creditable against such
holder's U.S. federal income tax liability.
If the Convertible Debentures were not classified for U.S. federal income
tax purposes as indebtedness of Apple South, payments by the Trust or any of its
paying agents to any holder of a TECONS who or which is a United States Alien
Holder could be subject to U.S. withholding tax at a 30% rate (or a lower rate
prescribed by an applicable tax treaty) unless certain exemptions were
applicable. Prospective investors that would be United States Alien Holders
should consult their tax advisors concerning the possible application of these
rules.
On April 15, 1996, the Internal Revenue Service proposed regulations (the
"Proposed Regulations") that could affect the procedures to be followed by a
United States Alien Holder in establishing such United States Alien Holder's
non-U.S. person status. The Proposed Regulations would generally be effective
for payments made after December 31, 1997. United States Alien Holders should
consult their tax advisors regarding the effect, if any, of the Proposed
Regulations on their purchase, ownership, and disposition of the TECONS.
INFORMATION REPORTING TO HOLDERS
Subject to the qualifications discussed below, income on the TECONS will be
reported to holders on Forms 1099, which forms should be mailed to holders of
TECONS by January 31 following each calendar year.
The Trust will be obligated to report annually to Cede & Co., as holder of
record of the TECONS, the OID related to the Convertible Debentures that accrued
during the year. The Trust currently intends to report such information on Form
1099 prior to January 31 following each calendar year even though the Trust is
not legally required to report to record holders until April 15 following each
calendar year. The Initial Purchasers have indicated to the Trust that, to the
extent that they hold TECONS as nominees for beneficial holders, they currently
expect to report to such beneficial holders on Forms 1099 by January 31
following each calendar year. Under current law, holders of TECONS who hold as
nominees for beneficial holders will not have any obligation to report
information regarding the beneficial holders to the Trust. The Trust, moreover,
will not have any obligation to report to beneficial holders who are not also
record holders. Thus, beneficial holders of TECONS who hold their TECONS through
the Initial Purchasers will receive Forms 1099 reflecting the income on their
TECONS from such nominee holders rather than the Trust.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the TECONS or the
Convertible Debentures distributed to holders of the TECONS may be subject to a
"backup" withholding tax of 31% unless the holder complies with certain
identification requirements. Any withheld amounts will be allowed as a refund or
a credit against the holder's U.S. federal income tax; PROVIDED, that the
required information is provided to the IRS.
50
<PAGE>
THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
TECONS, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX
LAWS (WITH POSSIBLE RETROACTIVE EFFECT).
ERISA CONSIDERATIONS
GENERAL
A fiduciary of an employee benefit plan subject to Title I of ERISA should
consider fiduciary standards under ERISA in the context of the particular
circumstances of such plan before authorizing an investment in the TECONS. Such
fiduciary should consider whether the investment satisfies ERISA's
diversification and prudence requirements, whether the investment constitutes
unauthorized delegation of fiduciary authority and whether the investment is in
accordance with the documents and instruments governing the plan. In addition,
ERISA and the Code prohibit a wide range of transactions ("Prohibited
Transactions") involving the assets of a plan subject to ERISA or the assets of
an individual retirement account or plan subject to Section 4975 of the Code
(hereinafter an "ERISA Plan") and persons who have certain specified
relationships to the ERISA Plan ("parties in interest," within the meaning of
ERISA, and "disqualified persons," within the meaning of the Code). Such
transactions may require "correction" and may cause the ERISA Plan fiduciary to
incur certain liabilities and the parties in interest or disqualified persons to
be subject to excise taxes.
The acquisition of TECONS by any person who is using for such acquisition
the assets of an ERISA Plan shall constitute a representation by such person to
Apple South that (i) Apple South is a "party in interest" or a "disqualified
person" with respect to such ERISA Plan, then such security is being acquired
pursuant to an exemption from the Prohibited Transaction rules under ERISA and
the Code, and (ii) Apple South is not a "fiduciary," within the meaning of
Section 3(21) of ERISA and the regulations thereunder, with respect to such
person's interest in the TECONS or the Convertible Debentures.
Governmental plans and certain church plans (each as defined under ERISA)
are not subject to the Prohibited Transaction rules. Such plans may, however, be
subject to federal, state or local laws or regulations which may affect their
investment in the TECONS. Any fiduciary of such a governmental or church plan
considering an investment in the TECONS should determine the need for, and the
availability, if necessary, of any exemptive relief under such laws or
regulations.
The discussion herein of ERISA is general in nature and is not intended to
be all inclusive. Any fiduciary of an ERISA Plan, governmental plan or church
plan considering an investment in the TECONS should consult with its legal
advisors regarding the consequences of such investment.
PROHIBITED TRANSACTIONS
Apple South may be a party in interest or a disqualified person with respect
to an ERISA Plan investing in the TECONS, and, therefore, such investments by an
ERISA Plan may give rise to a Prohibited Transaction. Consequently, before
investing in the TECONS, any person who is, or who in acquiring such securities
is using the assets of, an ERISA Plan should determine that either a statutory
or an administrative exemption from the Prohibited Transaction rules discussed
below or otherwise available is applicable to such person's investment in the
TECONS, or that its investment in such securities will no result in a Prohibited
Transaction.
Certain statutory or administrative exemptions from the Prohibited
Transaction rules under ERISA and the Code may be available to an ERISA Plan
which is investing in the TECONS. Included among
51
<PAGE>
these exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90-1,
regarding investments by insurance company pooled separate accounts; PTCE 91-38,
regarding investments by bank collective investment funds; PTCE 84-14, regarding
transactions effected by qualified professional asset managers; PTCE 96-23,
regarding transactions effected by in-house asset managers; or PTCE 95-60,
regarding investments by insurance company general accounts.
TRUST ASSETS AS "PLAN ASSETS"
The Department of Labor has issued final regulations (the "Labor
Regulations") as to what constitutes assets of an employee benefit plan ("plan
asset") under ERISA. The Labor Regulations provide that, as a general rule, when
an ERISA Plan acquires an equity interest in an entity and such interest does
not represent a "publicly offered security" nor a security issued by an
investment company registered under the Investment Company Act of 1940, the
ERISA Plan's assets include both the equity interest and an undivided interest
in each of the underlying assets of the entity, unless it is established either
that the entity in an operating company or that equity participation in the
entity by "benefit plan investors" is not "significant." For purposes of the
Labor Regulations, the Trust will not be an investment company nor an operating
company and the TECONS will not constitute a "publicly offered security." As
discussed below, after resales pursuant to the shelf registration statement, the
TECONS may qualify as "publicly offered securities" for purposes of the Labor
Regulations, but such result cannot be assured.
Under the Labor Regulations, equity participation by benefit plan investors
will not be considered "significant" on any date only if, immediately after the
most recent acquisition of TECONS, the aggregate interest in the TECONS held by
benefit plan investors will be less than 25% of the value of the TECONS.
Although it is possible that the equity participation by benefit plan investors
on any date will not be "significant" for purposes of the Labor Regulations,
such result cannot be assured. Consequently, if ERISA Plans or investors using
plan assets of ERISA plans purchase the TECONS, the Trust's assets could be
deemed to be "plan assets" of such ERISA Plans for purposes of the fiduciary
responsibility provisions of ERISA and the Code. Under ERISA, any person who
exercises any authority or control respecting the management or disposition of
the assets of an ERISA Plan is considered to be a fiduciary of such ERISA Plan.
For example, the Institutional Trustee could therefore become a fiduciary of the
ERISA Plans that invest in the TECONS and be subject to the general fiduciary
requirements of ERISA in exercising its authority with respect to the management
of the assets of the Trust. However, the Institutional Trustee will have only
limited discretionary authority with respect to the Trust's assets and the
remaining functions and the responsibilities performed by the Institutional
Trustee will be for the most part custodial and ministerial in nature. Inasmuch
as the Institutional Trustee or another person with authority or control
respecting the management or disposition of the Trust assets may become a
fiduciary with respect to the ERISA Plans that will purchase the TECONS, there
may be an improper delegation by such ERISA Plans of the responsibility to
manage plan assets.
It is expected that TECONS will be distributed pursuant to an effective
registration statement under the Securities Act and they may subsequently be
registered under the Exchange Act. TECONS may qualify as "publicly offered
securities" under the Labor Regulations if, in addition to such distribution and
registration, they are also "widely held" and "freely transferable." Under the
Labor Regulations, a class of securities is "widely held" only if it is a class
of securities that is owned by 100 or more investors independent of the issuer
and of one another. Although it is possible that after distribution pursuant to
the shelf registration statement the TECONS will be "widely held," such result
cannot be assured. Whether a security is "freely transferable" for purposes of
the Labor Regulations is a factual question to be determined on the basis of all
relevant facts and circumstances. If after the distribution pursuant to the
shelf registration statement, the TECONS do not qualify as "publicly offered
securities," the "plan asset" considerations discussed in the immediately
preceding paragraph could continue to be applicable in connection with the
investment by ERISA Plans or investors' using plan assets of ERISA Plans.
52
<PAGE>
SELLING HOLDERS
The holders listed below and the beneficial owners of the TECONS and their
transferees, pledgees, donees or other successors, if not identified hereunder
then so identified in supplements to this Prospectus, are the Selling Holders
under this Prospectus. The following table sets forth, as of a recent
practicable date prior to the effectiveness of the Registration Statement of
which this Prospectus forms a part, certain information with respect to the
Selling Holders named below and the respective number of TECONS owned by each
Selling Holder that may be offered pursuant to this Prospectus. Such information
has been obtained from the Selling Holders, DTC and/or the Institutional
Trustee.
<TABLE>
<CAPTION>
NUMBER OF
SELLING HOLDER TECONS
- ------------------------------------------------------------------------------------------- ----------
<S> <C>
Alpine Associates.......................................................................... 150,000
Austin Firefighters........................................................................ 1,000
Baptist Hospital........................................................................... 900
Boston Museum of Fine Arts................................................................. 400
Christian Science Trustees for Gifts & Endowments.......................................... 3,000
Cincinatti Bell Telephone Convertible Value Fund........................................... 12,600
Declaration of Trust for Defined Benefit Plan of ZENECA Holdings Inc....................... 8,100
Declaration of Trust for the Defined Benefit Plan of ICI American Holdings Inc............. 11,925
Delaware State Employees Retirement Fund................................................... 38,850
Dunham & Associates Fund II................................................................ 300
Dunham & Associates Fund III............................................................... 100
Engineers Joint Pension Fund............................................................... 1,400
First Church of Christ, Scientist-Endowment................................................ 3,375
General Motors Employees Domestic Group Trust.............................................. 138,600
Hillside Capital Incorporated Corporate Acct............................................... 3,600
Lincoln National Convertible Securities Fund............................................... 39,745
Lincoln National Life Insurance............................................................ 102,415
Massachusetts Mutual Life Insurance........................................................ 6,500
Medical Malpractice Insurance Fund......................................................... 2,600
Municipal Employees Retirement System of the State of Michigan............................. 28,800
Nicholas-Applegate Income & Growth Fund.................................................... 9,000
North Dakota State Workers Compensation Fund............................................... 11,000
Norwest Bank NA............................................................................ 4,370
Occidental College......................................................................... 800
Reserve Convertible Securities Fund........................................................ 7,000
San Diego City Retirement.................................................................. 2,700
San Diego County........................................................................... 11,600
TCW Convertible Securities Fund............................................................ 61,000
TCW Convertible Value Fund................................................................. 23,300
TCW Galileo Convertible Securities Fund.................................................... 6,900
TCW/DW Income & Growth Fund................................................................ 7,300
The J.W. McConnell Family Foundation....................................................... 7,800
Thermo Electron Balanced Investment Fund................................................... 9,750
United National Life Insurance............................................................. 1,845
Wake Forest University..................................................................... 2,200
Weirton Trust.............................................................................. 11,625
Any other holder of TECONS or future transferee from any such holder....................... 1,567,600
----------
Total.................................................................................. 2,300,000
----------
----------
</TABLE>
53
<PAGE>
None of the Selling Holders has, or within the past three years has had, any
position, office or other material relationship with the Trust or the Company or
any of their predecessors or affiliates. None of the Selling Holders owns any
shares of Apple South Common Stock. Because the Selling Holders may, pursuant to
this Prospectus, offer all or some portion of the TECONS, the Convertible
Debentures or the Apple South Common Stock issuable upon conversion of the
TECONS, no estimate can be given as to the amount of the TECONS, the Convertible
Debentures or the Apple South Common Stock issuable upon conversion of the
TECONS that will be held by the Selling Holders upon termination of any such
sales. In addition, the Selling Holders identified above may have sold,
transferred or otherwise disposed of all or a portion of their TECONS, since the
date on which they provided the information regarding their TECONS, in
transactions exempt from the registration requirements of the Securities Act.
See "Plan of Distribution."
Only Selling Holders identified above who beneficially own the Offered
Securities set forth opposite each such Selling Holder's name in the foregoing
table on the effective date of the Registration Statement of which this
Prospectus forms a part may sell such Offered Securities pursuant to the
Registration Statement. The Company may from time to time, in accordance with
the Registration Rights Agreement, include additional Selling Holders in
supplements to this Prospectus.
PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time to purchasers directly
by the Selling Holders. Alternatively, the Selling Holders may from time to time
offer the Offered Securities to or through underwriters, broker/dealers or
agents, who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Holders or the purchasers of such
securities for whom they may act as agents. The Selling Holders and any
underwriters, broker/dealers or agents that participate in the distribution of
Offered Securities may be deemed to be "underwriters" within the meaning of the
Securities Act, and any profit on the sale of such securities and any discounts,
commissions, concessions or other compensation received by any such underwriter,
broker/dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act.
The Offered Securities may be sold from time to time in one or more
transactions at fixed prices, at the prevailing market prices at the time of
sale, at varying prices determined at the time of sale or at negotiated prices.
The sale of Offered Securities may be effected in transactions (which may
involve crosses or block transactions) (i) on any national securities exchange
or quotation service on which the Offered Securities may be listed or quoted at
the time of sale, (ii) in the over-the-counter market, (iii) in transactions
otherwise than on such exchanges or in the over-the-counter market or (iv)
through the writing of options. At the time a particular offering of the Offered
Securities is made, a Prospectus Supplement, if required, will be distributed
which will set forth the aggregate amount and type of Offered Securities being
offered and the terms of the offering, including the name or names of any
underwriters, broker/dealers or agents, any discounts, commissions and other
terms constituting compensation from the Selling Holders and any discounts,
commissions or concessions allowed or reallowed or paid to broker/ dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Offered Securities will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Offered Securities may not be offered or sold unless they have
been registered or qualified for sale in such jurisdictions or any exemption
from registration or qualification is available and is complied with.
The Selling Holders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, which provisions may limit the
timing of purchases and sales of any of the Offered Securities by the Selling
Holders. The foregoing may affect the marketability of such securities.
54
<PAGE>
The costs of the registration of the Offered Securities will be paid by the
Company, including, without limitation, Commission filing fees and expenses of
compliance with state securities or "blue sky" laws; provided, however, that the
Selling Holders will pay all underwriting discounts and selling commissions, if
any. The Selling Holders will be indemnified by the Company and the Trust,
jointly and severally against certain civil liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection therewith. The Company and the Trust will be indemnified by the
Selling Holders severally against certain civil liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection therewith.
The Trust, Apple South, Apple South's directors and certain of Apple South's
executive officers have agreed not to (i) offer, pledge to sell, file a
registration statement relating to, announce the intention to sell or otherwise
transfer or dispose of any TECONS, any shares of Apple South's Common Stock or
any securities convertible into or exchangeable for any shares of Apple South
Common Stock (except for the TECONS offered hereby and Apple South Common Stock
issuable upon conversion of the Convertible Debentures or pursuant to Apple
South's existing employee benefit plans as in effect on the Original Offering
Date), or (ii) enter into any swap or other agreement that transfers, in whole
or in part, any of the economic consequences of ownership of Apple South Common
Stock for a period of 90 days after the Original Offering Date, without the
prior written consent of J.P. Morgan Securities Inc.; PROVIDED, that,
notwithstanding the foregoing, such executive officers and directors may
transfer, pledge or otherwise dispose of shares of Apple South Common Stock to
certain permitted transferees who agree to be similarly bound; and PROVIDED
FURTHER that Apple South may make issuances of options or shares of Common
Stock, or securities convertible into, or exercisable or exchangeable therefor,
pursuant to employee benefit plans registered on Form S-8 or, subject to certain
limitations, as consideration for acquisitions.
Apple South intends to list the TECONS on the Nasdaq National Market. The
Trust has been advised by the Initial Purchasers that they intend to make a
market in them as permitted by applicable laws and regulations. The Initial
Purchasers are not obligated, however, to make a market in the TECONS and any
such market-making may be discontinued at any time at the sole discretion of the
Initial Purchasers. Accordingly, no assurance can be given as to the liquidity
of, or effective trading markets for, the TECONS.
LEGAL MATTERS
The validity of the Convertible Debentures, the Apple South Common Stock
issuable upon conversion, the Guarantee and certain matters relating thereto,
and certain U.S. federal income taxation matters will be passed upon for Apple
South and the Trust by Kilpatrick Stockton LLP, Atlanta, Georgia, and the
validity of the TECONS will be passed upon for Apple South and the Trust by
Richards, Layton & Finger, Wilmington, Delaware, special Delaware counsel to
Apple South and the Trust. Attorneys at Kilpatrick Stockton LLP who participated
in the preparation of this Prospectus own a total of 3,030 shares of Apple South
Common Stock as of April 15, 1997.
EXPERTS
The consolidated financial statements of Apple South, Inc., as of December
29, 1996 and December 31, 1995, and for each of the years in the three-year
period ended December 29, 1996, incorporated by reference in this registration
statement have been incorporated by reference in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants and upon the
authority of that firm as experts in accounting and auditing.
55
<PAGE>
APPENDIX A
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
First Union National Bank of Georgia
Corporate Trust Administration
999 Peachtree Street, N.E., Suite 1100
Atlanta, Georgia 30309
Apple South, Inc.
Hancock at Washington
Madison, Georgia 30650
Re: Apple South Financing I (the "Trust") TECONS
Apple South, Inc. (the "Company")
Dear Sirs:
Please be advised that has transferred
TECONS, (or 7% Convertible
Subordinated Debentures due March 1, 2027 or shares of Common Stock of the
Company, issued in exchange for or upon conversion of the TECONS) pursuant to an
effective Registration Statement on Form S-3 (File No. 333-25205) filed by the
Company and the Trust.
We hereby certify that the prospectus delivery requirements, if any, of the
Securities Act of 1933, as amended, have been satisfied and that the above-named
beneficial owner of the transferred securities is named as a "Selling Holder" in
the Prospectus dated , 1997 or in supplements thereto, and
that the aggregate amount of the securities transferred are (or are included in)
the securities listed in such Prospectus opposite such owner's name.
Dated:
Very truly yours,
--------------------------------------
(Name)
By:
--------------------------------------
(Authorized Signature)
APP A-1
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE TRUST. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information....................... 3
Incorporation of Certain Documents by
Reference.................................. 4
Prospectus Summary.......................... 5
Safe Harbor Statement....................... 11
Risk Factors................................ 13
Recent Developments......................... 17
Use of Proceeds............................. 18
Ratio of Earnings to Fixed Charges and of
Earnings to Combined Fixed Charges and
Preferred Stock Dividends.................. 18
Apple South Financing I..................... 19
Description of the TECONS................... 20
Description of the Guarantee................ 38
Description of the Convertible Debentures... 39
Effect of Obligations Under the Convertible
Debentures and the Guarantee............... 45
Certain Federal Tax Consequences............ 46
ERISA Considerations........................ 51
Selling Holders............................. 53
Plan of Distribution........................ 54
Legal Matters............................... 55
Experts..................................... 55
Notice of Transfer Pursuant to Registration
Statement.................................. App A
</TABLE>
APPLE SOUTH FINANCING I
2,300,000
$3.50 TERM CONVERTIBLE SECURITIES,
SERIES A (TECONS-SM-)
FULLY AND UNCONDITIONALLY
GUARANTEED BY
APPLE SOUTH, INC.
7% CONVERTIBLE SUBORDINATED DEBENTURES
DUE MARCH 1, 2027
COMMON STOCK
-------------
PROSPECTUS
--------------
MAY 22, 1997
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Estimated expenses (other than underwriting commissions) of the sale of the
TECONS are as follows:
<TABLE>
<S> <C>
Registration Filing Fee......................................... $37,811.00
Printing and Engraving Expenses................................. 1,000.00
Legal Fees and Expenses......................................... 25,000.00
Accounting Fees and Expenses.................................... 10,000.00
Miscellaneous Expenses.......................................... 5,000.00
---------
Total....................................................... $78,811.00
---------
---------
</TABLE>
None of the expenses of registering the securities are to be borne by the
selling security holders.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as exhibits to this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
4.1* Trust Agreement of Apple South Financing I, dated as of February 18, 1997, among Apple South, Inc.,
First Union National Bank of Georgia, First Union Bank of Delaware and Lansing S. Patterson
4.2* Amended and Restated Declaration of Trust of Apple South Financing I, dated as of March 11, 1997,
among Apple South, Inc., as Sponsor, First Union National Bank of Georgia, as Institutional
Trustee, First Union Bank of Delaware, as Delaware Trustee, and the Regular Trustees named therein
4.3* Indenture for the 7% Convertible Subordinated Debentures, dated as of March 6, 1997, between Apple
South, Inc. and First Union National Bank of Georgia, as Trustee
4.4* Form of $3.50 Term Convertible Security, Series A (included in Exhibit 4.2)
4.5* Form of 7% Convertible Subordinated Debenture (included in Exhibit 4.3)
4.6* Preferred Securities Guarantee Agreement, dated as of March 11, 1997, between Apple South, Inc., as
Guarantor, and First Union National Bank of Georgia, as Preferred Guarantee Trustee
4.7* Registration Rights Agreement, dated as of March 11, 1997, among Apple South, Inc., Apple South
Financing I, J.P. Morgan Securities Inc., and Smith Barney Inc.
5.1 Opinion of Richards, Layton & Finger as to the validity of the $3.50 Term Convertible Securities,
Series A, being registered
5.2 Opinion of Kilpatrick Stockton LLP as to the validity of the 7% Convertible Subordinated
Debentures, the Common Stock and the Guarantee being registered
8.1 Opinion of Kilpatrick Stockton LLP relating to certain tax matters
12.1 Calculation of Ratio of Earnings to Fixed Charges
23.1 Consent of Richards, Layton & Finger (contained in Exhibit 5.1)
23.2 Consent of Kilpatrick Stockton LLP (contained in Exhibit 5.2)
23.3* Consent of KPMG Peat Marwick LLP
23.4 Consent of KPMG Peat Marwick LLP
24.1* Power of Attorney (set forth on signature page to the Registration Statement)
25.1* Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of First
Union National Bank of Georgia, as Institutional Trustee under the Amended and Restated Declaration
of Trust
25.2* Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of First
Union National Bank of Georgia, as Trustee under the Indenture for the 7% Convertible Subordinated
Debentures
25.3* Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of First
Union National Bank of Georgia, as Preferred Guarantee Trustee under the Preferred Securities
Guarantee Agreement
27.1* Financial Data Schedule
</TABLE>
- ------------------------
* Previously filed
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Trust
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Madison, State of Georgia, on May 21, 1997.
APPLE SOUTH FINANCING I
By: /s/ JOHN G. MCLEOD, JR.
--------------------------------------
John G. McLeod, Jr., Regular Trustee
By: /s/ ERICH J. BOOTH
--------------------------------------
Erich J. Booth, Regular Trustee
By: /s/ LANSING S. PATTERSON
--------------------------------------
Lansing S. Patterson, Regular Trustee
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Madison, State of Georgia, on May 21, 1997.
APPLE SOUTH, INC.
By: /s/ TOM E. DUPREE, JR.
--------------------------------------
Tom E. DuPree, Jr.
Chief Executive Officer and
Chairman of the Board of Directors
II-2
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------- ---------------------------------------- ---------------
<C> <S> <C>
/s/ TOM E. DUPREE, JR. Chairman of the Board of Directors and May 21, 1997
---------------------------------------- Chief Executive Officer (principal
Tom E. DuPree, Jr. executive officer)
/s/ JOHN G. MCLEOD, JR. Director May 21, 1997
----------------------------------------
John G. McLeod, Jr.
* Director May 21, 1997
----------------------------------------
David P. Frazier
* Director May 21, 1997
----------------------------------------
Marc D. Redus
* Director May 21, 1997
----------------------------------------
Thomas R. Williams
* Director May 21, 1997
----------------------------------------
James W. Rowe
* Director May 21, 1997
----------------------------------------
Ruth G. Shaw
* Director May 21, 1997
----------------------------------------
John L. Moorhead
/s/ ERICH J. BOOTH Chief Financial Officer and Treasurer May 21, 1997
---------------------------------------- (Principal Financial Officer and
Erich J. Booth Principal Accounting Officer)
</TABLE>
- ------------------------
* Pursuant to a power of attorney previously filed.
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------ -----
<C> <S> <C>
4.1* Trust Agreement of Apple South Financing I, dated as of February 18, 1997, among Apple
South, Inc., First Union National Bank of Georgia, First Union Bank of Delaware and
Lansing S. Patterson
4.2* Amended and Restated Declaration of Trust of Apple South Financing I, dated as of March
11, 1997, among Apple South, Inc., as Sponsor, First Union National Bank of Georgia, as
Institutional Trustee, First Union Bank of Delaware, as Delaware Trustee, and the Regular
Trustees named therein
4.3* Indenture for the 7% Convertible Subordinated Debentures, dated as of March 6, 1997,
between Apple South, Inc. and First Union National Bank of Georgia, as Trustee
4.4* Form of $3.50 Term Convertible Security, Series A (included in Exhibit 4.2)
4.5* Form of 7% Convertible Subordinated Debenture (included in Exhibit 4.3)
4.6* Preferred Securities Guarantee Agreement, dated as of March 11, 1997, between Apple South,
Inc., as Guarantor, and First Union National Bank of Georgia, as Preferred Guarantee
Trustee
4.7* Registration Rights Agreement, dated as of March 11, 1997, among Apple South, Inc., Apple
South Financing I, J.P. Morgan Securities Inc., and Smith Barney Inc.
5.1 Opinion of Richards, Layton & Finger as to the validity of the $3.50 Term Convertible
Securities, Series A, being registered
5.2 Opinion of Kilpatrick Stockton LLP as to the validity of the 7% Convertible Subordinated
Debentures, the Common Stock and the Guarantee being registered
8.1 Opinion of Kilpatrick Stockton LLP relating to certain tax matters
12.1 Calculation of Ratio of Earnings to Fixed Charges
23.1 Consent of Richards, Layton & Finger (contained in Exhibit 5.1)
23.2 Consent of Kilpatrick Stockton LLP (contained in Exhibit 5.2)
23.3* Consent of KPMG Peat Marwick LLP
23.4 Consent of KPMG Peat Marwick LLP
24.1* Power of Attorney (set forth on signature page to the Registration Statement)
25.1* Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939
of First Union National Bank of Georgia, as Institutional Trustee under the Amended and
Restated Declaration of Trust
25.2* Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939
of First Union National Bank of Georgia, as Trustee under the Indenture for the 7%
Convertible Subordinated Debentures
25.3* Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939
of First Union National Bank of Georgia, as Preferred Guarantee Trustee under the
Preferred Securities Guarantee Agreement
27.1* Financial Data Schedule
</TABLE>
- ------------------------
* Previously filed
<PAGE>
Richards, Layton & Finger
One Rodney Square, P.O. Box 551
Wilmington, Delaware 19899
Telephone: (302) 658-6541
Fax: (302) 658-6548
May 20, 1997
Apple South Financing I Apple South, Inc.
c/o Apple South, Inc. Hancock at Washington
Hancock at Washington Madison, Georgia 30650
Madison, Georgia 30650
Re: Apple South Financing I
Ladies and Gentlemen:
We have acted as special Delaware counsel for Apple South, Inc., a
Georgia corporation (the "Company"), and Apple South Financing I, a Delaware
business trust (the "Trust"), in connection with the matters set forth
herein. At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our examination of
documents has been limited to the examination of originals or copies of the
following:
(a) The Certificate of Trust of the Trust, dated as of February 18, 1997
(the "Certificate"), as filed in the office of the Secretary of State of the
State of Delaware (the "Secretary of State") on February 18, 1997;
(b) The Trust Agreement of the Trust, dated as of February 18, 1997,
among the Company and the trustees of the Trust named therein;
(c) The Amended and Restated Declaration of the Trust, dated as of March
11, 1997, including Annex I and Exhibits A-1 and A-2 thereto (the
"Declaration"), among the Company, the trustees of the Trust named therein,
and the holders, from time to time, of undivided beneficial interests in the
assets of the Trust;
(d) Amendment No. 2 to the Registration Statement on Form S-3 (the
"Registration Statement"), including a preliminary prospectus (the
"Prospectus"), relating to the resale of the $3.50 Term Convertible
Securities, Series A, of the Trust representing undivided beneficial
interests in the assets of the Trust (each, a "Trust
<PAGE>
Preferred Security" and collectively, the "Trust Preferred Securities"), as
proposed to be filed by the Company and the Trust with the Securities and
Exchange Commission on or about May 20, 1997; and
(e) A Certificate of Good Standing for the Trust, dated May 20, 1997,
obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are
used as defined in the Declaration.
For purposes of this opinion, we have not reviewed any documents other
than the documents listed in paragraphs (a) through (e) above. In
particular, we have not reviewed any document (other than the documents
listed in paragraphs (a) through (e) above) that is referred to in or
incorporated by reference into the documents reviewed by us. We have assumed
that there exists no provision in any document that we have not reviewed that
is inconsistent with the opinions stated herein. We have conducted no
independent factual investigation of our own but rather have relied solely
upon the foregoing documents, the statements and information set forth
therein and the additional matters recited or assumed herein, all of which we
have assumed to be true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii)
the conformity with the originals of all documents submitted to us as copies
or forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Declaration
constitutes the entire agreement among the parties thereto with respect to
the subject matter thereof, including with respect to the creation, operation
and termination of the Trust, and that the Declaration and the Certificate
are in full force and effect and have not been amended, (ii) except to the
extent provided in paragraph 1 below, the due creation or due organization or
due formation, as the case may be, and valid existence in good standing of
each party to the documents examined by us under the laws of the jurisdiction
governing its creation, organization or formation, (iii) the legal capacity
of natural persons who are parties to the documents examined by us, (iv) that
each of the parties to the documents examined by us has the power and
authority to execute and deliver, and to perform its obligations under, such
documents, (v) the due authorization, execution and delivery by all parties
thereto of all documents examined by us, (vi) the receipt by each Person to
whom a Trust Preferred Security was issued by the Trust (collectively, the
"Trust Preferred Security Holders") of a Trust Preferred Security Certificate
for such Trust Preferred Security and the payment for the Trust Preferred
Security acquired by it, in accordance with the Trust Agreement and the
Registration Statement, and (vii) that the Trust Preferred Securities were
issued and sold to the Trust Preferred Security Holders in accordance with
the Declaration and the Registration Statement. We have not participated in
the preparation of the Registration
<PAGE>
Statement and assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware (excluding
the securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal
laws and rules and regulations relating thereto. Our opinions are rendered
only with respect to Delaware laws and rules, regulations and orders
thereunder that are currently in effect.
Based upon the foregoing, and upon our examination of such questions of
law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Business Trust Act.
2. The Trust Preferred Securities represent valid and, subject to the
qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
3. The Trust Preferred Security Holders, as beneficial owners of the
Trust, are entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Trust Preferred
Security Holders may be obligated to make payments as set forth in the
Declaration.
We consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit to the Registration Statement. In addition, we
hereby consent to the use of our name under the heading "Legal Matters" in
the Prospectus. In giving the foregoing consents, we do not thereby admit
that we come within the category of Persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder. Except as
stated above, without our prior written consent, this opinion may not be
furnished or quoted to, or relied upon by, any other Person for any purpose.
Very truly yours,
/s/ RICHARDS, LAYTON & FINGER
BJK/dgw
<PAGE>
Exhibit 5.2
KILPATRICK STOCKTON LLP
1100 Peachtree Street
Suite 2800
Atlanta, Georgia 30309-4530
(404) 815-6175
May 20, 1997
Apple South, Inc.
Hancock at Washington
Madison, Georgia 30650
Apple South Financing I
c/o Apple South, Inc.
Hancock at Washington
Madison, Georgia 30650
Dear Sirs:
This opinion letter is being delivered to you at your request in
connection with our representation of Apple South, Inc., a Georgia
corporation (the "Company") and Apple South Financing I, a Delaware business
trust (the "Trust"), with regard to the registration under the Securities Act
of 1933, as amended, on Form S-3 (the "Registration Statement") of resales of
(i) $3.50 Term Convertible Securities, Series A, of the Trust (the "TECONS"),
(ii) the Company's 7% Convertible Subordinated Debentures (the "Debentures")
issued under the Indenture dated as of March 6, 1997, between the Company and
First Union National Bank of Georgia, as Trustee, as it may be amended from
time to time (the "Indenture"), (iii) the shares (the "Conversion Shares") of
the Company's common stock, $0.01 par value per share, into which the
Debentures and the TECONS are convertible, and (iv) the Preferred Securities
Guarantee issued under the Preferred Securities Guaranty Agreement dated as
of March 11, 1997, between the Company and First Union National Bank of
Georgia, as Preferred Guarantee Trustee, as it may be amended from time to
time (the "Guarantee").
We are delivering this opinion in our capacity as counsel to the Company
and the Trust solely in connection with the filing of the Registration
Statement and the registration of the Debentures, the Conversion Shares and
the Guarantee.
<PAGE>
Apple South, Inc.
Apple South Financing I
May 20, 1997
Page 2
This opinion letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section
of Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage, and other
limitations, all as more particularly described in the Accord, and this
letter should be read in conjunction with the Accord.
The opinions set forth in this opinion letter are limited to the laws of
the State of Georgia and the federal laws of the United States.
Based upon and subject to the foregoing, it is our opinion that:
(i) The execution and delivery of the Indenture and the Debentures
have been duly authorized by all necessary corporate action of the Company,
and the Indenture and the Debentures have been duly executed and delivered
by the Company. The Indenture is a valid and binding instrument of the
Company, enforceable against the Company in accordance with its terms, and
the Debentures are the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms.
(ii) The Conversion Shares have been duly authorized by all necessary
corporate action on the part of the Company and reserved for issuance, and,
upon issuance thereof on conversion of the Debentures and TECONS, the
Conversion Shares will be validly issued, fully paid, and nonassessable.
(iii) The execution and delivery of the Guarantee has been duly
authorized by all necessary corporate action of the Company, and the
Guarantee has been duly executed and delivered by the Company. The
Guarantee is a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms; provided that we express
no opinion as to the enforceability of the Guarantee to the extent that it
purports to provide that the guarantor thereunder shall be liable
notwithstanding the unenforceability of any obligation guaranteed
thereunder, but the inclusion of such provision in the Guarantee does not
affect the enforceability of the other provisions of the Guarantee.
This opinion letter is provided to the Company and the Trust for their
exclusive use solely in connection with the filing of the Registration
Statement, and may not be relied upon by any other person or for any other
purpose without prior written consent.
<PAGE>
Apple South, Inc.
Apple South Financing I
May 20, 1997
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" therein. In giving this consent, we do not thereby admit that we
are within the category of persons whose consent is required under Sction 7
of the Securities Act of 1933 or the rules and regulations of the Securities
and Exchange Commission promulgated thereunder.
Very truly yours,
KILPATRICK STOCKTON LLP
By: /s/ Larry D. Ledbetter
----------------------------
Larry D. Ledbetter, Partner
<PAGE>
KILPATRICK STOCKTON LLP
1100 Peachtree Street
Suite 2800
Atlanta, Georgia 30309-4530
(404) 815-6175
May 20, 1997
Apple South, Inc.
Apple South Financing I
Hancock at Washington
Madison, Georgia 30650
Ladies and Gentlemen:
This opinion letter is being delivered to you at your request in connection
with our representation of Apple South, Inc., a Georgia corporation (the
"Company") and Apple South Financing I, a Delaware business trust (the "Trust"),
as special tax counsel with regard to the registration under the Securities Act
of 1933, as amended, on Form S-3 (the "Registration Statement") of resales of
(i) $3.50 Term Convertible Securities, Series A, of the Trust (the "TECONS"),
(ii) the Company's 7% Convertible Subordinated Debentures (the "Debentures")
issued under the Indenture dated as of March 6, 1997, between the Company and
First Union National Bank of Georgia, as Trustee, as it may be amended from time
to time (the "Indenture"), (iii) the shares (the "Conversion Shares") of the
Company's common stock, $0.01 par value per share, into which the Debentures and
the TECONS are convertible, and (iv) the Preferred Securities Guarantee issued
under the Preferred Securities Guaranty Agreement dated as of March 11, 1997,
between the Company and First Union National Bank of Georgia, as Preferred
Guarantee Trustee, as it may be amended from time to time (the "Guarantee").
Capitalized terms used and not otherwise defined in this letter have the
meanings set forth in the prospectus forming part of the Registration Statement
(the "Prospectus").
We are delivering this opinion in our capacity as special tax counsel to the
Company and the Trust solely in connection with the filing of the Registration
Statement and the registration of the Debentures, the Conversion Shares and the
Guarantee.
In connection with this opinion, we have examined originals or certified,
conformed, or reproduction copies of the following documents, and, without
independent verification or investigation, have relied upon the accuracy
thereof: (i) the Prospectus; (ii) the Certificate of Trust of the Trust, dated
February 18, 1997, as filed with the Secretary of State of the State of
Delaware; (iii) the Declaration (including the designation of the terms of the
TECONS and the Trust Common Securities annexed thereto); (iv) the forms of the
TECONS and the Trust Common Securities and specimen certificates thereof; (v)
the Preferred Securities Guarantee and the Common Securities Guarantee, dated
March 11, 1997; (vi) the Indenture; and (vii) the form of the Convertible
Debentures and a specimen thereof. We also have examined originals or certified,
conformed, or reproduction copies of such other documents, certificates and
records as we have deemed necessary or appropriate as a basis for the opinions
set forth herein, and, without independent investigation or verification, have
relied upon the accuracy thereof.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies, and the conformity to final
versions of all items submitted to us in draft version. In making our
examination of documents executed by parties other than the Company or the
Trust, we have assumed that such parties have the power, corporate or otherwise,
to enter into and perform all obligations thereunder, and also have assumed the
due authorization by all requisite action, corporate or otherwise, and the
execution and delivery by such parties of such documents and that such documents
constitute valid and binding obligations of such parties.
We also have assumed, without independent verification or investigation,
that (i) we have been provided with true, correct, and complete copies of the
foregoing documents, (ii) none of such documents has been amended or modified,
(iii) all such documents are in full force and effect in accordance with the
<PAGE>
Apple South, Inc.
Apple South Financing I
May 20, 1997
Page 2
terms thereof, (iv) there are no other documents that affect the opinions
hereinafter set forth, and (v) the documents reviewed by us reflect the entire
agreement of the parties thereto with respect to the subject matter thereof. As
to any facts material to the opinions expressed herein that were not
independently established or verified, we have relied upon oral or written
statements and representations of officers and other representatives of, and
accountants for, Apple South, the Trust, the Delaware Trustee, the Regular
Trustees, and others.
Our opinion is conditioned upon, among other things, the initial and
continuing accuracy of the facts, information, covenants and representations set
forth in the documents referred to above and the statements and representations
referred to above.
Based upon and subject to the foregoing, we hereby confirm that the
discussion set forth in the Prospectus under the heading "Certain Federal Tax
Consequences" does not purport to discuss all possible U.S. federal income tax
consequences of the purchase, ownership and disposition of the Trust Securities
or the Convertible Debentures. In our opinion, however, such discussion
constitutes, with respect to the U.S. federal income tax consequences discussed,
an accurate summary of all material U.S. federal income tax consequences of the
purchase, ownership and disposition of the Trust Securities or the Convertible
Debentures, based upon current law and the assumptions stated or referred to
therein.
This opinion is not binding on the Internal Revenue Service (the "Service"),
and no ruling has been or will be requested from the Service as to any U.S.
federal tax consequence described above. Although this opinion is based upon our
best interpretation of current provisions of the Internal Revenue Code of 1986,
as amended, and the Treasury Department regulations promulgated thereunder, as
well as existing court decisions and administrative rulings, and sets forth the
conclusions we believe would be reached by a court if the issues were properly
briefed and presented to it, the tax law underlying this opinion is not entirely
clear, and, therefore, no assurance can be provided that a court in fact would
agree with our interpretation. Further, we can provide no assurance that the
applicable law will not change in a manner that will adversely affect these
consequences, and any such adverse change could be retroactive.
We express no opinion as to any U.S. federal income tax consequence other
than as specifically set forth herein, and we express no opinion with respect to
the amount or timing of any federal income tax deductions or credits or with
respect to any tax issue arising under state, local, or foreign tax provisions.
Further, we express no opinion regarding the accuracy or the validity of any
mathematical or numerical calculation related to the Trust, the Guarantee, or
the Convertible Debentures. Finally, we expressly disclaim any duty to update
this letter in the future in the event there are any changes in relevant fact or
law that may affect any of our opinions expressed herein.
We are furnishing the opinions expressed herein solely for your benefit, and
they may not be relied upon, quoted from or delivered to any person other than
your legal counsel without our express, prior written consent. We hereby consent
to the filing of this opinion as Exhibit 8.1 of the Registration Statement and a
reference to us under the caption "Legal Matters" therein. In giving this
consent, we do not admit that we are "experts" within the meaning of the Act or
the rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
Very truly yours,
KILPATRICK STOCKTON LLP
By:/s/ LYNN FOWLER
--------------------------------------
Partner
<PAGE>
EXHIBIT 12.1
APPLE SOUTH, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
YEARS ENDED DECEMBER
(IN THOUSANDS EXCEPT RATIO AMOUNTS)
<TABLE>
<CAPTION>
QUARTER
ENDED,
-----------
<S> <C> <C> <C> <C> <C> <C>
MARCH 31,
1992 1993 1994 1995 1996 1996
--------- --------- --------- --------- --------- -----------
Earnings:
Earnings before income taxes...................... 9,887 19,193 29,960 34,429 18,224 (8,587)
Amortization of capitalized interest................ 39 49 72 115 181 36
Interest expense (a)................................ 2,193 2,205 3,184 6,284 11,572 1,978
Interest portion of rent expense (b)................ 2,518 2,969 3,413 4,486 5,136 1,295
--------- --------- --------- --------- --------- -----------
Earnings available for fixed charges................ 14,637 24,416 36,629 45,314 35,113 (5,278)
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
Fixed Charges:
Interest expense (a)................................ 2,193 2,205 3,184 6,284 11,572 1,978
Capitalized interest................................ 185 218 673 1,074 1,572 97
Interest portion of rent expense (b)................ 2,518 2,969 3,413 4,486 5,136 1,295
--------- --------- --------- --------- --------- -----------
Total fixed charges............................... 4,896 5,392 7,270 11,844 18,280 3,370
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
Ratio of Earnings to Fixed Charges.................. 2.99 4.53 5.04 3.83 1.92 (1.57)
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
<CAPTION>
<S> <C>
MARCH 30,
1997
-----------
Earnings:
Earnings before income taxes...................... 11,343
Amortization of capitalized interest................ 59
Interest expense (a)................................ 4,345
Interest portion of rent expense (b)................ 1,611
-----------
Earnings available for fixed charges................ 17,358
-----------
-----------
Fixed Charges:
Interest expense (a)................................ 4,345
Capitalized interest................................ 549
Interest portion of rent expense (b)................ 1,611
-----------
Total fixed charges............................... 6,505
-----------
-----------
Ratio of Earnings to Fixed Charges.................. 2.67
-----------
-----------
</TABLE>
- ------------------------
(a) Includes proportionate share of interest expense for a fifty-percent owned
subsidiary.
(b) One-third of total rental expense is the portion deemed representative of
the interest factor.
<PAGE>
Exhibit 23.4
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
Apple South Inc.:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Atlanta, Georgia
May 21, 1997
