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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 1998
REGISTRATION NO.
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
THE RESTAURANT COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5812 62-1254388
(State of other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Numbers)
</TABLE>
THE RESTAURANT COMPANY
1 PIERCE PLACE
SUITE 100 EAST
ITASCA, ILLINOIS 60341
(901) 766-6400
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------
DONALD F. WISEMAN
THE RESTAURANT COMPANY
6075 POPLAR AVENUE
SUITE 800
MEMPHIS, TN 38119
(901) 766-6400
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
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WITH A COPY TO:
PHILIP J. NIEHOFF
JAMES T. LIDBURY
MAYER, BROWN & PLATT
190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603
(312) 782-0600
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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 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, check the following box: / /
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT REGISTRATION FEE
<S> <C> <C> <C>
11 1/4% Series B Senior Discount Notes Due
2008....................................... $18,009,077 $1,000 $5,312.68
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 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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<PAGE>
PROSPECTUS
THE RESTAURANT COMPANY
OFFER TO EXCHANGE ITS 11 1/4% SERIES B SENIOR DISCOUNT NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, FOR ANY
AND ALL OF ITS OUTSTANDING 11 1/4% SERIES A SENIOR DISCOUNT NOTES DUE 2008
-----------
The Restaurant Company, a Delaware corporation (the "Issuer") hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus and in
the accompanying letter of transmittal (the "Letter of Transmittal") (which
together constitute the "Exchange Offer"), to exchange up to $31,100,000
original principal amount at maturity of the Issuer's issued and outstanding
11 1/4% Series B Discount Notes due 2008 (the "New Notes"), of the Issuer for a
like principal amount of the Issuer's issued and outstanding 11 1/4% Series A
Senior Discount Notes Due 2008 (the "Old Notes" and collectively with the New
Notes, the "Notes"), with the holders (each holder of Old Notes, a "Holder")
thereof. The Issuer will receive no proceeds in connection with the Exchange
Offer. The form and terms of the New Notes are substantially identical to the
form and terms of the Old Notes that are to be exchanged therefor except that
the New Notes have been registered under the Securities Act and hence will not
bear legends restricting the transfer thereof. The offering of the Old Notes is
sometimes referred to herein as the "Offering". See "Description of Notes."
The notes will not accrue cash interest nor will cash interest be payable
thereon prior to May 15, 2003; PROVIDED that on any Semi-Annual Accrual Date (as
defined) prior to May 15, 2003, the Issuer may elect to begin accruing cash
interest on the Notes by giving notice of such election to the Trustee and the
holders of the Notes on or prior to such Semi-Annual Accrual Date (the "Cash
Interest Election"). Cash interest on the Notes will accrue at a rate of 11 1/4%
per annum from the earlier of May 15, 2003 or the Semi-Annual Accrual Date with
respect to which the Cash Interest Election is made, and will be payable
semi-annually in arrears on each May 15 and November 15, commencing on the
earlier of November 15, 2003 or the Interest Payment Date immediately following
the Semi-Annual Accrual Date with respect to which the Cash Interest Election is
made. However, following each successive Semi-Annual Accrual Date until the
earlier of the time the Cash Interest Election is made or May 15, 2003, the
yield to maturity of the Notes for tax purposes for subsequent periods
(calculated on a bond equivalent basis assuming that the redemption price less
the issue price with respect to each Note is treated as interest) will increase
such that if no Cash Interest Election is made prior to May 15, 2003, on May 15,
2003 the yield to maturity of the Notes, calculated on such bond equivalent
basis, will have increased to 11.89% for the remaining term of the Note. On May
15, 2003, the Issuer will be required to pay all accrued but unpaid interest on
the Notes by redeeming an amount per Note equal to the Accreted Value (as
defined) of such Note on May 15, 2003, LESS the issue price with respect to such
Note at a redemption price equal to 105.625% of the amount redeemed; and the
Principal Amount at Maturity (as defined) of such Note shall thereafter be
reduced by the amount of such Accreted Value.
The Notes are redeemable, at the option of the Issuer, on or after May 15,
2003 at the redemption prices set forth herein, plus accrued and unpaid interest
and Liquidated Damages (as defined), if any, thereon to the redemption date. In
the event of a Change of Control (as defined), holders of Notes have the right
to require the Issuer to purchase each such holder's Notes at a purchase price
equal to 101% of the Accreted Value thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the date of purchase. There can be no
assurance that the Issuer will have access to sufficient funds to repurchase
Notes in the event of a Change of Control.
The Notes will be general unsecured obligations of the Issuer ranking PARI
PASSU in right of payment with all senior unsecured indebtedness of the Issuer.
However, the Notes will be effectively subordinated in right of payment to all
existing and future secured indebtedness of the Issuer and to all secured and
unsecured liabilities (including indebtedness) of the Issuer's subsidiaries. As
of March 31, 1998, on a pro forma basis, the Issuer had no secured indebtedness
outstanding and the Issuer's subsidiaries had $181.0 million of total
liabilities outstanding, including $141.0 million of indebtedness.
-------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998, UNLESS EXTENDED.
--------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS OF
OLD NOTES WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER, SEE "RISK FACTORS"
BEGINNING ON PAGE 17 OF THIS PROSPECTUS.
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.
--------------
The date of this Prospectus is June , 1998
<PAGE>
Prior to the Exchange Offer, there has been no established trading market
for the Old Notes or the New Notes. The Issuer does not intend to apply for
listing or quotation of the New Notes on any securities exchange or stock
market. Therefore, there can be no assurance as to the liquidity of any trading
market for the New Notes or that an active public market for the New Notes will
develop. Any Old Notes not tendered and accepted in the Exchange Offer will
remain outstanding. To the extent that Old Notes are tendered and accepted in
the Exchange Offer, a Holder's ability to sell untendered, or tendered but
unaccepted, Old Notes could be adversely affected. Following the consummation of
the Exchange Offer, the Holders of the Old Notes will continue to be subject to
the existing restrictions on transfer thereof and the Issuer will have no
further obligations to such Holders to provide for the registration of the Old
Notes under the Securities Act. See "The Exchange Offer -- Consequences of Not
Exchanging Old Notes."
The Issuer will accept for exchange any and all Old Notes that are validly
tendered and not withdrawn on or prior to 5:00 p.m., New York City time, on,
, 1998, unless the Exchange Offer is extended (the "Expiration
Date"). Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. However, the Exchange Offer is subject to certain customary conditions
which may be waived by the Issuer. The Issuer will pay the expenses of the
Exchange Offer.
The Old Notes were issued and sold as part of an offering on May 13, 1998
(the "Offering"), in a transaction not registered under the Securities Act of
1933, as amended (the "Securities Act"), in reliance upon an exemption from
registration under the Securities Act. Accordingly, the Old Notes may not be
reoffered, resold or otherwise pledged, hypothecated or transferred in the
United States unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available. The New Notes are
being offered for exchange in order to satisfy certain obligations of the Issuer
under a Registration Rights Agreement (as defined ) between the Issuer and the
Initial Purchasers (as defined). The New Notes will be obligations of the Issuer
evidencing the same indebtedness as the Old Notes and will be entitled to the
benefits of the same Indenture, which governs both the Old Notes and the New
Notes. The form and terms (including principal amount, interest rate, maturity
and ranking) of the New Notes are the same as the form and terms of the Old
Notes, except that the New Notes (i) will be registered under the Securities Act
and therefore will not be subject to certain restrictions on transfer applicable
to the Old Notes, (ii) will not be entitled to registration rights and (iii)
will not provide for any Liquidated Damages. See "The Exchange Offer --
Registration Rights; Liquidated Damages."
The Issuer is making the Exchange Offer pursuant to the registration
statement of which this Prospectus is a part in reliance upon the position of
the staff of the Securities and Exchange Commission (the "Commission") set forth
in certain no-action letters addressed to other parties in other transactions.
However, the Issuer has not sought its own no-action letter and there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer. Based on these interpretations by the staff
of the Commission, the Issuer believes that the New Notes issued pursuant to the
Exchange Offer may be offered for resale, resold and otherwise transferred by
Holders thereof (other than (i) any such Holder that is an "affiliate" of the
Issuers within the meaning of Rule 405 under the Securities Act, (ii) an Initial
Purchaser who acquired the Old Notes directly from the Issuer solely in order to
resell pursuant to Rule 144A of the Securities Act or any other available
exemption under the Securities Act or (iii) a broker-dealer who acquired the Old
Notes as a result of market making or other trading activities) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such Holder's business and such Holder is not participating and has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such New Notes.
By tendering, each Holder which is not a broker-dealer will represent to the
Issuer that, among other things, the person receiving the New Notes, whether or
not such person is the Holder, (i) is not an "affiliate," as defined in Rule 405
under the Securities Act, of the Issuer, (ii) will acquire the New Notes in
i
<PAGE>
the ordinary course of such person's business, and (iii) is not engaged in, does
not intend to engage in, and has no arrangement or understanding with any person
to participate in, a distribution of the New Notes. If any Holder or any such
other person has an arrangement or understanding with any person to participate
in a distribution of such New Notes, is engaged in or intends to engage in a
distribution of such New Notes, is an "affiliate," as defined in Rule 405 under
the Securities Act, of the Issuer, or acquired the Old Notes as a result of
market making or other trading activities, then such Holder or any such other
person (i) can not rely on the applicable interpretations of the staff of the
Commission and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes are acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Issuer has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
ii
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SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND HISTORICAL AND PRO FORMA
FINANCIAL DATA APPEARING ELSEWHERE IN THIS PROSPECTUS. THE TRANSACTIONS RELATED
TO THE REDEMPTION BY THE ISSUER OF THE COMMON STOCK OF THE ISSUER HELD BY
HARRAH'S OPERATING COMPANY, INC. ARE COLLECTIVELY REFERRED TO HEREIN AS THE
"REORGANIZATION." SEE "THE REORGANIZATION." EXCEPT AS THE CONTEXT OTHERWISE
REQUIRES, REFERENCES TO THE "COMPANY" REFER TO THE ISSUER TOGETHER WITH ITS
SUBSIDIARIES, INCLUDING, WITHOUT LIMITATION, PERKINS FAMILY RESTAURANTS, L.P.
THIS PROSPECTUS INCLUDES "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. ALTHOUGH
THE COMPANY BELIEVES THAT ITS PLANS, INTENTIONS AND EXPECTATIONS REFLECTED IN
SUCH FORWARD LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT
SUCH PLANS, INTENTIONS OR EXPECTATIONS WILL BE ACHIEVED. IMPORTANT FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S FORWARD
LOOKING STATEMENTS ARE SET FORTH IN "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS.
THE COMPANY
The Issuer is a holding company whose primary subsidiary is Perkins Family
Restaurants, L.P. ("PFR"), which is indirectly wholly-owned by the Issuer. The
Issuer is the sole stockholder of Perkins Restaurants, Inc. ("PRI") which is a
limited partner and the indirect owner of 100% of PFR and the parent corporation
of PFR's general partner, Perkins Management Company, Inc. ("PMC"). The Issuer
is also the sole stockholder of TRC Realty Co. The Issuer has no significant
assets other than its direct and indirect equity interests in its subsidiaries.
The Company, through PFR, is a leading operator and franchisor of
full-service, mid-scale restaurants located primarily in the Midwest,
Pennsylvania, upstate New York and central Florida. The Company's restaurants
operate under the names Perkins Family Restaurant-Registered Trademark- and
Perkins Family Restaurant and Bakery-Registered Trademark-. Perkins restaurants
offer a full menu assortment of breakfast, lunch, dinner, snack and dessert
items and many are open 24 hours a day. The business of Perkins was founded in
1958, and since then Perkins has continued to adapt its menus, product
offerings, building designs and decor to meet changing consumer preferences. A
substantial majority of Company-operated restaurants and franchised restaurants
have added in-store bakeries which offer a premium line of freshly prepared
baked goods including muffins, cookies and pies.
As of March 31, 1998, the Company operated 137 full-service restaurants and
franchised 344 full-service restaurants located in 33 states and five provinces
of Canada. For the year ended December 31, 1997, system-wide restaurant revenues
(including franchised restaurants), Company revenues and Company EBITDA (as
defined) were $711.0 million, $271.2 million and $36.0 million, respectively.
Company-operated restaurants have achieved comparable restaurant sales increases
in each of the last 26 quarters. The Company continues to focus on increasing
its number of franchised restaurants, which provide a higher margin of cash flow
relative to the required capital investment and create an additional sales
outlet for the products of the Company's Foxtail Foods ("Foxtail") food
manufacturing division. From 1988 to 1997, the average annual royalties per
franchised restaurant increased from approximately $38,500 to approximately
$56,700 and the number of franchised restaurants increased from 227 to 337.
The Perkins concept is designed to serve a variety of demographically and
geographically diverse customers for a wide range of dining occasions which are
appropriate for the entire family. The Perkins concept appeals to a wide range
of markets and customer tastes with its large, comfortable dining rooms,
flexible kitchens, broad menu, moderate pricing, extended operating hours, table
service and bakery specialties. Perkins offers a wide menu selection of high
quality, moderately priced food and beverage items consisting of traditional
favorites and seasonal specialties. Perkins offers guests a menu of over 140
items ranging in price from $3.09 to $9.29. The Company also approves additional
items to meet regional and local tastes. Perkins' signature menu items include
buttermilk pancakes, omelettes, bread bowl salads,
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melt sandwiches and Butterball-Registered Trademark- turkey dinners. Breakfast
items, which are available throughout the day, account for slightly more than
half of the entrees sold in the Company's restaurants.
Perkins restaurants are primarily located in free-standing buildings with
approximately 90 to 250 seats. Recently, the Company and its franchisees have
begun to test the Perkins concept in various non-traditional locations including
travel plazas, malls, hotels and airports. The Company and its franchisees
operate three alternative formats, including limited menu restaurants and a
stand-alone bakery, in addition to full-service stand-alone restaurants. These
alternative formats are operated under the names Perkins Cafe and
Bakery-Registered Trademark-, Perkins Bakery-Registered Trademark- and Perkins
Express-Registered Trademark-.
In addition to operating and franchising Perkins restaurants, the Company
operates Foxtail and is a partner in J. A. Joint Venture LLC, a joint venture
for the development of Jack Astor's Bar and Grill-Registered Trademark-
restaurants. Foxtail provides cookie dough, muffin batter, pancake mixes, pies
and other bakery products to Company-operated restaurants, franchisees and third
parties.
Foxtail accounted for 8.8% of 1997 Company revenues. During 1997, the
Company entered into a joint venture with a Canadian casual dining operator for
the development of a minimum of three Jack Astor's Bar and Grill restaurants.
Jack Astor's Bar and Grill is a casual themed dining concept with a high-energy,
fun atmosphere and menu offerings which include chicken, pasta, hamburgers and
alcoholic beverages. The joint venture's first restaurant opened in Greensboro,
North Carolina on October 6, 1997.
The Issuer also operates an aircraft through TRC Realty Co., its
wholly-owned subsidiary. The aircraft is operated for the benefit of, and all
operating costs are reimbursed by, PMC and Friendly Ice Cream Corporation.
In the 12 years under the Company's current leadership, a number of
improvements have been made to the Company's operations, including: (i)
upgrading its menu offerings; (ii) unifying the system's name, restaurant
design, marketing programs, purchasing, training and technology; (iii) creating
in-store bakeries; (iv) strengthening the franchise system; (v) creating
Foxtail; and (vi) developing alternative formats. Also over this time period,
PFR has made significant interest payments and distributions to the former
holders (the "Unitholders") of PFR's limited partnership interests (the
"Units"), including 44 consecutive quarterly cash distributions to Unitholders
between the time PFR became a publicly-traded limited partnership in 1986 and
its becoming an indirect wholly-owned subsidiary of the Issuer in December 1997.
COMPETITIVE STRENGTHS
ESTABLISHED, HIGH-VALUE RESTAURANT BRAND. Perkins is a well-established,
highly recognized brand in the geographic areas it serves. Perkins offers its
guests a wide variety of over 140 reasonably priced menu items, including fresh
bakery products, served in a warm and comfortable dining environment with the
convenience of extended operating hours. Entrees served in Company-operated
restaurants ranged in price from $3.09 to $9.29 for breakfast, $4.49 to $6.59
for lunch and $6.19 to $9.29 for dinner. The Company operates a 3,000 square
foot test kitchen in Memphis, Tennessee which develops and tests new menu items.
Menus are updated at least three times per year and supplemented with special
menus for holiday and promotional events.
STRONG FRANCHISE NETWORK. As of March 31, 1998, the Company had 110
franchisees which operate 344 full-service restaurants in 31 states and five
Canadian provinces, representing over 70% of the restaurants in the Perkins
system. In addition to providing the Company with substantial royalty revenues
($18.8 million for the year ended December 31, 1997), the franchise network
allows the Company to significantly expand the Perkins system without
substantial capital investment by the Company. The Company believes that it
enjoys good relations with its franchisees.
UPDATED, MODERN RESTAURANTS. The Company employs an on-going system of
prototype development, testing and remodeling to maintain operationally
efficient, cost-effective and unique interior and exterior facility design and
decor. An accelerated program to upgrade existing Company-operated restaurants
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began in 1995 and continues today. The current remodel package features a
modern, distinctive interior and exterior layout that enhances operating
efficiencies and guest appeal. As of March 31, 1998, approximately 87% of
Company-operated restaurants had either been remodeled or initially constructed
since January 1, 1994.
To promote a consistent and current image throughout the Perkins system, the
Company encourages its franchise operators to remodel their restaurants by
providing financial incentives and sponsoring third-party financing programs.
Twenty-two franchised restaurants were remodeled in 1996 and 40 additional
restaurants were remodeled in 1997. The Company expects that franchisees will
remodel an additional 40 restaurants in 1998.
MANAGEMENT EXPERTISE. The Company has an experienced management team with
average tenure with the Company of over seven years and average restaurant
industry experience of 20 years. Donald N. Smith, the Company's Chairman and
Chief Executive Officer, has over 30 years of restaurant experience, over 12 of
which have been with the Company. Richard K. Arras, PMC's President and Chief
Operating Officer, has 18 years of restaurant experience, all of which have been
with the Company.
EFFICIENT OPERATIONS. The Company uses a combination of current technology,
on-going operational analyses, hourly employee performance programs and the
operating experience of both its own field management and that of its
franchisees to continuously improve the quality, efficiency and execution of its
operating systems. For example, Company-operated restaurants recently
implemented programs to improve labor efficiency, lower food cost and improve
facility utilization during peak periods.
DAYPART BALANCE. Perkins has successfully evolved over the last 40 years
from its origins as a breakfast-oriented pancake house by developing significant
lunch, dinner and late night product offerings. The flexibility of Perkins'
multi-daypart offerings allows each location to meet the needs of its local
market. During 1997, the revenue breakdown by daypart for Company-operated
restaurants was 25% breakfast, 29% lunch, 32% dinner and 14% late night (10:00
p.m. to 6:00 a.m.).
COMMITMENT TO GUEST SATISFACTION. The Company is focused on continually
improving guest satisfaction. The Company regularly surveys customers to
determine their overall satisfaction with their dining experience, conducts
extensive service quality training programs and operates a toll free number to
monitor guests' dining experiences.
MANAGEMENT INFORMATION SYSTEMS. The Company's information systems not only
provide detailed monthly financial statements for each restaurant but also daily
operating statistics such as sales, labor, guest check and average table turns.
The systems also generate weekly restaurant profit and loss statements and food
and labor variance analysis. The Company has also developed a labor scheduling
system which calculates the amount of labor necessary to provide optimal guest
service. The Company's systems are substantially year 2000 compliant.
PURCHASING LEVERAGE. The Company aggregates the purchasing requirements of
all of its Company-operated restaurants and over 90% of its franchised
restaurants to obtain purchasing economies of scale for food items, cleaning
supplies, equipment, maintenance services and regional distribution agreements.
In addition, the Company utilizes outside consultants for information regarding
purchases of commodity items and, together with its franchisees, makes
significant purchases of commodity products, such as sirloin steak or shrimp,
which provide the basis for several product-driven marketing programs throughout
the year.
BUSINESS STRATEGY
INCREASE FRANCHISE REVENUES. The Company plans to continue to add
franchised restaurants in existing and new geographic markets. In addition,
management will continue to encourage franchisees to remodel and renovate
restaurants where appropriate. Management believes its franchisees will open
35-40
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new restaurants in 1998. During 1997, franchisees opened 13 new full-service
restaurants and six under-performing franchised restaurants were closed.
SELECTIVELY DEVELOP NEW COMPANY-OPERATED RESTAURANTS. The Company will
continue to develop and operate new restaurants based upon its current
prototype. Management believes the development of successful Company-operated
restaurants supports the continued development of the Perkins franchise system.
The Company opened three new full-service Company-operated restaurants in 1997
and plans to add six new full-service Company-operated restaurants in 1998.
EXPAND NON-TRADITIONAL LOCATIONS AND ALTERNATIVE FORMATS. The Company and
its franchisees have built, on a limited test basis, restaurants within
non-traditional sites including hotels, airports, travel plazas and strip
shopping centers. Within these non-traditional locations, the Company has
recently opened restaurants with alternative formats, such as limited menu
restaurants and a stand-alone bakery, in addition to full-service, stand-alone
restaurants. The Company intends to continue testing non-traditional locations
and further develop alternative formats in conjunction with its franchisees in
cases where appropriate for the Perkins brand and where anticipated financial
returns are acceptable.
PURSUE COMPLEMENTARY ACQUISITIONS. The Company continually evaluates
potential acquisition opportunities of existing franchised Perkins restaurants
and other restaurant chains. The Company does not currently have any agreements
or understandings to make any acquisitions.
The Issuer's address is 1 Pierce Place, Suite 100 East, Itasca, Illinois
60341. PFR's address is 6075 Poplar Avenue, Suite 800, Memphis, Tennessee
38119-4709. The Company's phone number is (901) 766-6400 and its Internet
address is www.perkinsrestaurants.com.
THE REORGANIZATION
Prior to December 22, 1997, PFR was a limited partnership 48.6% indirectly
owned (including its general partner's interest) by the Issuer. The remainder of
the Units were owned by the public and traded on the New York Stock Exchange
under the symbol "PFR." PFR's business was conducted through Perkins Restaurants
Operating Company, L.P. ("PROC"), a Delaware limited partnership. PFR was the
sole limited partner and owned 99% of PROC, and PMC was the sole general partner
and owned the remaining 1% of PROC. Upon a majority vote of the holders of the
publicly traded Units, 5.44 million Units held by persons other than the Issuer
and its subsidiaries were converted into the right to receive $14.00 in cash per
Unit (the "Going Private Transaction"). Additionally, PROC was merged into PFR,
and PMC's 1% general partnership interest in PROC was converted into a limited
partnership interest in PFR. Upon consummation of the Going Private Transaction
on December 22, 1997, PFR became an indirect wholly-owned subsidiary of the
Issuer.
On May 7, 1998, the Issuer and Harrah's entered into an agreement whereby
the Issuer redeemed 100% of Harrah's interest in the Issuer (the
"Reorganization"). As a result of the Reorganization, the Issuer's common stock
is owned 50.0% by Donald N. Smith, the Issuer's Chairman and Chief Executive
Officer, 42.3% by The Equitable Life Assurance Society of the United States
("Equitable") and 7.7% by others. No change in the Company's management or
business strategy is anticipated as a result of the Reorganization.
Approximately $18 million was required to consummate the Reorganization and
pay related fees and expenses. Such funds were obtained from the proceeds of the
Offering. See "Use of Proceeds."
4
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Set forth below is a diagram of the organizational structure of the Issuer
and its subsidiaries.
[GRAPH]
5
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Securities Offered.................... $31.1 million aggregate Original Principal Amount
at Maturity of 11 1/4% Series B Senior Notes due
2008. The terms of the New Notes and the Old Notes
are identical in all material respects, except for
certain transfer restrictions and registration
rights relating to the Old Notes and except for
certain Liquidated Damages provisions relating to
the Old Notes described below under "Issuance of
Old Notes; Registration Rights."
Issuance of Old Notes;
Registration Rights................. The Old Notes were issued on May 18, 1998 to two
initial purchasers (the "Initial Purchasers"), who
placed the Old Notes with "qualified institutional
buyers" (as such term is defined in Rule 144A
promulgated under the Securities Act). In
connection therewith, the Issuer executed and
delivered for the benefit of the holders of Old
Notes a registration rights agreement (the
"Registration Rights Agreement"), pursuant to which
the Issuer agreed (i) to file a registration
statement (the "Registration Statement") on or
prior to , 1998 with respect to the
Exchange Offer and (ii) to use their best efforts
to cause the Registration Statement to be declared
effective by the Commission on or prior to
, 1998. If the Issuer does not comply
with its obligations under the Registration Rights
Agreement, it will be required to pay liquidated
damages ("Liquidated Damages") to holders of the
Old Notes under certain circumstances. See "The
Exchange Offer -- Registration Rights; Liquidated
Damages." Holders of Old Notes do not have any
appraisal rights in connection with the Exchange
Offer.
The Exchange Offer.................... The New Notes are being offered in exchange for a
like principal amount of Old Notes. The issuance of
the New Notes is intended to satisfy the
obligations of the Company contained in the
Registration Rights Agreement. Based upon the
position of the staff of the Commission set forth
in no-action letters issued to other parties in
other transactions substantially similar to the
Exchange Offer, the Issuer believes that the New
Notes issued pursuant to the Exchange Offer may be
offered for resale, resold and otherwise
transferred by holders thereof (other than (i) any
such holder that is an "affiliate" of the Issuer
within the meaning of Rule 405 under the Securities
Act; (ii) an Initial Purchaser who acquired the Old
Notes directly from the Issuer solely in order to
resell pursuant to Rule 144A of the Securities Act
or any other available exemption under the
Securities Act; or (iii) a broker-dealer who
acquired the Old Notes as a result of market making
or
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
other trading activities) without further
compliance with the registration and prospectus
delivery requirements of the Securities Act,
provided that such New Notes are acquired in the
ordinary course of such holder's business and such
holder is not participating and has no arrangement
or understanding with any person to participate in
a distribution (within the meaning of the
Securities Act) of such New Notes. By tendering,
each Holder which is not a broker-dealer will
represent to the Issuer that, among other things,
the person receiving the New Notes, whether or not
such person is the Holder, (i) is not an
"affiliate," as defined in Rule 405 under the
Securities Act, of the Issuer, (ii) will acquire
the New Notes in the ordinary course of such
person's business, and (iii) is not engaged in,
does not intend to engage in, and has no
arrangement or understanding with any person to
participate in, a distribution of the New Notes. If
any Holder or any such other person has an
arrangement or understanding with any person to
participate in a distribution of such New Notes, is
engaged in or intends to engage in a distribution
of such New Notes, is an "affiliate," as defined in
Rule 405 under the Securities Act, of the Issuer,
or acquired the Old Notes as a result of market
making or other trading activities, then such
Holder or any such other person (i) cannot rely on
the applicable interpretations of the staff of the
Commission and (ii) must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any resale
transaction. Each broker-dealer that receives New
Notes for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a
prospectus meeting the requirements of the
Securities Act in connection with any resale of
such New Notes. Although there has been no
indication of any change in the staff's position,
there can be no assurance that the staff of the
Commission would make a similar determination with
respect to the resale of the New Notes. See "Risk
Factors."
Procedures for Tendering.............. Tendering Holders of Old Notes must complete and
sign the Letter of Transmittal in accordance with
the instructions contained therein and forward the
same by mail, facsimile or hand delivery, together
with any other required documents, to the Exchange
Agent, either with the Old Notes to be tendered or
in compliance with the specified procedures for
guaranteed delivery of Old Notes. Holders of the
Old Notes desiring to tender such Old Notes in
exchange for New Notes should allow sufficient time
to ensure timely delivery. Certain brokers,
dealers, commercial banks, trust companies and
other nominees may also effect tenders by
book-entry transfer. Holders of Old Notes
registered in the name of a broker, dealer,
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
commercial bank, trust company or other nominee are
urged to contact such person promptly if they wish
to tender Old Notes pursuant to the Exchange Offer.
Letters of Transmittal and certificates
representing Old Notes should not be sent to the
Company. Such documents should only be sent to the
Exchange Agent. Questions regarding how to tender
the requests for information should be directed to
the Exchange Agent. See "The Exchange Offer --
Procedures for Tendering Old Notes."
Tenders, Expiration Date; The Exchange Offer will expire at 5:00 p.m., New
Withdrawal.......................... York City time, on , 1998 or such later
date and time to which it is extended. The tender
of Old Notes pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date.
Any Old Note not accepted for exchange for any
reason will be returned without expense to the
tendering Holder thereof as promptly as practicable
after the expiration or termination of the Exchange
Offer. See "The Exchange Offer -- Terms of the
Exchange Offer; Period for Tendering Old Notes" and
"-- Withdrawal Rights."
Certain Conditions to the
Exchange offer...................... The Exchange Offer is subject to certain customary
conditions, all of which may be waived by the
Company, including the absence of (i) threatened or
pending proceedings seeking to restrain the
Exchange Offer or resulting in a material delay to
the Exchange Offer; (ii) a general suspension of
trading on any national securities exchange or in
the over-the-counter market; (iii) a banking
moratorium; (iv) a commencement of war, armed
hostilities or other similar international calamity
directly or indirectly involving the United States;
and (v) change or threatened change in the
business, properties, assets, liabilities,
financial condition, operations, results of
operations or prospects of the Company and its
subsidiaries taken as a whole that, in the sole
judgment of the Issuer, is or may be adverse to the
Issuer. The Issuer shall not be required to accept
for exchange, or to issue New Notes in exchange
for, any Old Notes, if at any time before the
acceptance of such Old Notes for exchange or the
exchange of New Notes for such Old Notes, any of
the foregoing events occurs which, in the sole
judgment of the Issuer, make it inadvisable to
proceed with the Exchange Offer and/or with such
acceptance for exchange or with such exchange. In
the event the Issuer asserts or waives a condition
to the Exchange Offer which constitutes a material
change to the terms of the Exchange Offer, the
Issuer will disclose such change in a manner
reasonably calculated to inform prospective
investors of such change, and will extend the
period of the Exchange Offer by five business days.
If the Issuer fails to consummate the
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy,
they are obligated pursuant to the Registration
Rights Agreement to file with the Commission a
Shelf Registration Statement to cover resales of
the Transfer Restricted Securities (as defined) by
the holders thereof who satisfy certain conditions.
If the Issuer fails to consummate the Exchange
Offer or file a Shelf Registration Statement in
accordance with the Registration Rights Agreement,
the Issuer will pay Liquidated Damages to each
holder of Transfer Restricted Securities until the
cure of all defaults thereunder. The Exchange Offer
is not conditioned upon any minimum aggregate
principal amount of Old Notes being tendered for
exchange. See "The Exchange Offer -- Registration
Rights; Liquidated Damages" and "-- Certain
Conditions to the Exchange Offer."
Federal Income Tax Consequences....... The exchange of Old Notes for New Notes pursuant to
the Exchange Offer will not result in any income,
gain or loss to the Holders or the Issuer. See
"Certain Federal Income Tax Considerations" for a
discussion of the material federal tax consequences
expected to result from the Exchange Offer.
Use of Proceeds....................... There will be no proceeds to the Issuer from
exchanges pursuant to the Exchange Offer.
Appraisal Rights...................... Holders of Old Notes will not have dissenters'
rights or appraisal rights in connection with the
Exchange Offer.
Exchange Agent........................ State Street Bank and Trust Company is serving as
Exchange Agent in connection with the Exchange
Offer.
</TABLE>
CONSEQUENCES OF NOT EXCHANGING THE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Issuer does not currently anticipate that
it will register the Old Notes under the Securities Act. In addition, upon the
consummation of the Exchange Offer, holders of Old Notes which remain
outstanding will not be entitled to any rights to have such Old Notes registered
under the Securities Act or to any rights under the Registration Rights
Agreement. To the extent that Old Notes are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered, or tendered but
unaccepted, Old Notes could be adversely affected. See "Risk Factors --
Consequences of Exchange and Failure to Exchange" and "The Exchange Offer --
Consequences of Exchanging Old Notes."
SUMMARY DESCRIPTION OF THE NEW NOTES
(The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Old Notes and except that, if the Exchange Offer is not
consummated by June , 1998 (or any other Registration Default (as defined) has
9
<PAGE>
occurred), subject to certain exceptions, with respect to the first 90-day
period immediately following thereafter, the Company will be obligated to pay
liquidated damages to each Holder of Transfer Restricted Securities affected
thereby in an amount equal to $.05 per week for each $1,000 principal amount of
Transfer Restricted Securities, as applicable, held by such Holder ("Liquidated
Damages"). The amount of Liquidated Damages will increase by an additional $.05
per week with respect to each subsequent 90-day period until the Exchange Offer
is consummated, or any other Registration Default (as defined) is cured), up to
a maximum of $.50 per week for each $1,000 principal amount of Transfer
Restricted Securities, as applicable.
<TABLE>
<S> <C>
Issuer................................ The Restaurant Company.
Securities Offered.................... $31.1 million aggregate Original Principal Amount
at Maturity of New Notes.
Maturity Date......................... May 15, 2008.
Interest Rate and Payment Dates....... Cash interest will not accrue or be payable on the
Notes prior to May 15, 2003; PROVIDED that on any
Semi-Annual Accrual Date (as defined) prior to May
15, 2003, the Issuer may elect to begin accruing
and paying cash interest on the Notes by giving
notice of such election to the Trustee and the
Holders of the Notes on or prior to such
Semi-Annual Accrual Date (the "Cash Interest
Election"). Cash interest on the Notes will accrue
at an initial rate of 11 1/4% per annum from the
earlier of May 15, 2003 or the Semi-Annual Accrual
Date with respect to which the Cash Interest
Election is made, and will be payable in arrears on
each May 15 and November 15, commencing on the
earlier of November 15, 2003 or the Interest
Payment Date immediately following the Semi-Annual
Accrual Date with respect to which the Cash
Interest Election is made. However, following each
successive Semi-Annual Accrual Date until the
earlier of the time the Cash Interest Election is
made or May 15, 2003, the yield to maturity of the
Notes for tax purposes for subsequent periods
(calculated on a bond equivalent basis assuming
that the redemption price less the issue price with
respect to each Note is treated as interest) will
increase such that if no Cash Interest Election is
made prior to May 15, 2003 the yield to maturity of
the Notes, calculated on such bond equivalent
basis, will have increased to 11.89% for the
remaining term of the Notes.
Original Issue Discount............... For federal income tax purposes, the Notes will be
treated as having been issued with "original issue
discount" equal to the difference between the issue
price of the Notes and the sum of all cash payments
(whether denominated as principal or interest) to
be made thereon. Each holder of a Note must include
as gross income for federal income tax purposes a
portion of such original issue discount for each
day during each taxable year in which a Note is
held even though cash interest payments may not be
received prior to
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
November 15, 2003. See "Certain U.S. Tax
Consequences to Holders."
Mandatory Payment of Accrued On May 15, 2003, the Issuer will be required to pay
Interest............................ all accrued but unpaid interest on the Notes by
redeeming an amount per Note equal to the Accreted
Value of such Note on May 15, 2003 less the
original issue price with respect to such Note at a
redemption price equal to 105.625% of the amount
redeemed; and the Principal Amount at Maturity of
such Note shall thereafter be reduced by the amount
of such Accreted Value.
Ranking............................... The Notes are general unsecured obligations of the
Issuer. The Notes will rank PARI PASSU in right of
payment with all current and future senior
indebtedness of the Issuer. However, the Notes will
be effectively subordinated in right of payment to
all existing and future secured indebtedness of the
Issuer and to all liabilities (including
indebtedness) of the Issuer's subsidiaries. As of
March 31, 1998, on a pro forma basis, the Issuer
had no secured indebtedness outstanding and the
Issuer's subsidiaries had $181.0 million of total
liabilities outstanding, including $141.0 million
of indebtedness. The Indenture pursuant to which
the Notes will be issued (the "Indenture") will
permit additional borrowings by the Issuer and its
subsidiaries in the future.
Optional Redemption................... The Notes are redeemable, in whole or in part, at
the option of the Issuer, on or after May 15, 2003,
at the redemption prices set forth herein, plus
accrued and unpaid interest and Liquidated Damages,
if any, thereon, to the redemption date. See
"Description of Notes-- Optional Redemption."
Change of Control..................... Upon a change of Control, each Holder of Notes will
have the right to require the Issuer to purchase
all or any part of such Holder's Notes at a price
equal to 101% of the Accreted Value thereof, plus
accrued and unpaid interest and Liquidated Damages,
if any, thereon to the date of purchase. There can
be no assurance that the Issuer will have adequate
funds available to repurchase the Notes. See "Risk
Factors--Possible Inability to Fund Change of
Control Offer."
Certain Covenants..................... The Indenture contains certain covenants that,
among other things, limit the ability of the Issuer
and its Restricted Subsidiaries (as defined) to
incur additional Indebtedness and issue preferred
stock, pay distributions or make other Restricted
Payments, engage in sale and leaseback
transactions, create certain liens, enter into
certain transactions with affiliates, sell assets
of the Issuer or its subsidiaries, incur dividend
and other payment restrictions affecting Restricted
Subsidiaries, issue or sell
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
Equity Interests of the Issuer's subsidiaries or
enter into certain mergers and consolidations. In
addition, under certain circumstances, the Issuer
will be required to offer to purchase Notes at a
price equal to 100% of the Accreted Value thereof,
plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase, with the
proceeds of certain Asset Sales (as defined). See
"Description of Notes."
Transfer Restrictions................. The Old Notes have not been registered under the
Securities Act and are subject to restrictions on
transferability and resale. See "Notice to
Investors."
Use of Proceeds....................... The proceeds from the Offering were used to
consummate the Reorganization and pay related fees
and expenses. See "Use of Proceeds."
</TABLE>
12
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA
The historical financial information under the captions "Statement of
Operations Data" for each of the years in the three-year period ended December
31, 1997 and "Balance Sheet Data" as of December 31, 1997, has been derived from
the audited consolidated historical financial statements, which financial
statements have been audited by Arthur Andersen LLP, independent public
accountants. The financial statements for each of the years in the three-year
period ended December 31, 1997, and the report thereon are included elsewhere in
this Prospectus. The historical financial information under the captions
"Statement of Operations Data," "Other Financial Data" and "Balance Sheet Data"
as of March 31, 1998 and for the three months ended March 31, 1998 and 1997, has
been derived from the unaudited financial statements which are included
elsewhere herein. In the opinion of the Company, such information reflects all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the results of operations for such periods. The results of
operations for the three months ended March 31, 1998 are not necessarily
indicative of the results to be expected for the entire year. The historical
financial information for the years ended December 31, 1994 and 1993 is
unaudited and has been derived by adjusting the Issuer's audited consolidated
historical financial statements for such periods to exclude the operations of
Friendly Ice Cream Corporation, a former subsidiary of the Issuer which was
deconsolidated effective January 1, 1995. The summary financial information
should be read in conjunction with "Management's Discussion and Analysis of
Results of Operations and Financial Condition."
THE RESTAURANT COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Revenues:
Food sales.................. $ 197,090 $ 205,675 $ 228,259 $ 234,164 $ 250,193 $ 57,018 $ 62,774
Franchise revenues and
other..................... 16,032 17,322 19,275 20,092 21,005 4,887 5,174
---------- ---------- ---------- ---------- ---------- --------- ---------
Total revenues............ 213,122 222,997 247,534 254,256 271,198 61,905 67,948
Depreciation and
amortization................ 11,909 12,119 14,410 15,752 16,031 3,943 4,739
Income from continuing
operations before net
interest, income taxes and
extraordinary item(1)....... $ 9,107 $ 9,302 $ 9,363 $ 11,477 $ 12,145 $ 2,497 $ 3,057
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ---------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
EBITDA(2)..................... $ 31,677 $ 29,420 $ 31,118 $ 34,180 $ 36,043 $ 7,854 $ 8,591
EBITDA margin(2)(3)........... 14.9% 13.2% 12.6% 13.4% 13.3% 12.7% 12.6%
Net cash provided by (used in)
operating activities........ $ 28,113 $ 22,985 $ 25,102 $ 23,133 $ 33,100 $ (21) $ 6,847
Capital expenditures:
Maintenance................. $ 2,023 $ 2,130 $ 3,435 $ 2,987 $ 3,453 $ 204 $ 387
Renovation.................. 4,401 4,118 8,431 4,064 2,790 896 1,300
New restaurant
development............... 9,851 20,908 12,626 1,947 6,193 46 1,646
Manufacturing and other..... 3,793 3,643 4,439 2,863 2,666 415 656
---------- ---------- ---------- ---------- ---------- --------- ---------
Total capital
expenditures............ $ 20,068 $ 30,799 $ 28,931 $ 11,861 $ 15,102 $ 1,561 $ 3,989
---------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- --------- ---------
Net interest expense.......... $ 3,898 $ 4,380 $ 5,270 $ 5,269 $ 5,176 $ 1,301 $ 3,625
Ratio of EBITDA to net
interest expense(2)......... 8.1x 6.7x 5.9x 6.5x 7.0x 6.0x 2.4x
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PRO FORMA DATA:(4)
Net interest expense........................................................... $ 17,152 $ 4,348 $ 4,243
Net cash interest expense...................................................... 14,117 3,541 3,436
Ratio of EBITDA to net interest expense(2)..................................... 2.1x 1.8x 2.0x
Ratio of EBITDA to net cash interest expense(2)................................ 2.6x 2.3x 2.5x
Ratio of long-term debt and capital lease obligations to EBITDA(2)(8).................................
4.2x
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1998
-------------------------
ACTUAL PRO FORMA (5)
---------- -------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Property and equipment, net......................................................... $ 125,988 $ 125,988
Total assets........................................................................ 194,190 195,190
Total long-term debt and capital lease obligations.................................. 139,703 157,712
Total stockholders' investment (deficit)............................................ 11,502 (5,507)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------- ----------------------
1993 1994 1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT AVERAGE CHECK)
RESTAURANT OPERATING DATA:
Restaurant sales
Company-operated(6)..... $ 183,416 $ 187,711 $ 208,057 $ 212,787 $ 225,486 $ 52,518 $ 57,369
Franchised.............. 404,339 425,812 440,446 465,172 485,476 111,959 119,498
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total................. $ 587,755 $ 613,523 $ 648,503 $ 677,959 $ 710,962 $ 164,477 $ 176,867
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Restaurants open (at
period end)(6)
Company-operated........ 127 132 139 134 136 134 137
Franchised.............. 298 300 317 329 337 332 344
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total................. 425 432 456 463 473 466 481
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Company-operated
restaurant data:
Average sales per
restaurant(6)......... $ 1,478 $ 1,535 $ 1,535 $ 1,576 $ 1,682 $ 393 $ 425
Percentage change over
prior period........ 4.2% 3.9% 0.0% 2.7% 6.7% 5.1% 8.1%
Comparable restaurant
sales increase(7)..... 2.5% 0.8% 0.9% 2.6% 6.6% 5.0% 9.3%
Average check(6)........ $ 5.04 $ 5.16 $ 5.29 $ 5.36 $ 5.56 $ 5.50 $ 5.88
Franchised restaurant
data:
Average royalties per
restaurant............ $ 51.6 $ 53.3 $ 55.0 $ 55.2 $ 56.7 $ 13.2 $ 13.7
Average sales per
restaurant............ $ 1,381 $ 1,418 $ 1,441 $ 1,431 $ 1,466 $ 338 $ 353
</TABLE>
- ------------------------
(1) Includes unusual items as follows: year ended December 31, 1993--provision
for disposition of assets ($4.3 million); year ended December 31,
1994--provision for litigation costs ($1.1 million) and provision for
disposition of assets ($0.8 million); year ended December 31, 1995--asset
write-down (SFAS No. 121) ($1.9 million), provision for disposition of
assets ($0.6 million) and benefit from litigation costs ($0.2 million); year
ended December 31, 1997--tax-related reorganization costs ($0.7 million);
and three months ended March 31, 1998--asset write-down (SFAS No. 121) ($0.5
million) and provision for disposition of assets ($0.3 million).
(2) As used herein, "EBITDA" represents net income plus (i) net interest, (ii)
depreciation and amortization, (iii) income taxes, (iv) provision for
disposition of assets, (v) asset write-down (SFAS No. 121), (vi) provision
for (benefit from) litigation costs, (vii) tax-related reorganization costs,
(viii) extraordinary items, (ix) discontinued operations and (x) provision
for minority interest. The Company has included information concerning
EBITDA in this Prospectus because it believes that such information is used
by certain investors as one measure of an issuer's historical ability to
service debt. EBITDA should not be considered as an alternative to, or more
meaningful than, earnings from operations or other traditional indications
of an issuer's operating performance.
15
<PAGE>
(3) EBITDA margin represents EBITDA divided by total revenues.
(4) Gives effect to (i) the Going Private Transaction; (ii) the Offering and
(iii) the Reorganization, as if each occurred on January 1, 1997. The pro
forma data has been derived from the unaudited pro forma financial
statements included elsewhere in this Prospectus.
(5) Gives effect to the Offering and the Reorganization, as if each occurred on
March 31, 1998. The pro forma data has been derived from the unaudited pro
forma financial statements included elsewhere in this Prospectus.
(6) Represents full-service restaurants only.
(7) Comparable restaurant sales increase for each period is calculated using
sales of restaurants that have been open during such period and the entire
corresponding period of the prior fiscal year. Comparable restaurant sales
data excludes those days and dayparts for which the restaurant was not open
in both periods.
(8) For the purposes of this ratio, EBITDA represents EBITDA for the twelve
months ended March 31, 1998.
16
<PAGE>
RISK FACTORS
Holders of the Old Notes should consider carefully the risk factors set
forth below as well as the other information set forth in this Prospectus before
tendering their Old Notes in the Exchange Offer. The risk factors set forth
below (other than "Consequences of Exchange and Failure to Exchange") are
generally applicable to the Old Notes as well as the New Notes. This Prospectus
contains certain forward-looking statements, including statements containing the
words "believes," "anticipates," "expects" and words of similar import. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
adverse changes in national or local economic conditions, increased competition,
changes in availability, cost and terms of financing, changes in operating
expenses and other factors referenced in this Prospectus, including, without
limitation, under the captions "Management's Discussion and Analysis of Results
of Operations and Financial Condition" and "Business." Given these
uncertainties, prospective investors are cautioned not to place undue reliance
on such forward-looking statements. The Issuer disclaims any obligation to
update any such factors or to publicly announce the results of any revisions to
any of the forward-looking statements contained in this Prospectus to reflect
future events or developments.
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. In general,
the Old Notes may not be offered or sold unless registered under the Securities
Act, except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. The Issuer does not
currently anticipate that it will register the Old Notes under the Securities
Act. In addition, upon the consummation of the Exchange Offer holders of Old
Notes which remain outstanding will not be entitled to any rights to have such
Old Notes registered under the Securities Act or to any rights under the
Registration Rights Agreement. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered, or
tendered but unaccepted, Old Notes could be adversely affected. See "The
Exchange Offer--Consequences of Not Exchanging Old Notes."
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to other parties in other transactions substantially
similar to the Exchange Offer, the Issuer believes that the New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by a holder thereof (other than (i) an
"affiliate" of the Issuer within the meaning of Rule 405 under the Securities
Act; (ii) an Initial Purchaser who acquired the Old Notes directly from the
Issuer solely in order to resell pursuant to Rule 144A of the Securities Act or
any other available exemption under the Securities Act; or (iii) a broker-dealer
who acquired the Old Notes as a result of market making or other trading
activities) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's business and that such holder
is not participating and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Notes. The Issuer has not, however, sought its own no-action letter
from the staff of the Commission. Although there has been no indication of any
change in the staff's position, there can be no assurance that the staff of the
Commission would make a similar determination with respect to the resale of the
New Notes. By tendering, each Holder which is not a broker-dealer will represent
to the Issuer that, among other things, the person receiving the New Notes,
whether or not such person is a Holder, (i) is not an "affiliate," as defined in
Rule 405 under the Securities Act, of the Issuer, (ii) will acquire the New
Notes in the ordinary course of such person's business, and (iii) is not engaged
in, does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the New
17
<PAGE>
Notes. If any Holder or any such other person has an arrangement or
understanding with any person to participate in a distribution of such New
Notes, is engaged in or intends to engage in a distribution of such New Notes,
is an "affiliate," as defined under Rule 405 of the Securities Act, of the
Issuer, or acquired the Old Notes as a result of market making or other trading
activities, then such Holder or any such other person (i) cannot rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction, unless such sale is made
pursuant to an exemption from such requirements. See "The Exchange
Offer--Purpose of the Exchange Offer."
SUBSTANTIAL LEVERAGE
The Company is highly leveraged. On March 31, 1998, after giving pro forma
effect to the Offering and the application of the proceeds thereof, the Issuer
had total consolidated indebtedness of approximately $159.0 million (of which
approximately $18 million would have consisted of the Notes) and stockholders'
deficit of approximately $5.5 million. The Issuer and its subsidiaries will be
permitted to incur substantial additional indebtedness in the future. See
"Capitalization" and "Selected Historical and Pro Forma Financial and Other
Data" and "Description of Notes."
The Issuer's ability to make scheduled payments of principal of, or to pay
the interest or Liquidated Damages, if any, on, or to refinance, its
indebtedness (including the Old Notes), or to fund planned capital expenditures
will depend on its future performance, which, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control. Based upon the current level of operations,
management believes that cash flow from operations and available cash, together
with available borrowings under the Credit Facility, will be adequate to meet
the Company's liquidity needs for the foreseeable future. The Issuer may,
however, need to refinance all or a portion of the principal of the Notes on or
prior to May 15, 2003 or on or prior to maturity. In addition, PFR may need to
refinance all or a portion of the principal of the 10 1/8% Senior Notes due 2007
(the "10 1/8% Senior Notes") on or prior to maturity. There can be no assurance
that the Company's business will generate sufficient cash flow from operations,
or that future borrowings will be available in an amount sufficient to enable
the Issuer and PFR to service their respective indebtedness, including, in the
case of the Issuer, the Notes, or to fund its other liquidity needs. In
addition, there can be no assurance that the Company will be able to effect any
such refinancing on commercially reasonable terms or at all. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition--Capital Resources and Liquidity."
The degree to which the Issuer is leveraged could have important
consequences to Holders of the New Notes, including, but not limited to: (i)
making it more difficult for the Issuer to satisfy its obligations with respect
to the New Notes, (ii) increasing the Company's vulnerability to general adverse
economic and industry conditions, (iii) limiting the Company's ability to obtain
additional financing to fund future working capital, capital expenditures and
other general corporate requirements, (iv) requiring the dedication of a
substantial portion of the Company's cash flow from operations to the payment of
principal of, and interest on, indebtedness, thereby reducing the availability
of such cash flow to fund working capital, capital expenditures, research and
development or other general corporate purposes, (v) limiting the Company's
flexibility in planning for, or reacting to, changes in its business and the
industry, and (vi) placing the Company at a competitive disadvantage as compared
to less leveraged competitors. In addition, PFR's revolving credit facility,
dated December 22, 1997, as amended, (the "Credit Facility") and 10 1/8% Senior
Note Indenture, dated December 22, 1997, (the "10 1/8% Senior Note Indenture")
do contain, and the Indenture contains, financial and other restrictive
covenants that limit the ability of PFR and the Issuer, respectively, to, among
other things, borrow additional funds. Failure by the Company to comply with
such covenants could result in an event of default which, if not cured or
waived, could have a material adverse effect on the Company. In addition, the
degree to which the Company is leveraged could prevent the Issuer from
repurchasing all of the New Notes tendered to it upon the occurrence of a Change
of
18
<PAGE>
Control. See "--Possible Inability to Fund Change of Control Offer,"
"Description of New Notes-- Repurchase at the Option of Holders--Change of
Control" and "Description of Other Indebtedness."
HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION
The Issuer is a holding company which has no significant assets other than
its direct and indirect equity interest in its subsidiaries. Accordingly, the
Issuer must rely entirely upon distributions from its subsidiaries to generate
the funds necessary to meet its obligations, including the payment of Accreted
Value or principal and interest and Liquidated Damages, if any, on the Notes.
The Credit Facility restricts the distribution of funds by PFR to the Issuer. In
addition, the 10 1/8% Senior Notes Indenture contains significant restrictions
on the ability of PFR to distribute funds to the Issuer. See "Description of
Other Indebtedness." There can be no assurance that the Credit Facility, the
10 1/8% Senior Notes Indenture or any agreement governing indebtedness that
refinances such indebtedness or other indebtedness of PFR will permit the
distribution of funds to the Issuer in amounts sufficient to pay the Accreted
Value or principal or interest or Liquidated Damages, if any, on the Notes when
the same become due (whether at mandatory redemption, maturity, upon
acceleration or otherwise).
The only significant assets of the Issuer are the equity interests in its
subsidiaries owned by it. All of such interests in PFR are pledged as collateral
under the Credit Facility. Therefore, if the Issuer were unable to pay the
Accreted Value or principal or interest or Liquidated Damages, if any, on the
Notes when due (whether at mandatory redemption, maturity, upon acceleration or
otherwise), the ability of the holders of the Notes to proceed against such
equity interests to satisfy such amounts would be subject to the ability of such
holders to obtain a judgment against the Issuer and the prior satisfaction in
full of all amounts under the Credit Facility. Any action to proceed against
such equity interests by or on behalf of the holders of Notes would constitute
an event of default under the Credit Facility entitling the lenders thereunder
to declare all amounts owing to be immediately due and payable, which event
would in turn constitute an event of default under the 10 1/8% Senior Notes
Indenture, entitling the holders thereof to declare the principal and accrued
interest of the 10 1/8% Senior Notes to be immediately due and payable. In
addition, as secured creditors, the lenders under the Credit Facility would
control the disposition and sale of such equity interests after an event of
default under the Credit Facility and would not be legally required to take into
account the interests of unsecured creditors of the Issuer or PFR, such as the
holders of the Notes, with respect to any such disposition or sale. There can be
no assurance that the assets of the Issuer, after the satisfaction of claims of
its secured creditors, would be sufficient to satisfy any amounts owing with
respect to its unsecured obligations, such as the Notes.
Since the Issuer is a holding company and conducts its business through
subsidiaries, the Notes will be effectively subordinated to all existing and
future claims of creditors of the Issuer's subsidiaries, including the lenders
under the Credit Facility, the holders of the 10 1/8% Senior Notes and trade
creditors of such subsidiaries. At March 31, 1998, such subsidiaries had
approximately $181.0 million of total liabilities, including approximately
$141.0 million of indebtedness. The rights of the Issuer and its creditors,
including the holders of the Notes, to realize upon the assets of any of the
Issuer's subsidiaries upon any such subsidiary's liquidation or reorganization
(and the consequent rights of the holders of the Notes to participate in the
realization of those assets) will be subject to the prior claims of such
subsidiary's respective creditors, including the lenders under the Credit
Facility and the holders of the 10 1/8% Senior Notes. In such event, there may
not be sufficient assets remaining to pay amounts due on any or all of the Notes
then outstanding. See "Description of Notes--Ranking" and "Description of Other
Indebtedness." The Indenture will permit the Issuer's subsidiaries to incur
additional indebtedness under certain circumstances. See "Description of the
Notes."
The 10 1/8% Senior Notes and all amounts under the Credit Facility will
mature prior to the maturity of the Notes. The Indenture requires that any
agreements governing indebtedness that refinances the 10 1/8% Senior Notes or
the Credit Facility contain restrictions on the ability of the Issuer's
subsidiaries to make distributions to the Issuer that are no more restrictive
than those contained in the indebtedness refinanced.
19
<PAGE>
There can be no assurance that if PFR is required to refinance the 10 1/8%
Senior Notes or any amounts under the Credit Facility, it will be able to do so
upon acceptable terms, if at all.
RISKS ASSOCIATED WITH THE FOOD SERVICE INDUSTRY
Food service businesses are often affected by changes in consumer tastes,
national, regional and local economic conditions, demographic trends, traffic
patterns, the cost and availability of labor, purchasing power, availability of
products and the type, number and location of competing restaurants. The Company
could also be substantially adversely affected by publicity resulting from food
quality, illness, injury or other health concerns or alleged discrimination or
other operating issues stemming from one location or a limited number of
locations, whether or not the Company is liable. In addition, factors such as
increased costs of goods, regional weather conditions and the potential scarcity
of experienced management and hourly employees may also adversely affect the
food service industry in general and the results of operations and financial
condition of the Company.
RELIANCE ON KEY MANAGEMENT
The Company's business is managed, and its business strategies formulated,
by a relatively small number of key executive officers and managers. The loss of
these key management persons, including Mr. Smith and Mr. Arras, could have a
material adverse effect on the Company. See "Management."
COMPETITION
The Company's business (including Foxtail) and the restaurant and food
service industries in general are highly competitive. The Company competes
directly or indirectly with all restaurants, from national and regional chains
to local establishments. Some of its competitors are significantly larger than
the Company and have substantially greater capital resources at their disposal.
EXPOSURE TO COMMODITY PRICING
The Company's purchasing department contracts for the purchase of food
products in large quantities. Although the Company does not hedge its positions
in any of these commodities as a matter of policy, it may opportunistically
contract for some of these items in advance of a specific need. As a result, the
Company is subject to the risk of substantial and sudden price increases,
shortages or interruptions in supply of such items, which could have a material
adverse effect on the Company.
FRANCHISE OPERATIONS
At March 31, 1998, the Company franchised 344 full-service restaurants. The
opening and success of franchised restaurants depends on various factors,
including the availability of suitable sites, the negotiation of acceptable
lease or purchase terms for new locations, permitting and regulatory compliance,
the ability to meet construction schedules and the financial and other
capabilities of the Company's franchisees and developers. There can be no
assurance that developers planning the opening of multiple restaurants under
area development agreements will have the business abilities or sufficient
access to financial resources necessary to open the restaurants required by
their agreements. There can also be no assurances that franchisees will
successfully operate their restaurants in a manner consistent with the Company's
concept and standards.
The Company's largest franchisee operates 41 restaurants, 37 of which are
leased from unaffiliated lessors, pursuant to a temporary license agreement
which expires September 30, 1998. In May 1998, the franchisee filed a petition
for reorganization under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the Western District of New York. The Company
and the franchisee have entered into a Stipulation and Order Authorizing
Standstill and Extension Agreement which was approved by the Bankruptcy Court on
June 17, 1998 authorizing the continuing temporary
20
<PAGE>
operation of the franchisee's restaurants. The franchisee has advised the
Company that it has entered into an agreement in principle with an operator of
truck stops and travel plazas for the acquisition of all of the franchisee's
assets related to its Perkins Family Restaurants. If approved by the Bankruptcy
Court, the acquiror will become a franchisee of the Company and provide funds
for remodeling existing restaurants. The Company also expects to receive
sufficient funds to cover its unreserved receivable from the franchisee. During
the past three years, the franchisee's average net royalty payments to the
Company were approximately $1.8 million and at March 31, 1998, the franchisee
was delinquent in its royalty obligations in the amount of approximately
$450,000, of which $300,000 had been reserved.
SEASONALITY
The Company's revenues are subject to seasonal fluctuations. Customer
traffic and consequently revenues are highest in the summer months and lowest
during the winter months because of the high proportion of restaurants located
in states where inclement weather adversely affects guest visits.
GEOGRAPHIC CONCENTRATION
Perkins restaurants are concentrated in the Midwest, Pennsylvania, upstate
New York and central Florida. As a result, a severe or prolonged economic
recession or changes in demographic mix, employment levels, population density,
weather, real estate market conditions or other factors unique to these
geographic regions may adversely affect the Company more than certain of its
competitors which are more geographically diverse.
ORIGINAL ISSUE DISCOUNT CONSEQUENCES
The Notes will be issued at a substantial discount to their principal amount
at maturity. Although cash interest may not accrue on the Notes prior to May 15,
2003, and there may be no periodic payments of cash interest on the Notes prior
to November 15, 2003, original issue discount (the difference between the
aggregate amount payable on the Notes (including stated interest) and the issue
price of the Notes) will accrue from the issue date of the Notes. Consequently,
purchasers of Notes generally will be required to include amounts in gross
income for United States federal income tax purposes in advance of their receipt
of the cash payments to which the income is attributable. See "Certain U.S. Tax
Consequences to Holders" for a more detailed discussion of the federal income
tax consequences of the purchase, ownership and disposition of the Notes.
In the event a bankruptcy case is commenced by or against the Issuer under
the United States Bankruptcy Code after the issuance of the Notes, the claim of
a holder of Notes may be limited to an amount equal to the sum of (i) the
initial offering price and (ii) that portion of the original issue discount
which is not deemed to constitute "unmatured interest" for purposes of the
Bankruptcy Code. Any original issue discount that was not amortized as of the
date of any such bankruptcy filing would constitute "unmatured interest." To the
extent that the Bankruptcy Code differs from the Internal Revenue Code in
determining the method of amortization of original issue discount, a holder of
Notes may realize taxable gain or loss on payment of such holder's claim in
bankruptcy.
ABSENCE OF A PUBLIC MARKET; RESTRICTIONS ON TRANSFER
The Old Notes were not registered under the Securities Act. Accordingly, the
Old Notes may only be offered or sold pursuant to an exemption from the
registration requirements of the Securities Act or pursuant to an effective
registration statement. See "Description of Notes--Registration Rights" and
"Notice to Investors." Although the Old Notes are eligible for trading in
PORTAL, there can be no assurance as to the liquidity of any markets that may
develop for the Notes, the ability of Holders of the Notes to sell their Notes,
or the prices at which Holders would be able to sell their Notes. Future trading
prices of the Notes will depend on many factors, including, among other things,
the Issuer's ability to effect
21
<PAGE>
the Exchange Offer, prevailing interest rates, the Company's operating results
and the market for similar securities. The Initial Purchasers have advised the
Issuer that they currently intend to make a market in the New Notes offered
hereby. However, they are not obligated to do so and any market making may be
discontinued at any time without notice. In addition, such market making
activity will be subject to the limits imposed by the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and may be
limited during the Exchange Offer and the pendency of any Shelf Registration
Statement. See "Description of Notes--Registration Rights; Liquidated Damages."
The Issuer does not intend to apply for listing of the Notes on any securities
exchange.
REGULATION
The restaurant and food distribution industries are subject to numerous
federal, state and local government regulations, including those relating to the
preparation and sale of food and building and zoning requirements. Also, the
Company is subject to laws governing its relationship with employees, including
minimum wage requirements, overtime, working conditions and citizenship
requirements. The failure to obtain or retain food licenses or an increase in
the minimum wage rate, employee benefit costs or other costs associated with
employees could adversely affect the Company. In September 1997, the second
phase of an increase in the minimum wage was implemented in accordance with the
Federal Fair Labor Standards Act of 1996. See "Business--Government Regulation."
CONTROL OF THE ISSUER; RELATIONSHIP WITH FRIENDLY ICE CREAM CORPORATION;
POTENTIAL CONFLICTS OF INTEREST
The Issuer's common stock is owned 50.0% by Donald N. Smith, and 42.3% by
Equitable. These shareholders, if they were to act together, would have the
ability to make significant decisions affecting the operations of the Issuer.
Mr. Smith and Equitable own 9.5% and 2.0%, respectively, of Friendly Ice
Cream Corporation ("Friendly's"), which operates and franchises full-service
restaurants. Mr. Smith, the Chairman of the Board and Chief Executive Officer of
the Issuer and of PMC, an indirect wholly-owned subsidiary of the Issuer and the
general partner of PFR, is the Chairman, Chief Executive Officer and President
of Friendly's. In addition, three of the directors of PMC are directors of
Friendly's. In the ordinary course of business, the Company enters into
transactions with Friendly's. The Company's policy is to only enter into a
transaction with an affiliate in the ordinary course of, and pursuant to the
reasonable requirements of, its business and upon terms that are no less
favorable to the Company than could be obtained if the transaction was entered
into with an unaffiliated third party. See "Certain Transactions."
TRC Realty Co., a wholly-owned subsidiary of the Issuer, leases an aircraft
for the use of PMC and Friendly's. Pursuant to an agreement expiring April 14,
2004, Friendly's and PMC are each obligated to reimburse TRC Realty Co. on a
monthly basis for 50% of the fixed costs of the aircraft (consisting principally
of lease payments, pilot salaries, insurance and hangar rental) and their
respective proportionate shares of variable expenses (such as fuel and
maintenance) based on their respective actual usage of the aircraft. During
1997, PMC and Friendly's made payments to TRC Realty Co. totaling approximately
$504,600 and $565,000, respectively, related to the use of the aircraft.
Circumstances could arise in which the interests of the Issuer and its
stockholders could be in conflict with the interests of the Holders of the
Notes. In addition, Friendly's competes with the Company in certain markets and
circumstances could arise in which the interests of Friendly's could be in
conflict with the interests of the Company. Since Mr. Smith serves as Chairman,
Chief Executive Officer and President of Friendly's and as Chairman and Chief
Executive Officer of the Issuer and PMC and, consequently, devotes a portion of
his time to the affairs of each company, he may be required to limit his
involvement in those areas, if any, where the interests of the Company conflict
with those of Friendly's. Mr. Smith does
22
<PAGE>
not have an employment agreement with the Company nor is he contractually
prohibited from engaging in other business ventures in the future, any of which
could compete with the Company.
FRAUDULENT CONVEYANCE STATUTES
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if, among other things, the Issuer
at the time it incurred the indebtedness evidenced by the Notes, (i) (a) was or
is insolvent or rendered insolvent by reason of such incurrence or (b) was or is
engaged in a business or transaction for which the assets remaining with the
Issuer constituted unreasonably small capital or (c) intended or intends to
incur, or believed or believes that it would incur debts beyond its ability to
pay such debts as they mature, and (ii) received or receives less than
reasonably equivalent value or fair consideration for the incurrence of such
indebtedness, then the Notes, and any pledge or other security interest securing
such indebtedness, could be voided, or claims in respect of the Notes could be
subordinated to all other debts of the Issuer. In addition, the payment of
interest and principal by the Issuer pursuant to the Notes could be voided and
required to be returned to the person making such payment, or to a fund for the
benefit of the creditors of the Issuer.
The measures of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Issuer would be considered insolvent if (i)
the sum of its debts, including contingent liabilities, were greater than the
saleable value of all of its assets at a fair valuation or if the present fair
saleable value of its assets were less than the amount that would be required to
pay its probable liability on its existing debts, including contingent
liabilities, as they become absolute and mature or (ii) it could not pay its
debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, the Issuer believes that, after giving effect to the
indebtedness incurred in connection with the Offering and the application of the
net proceeds therefrom, the Issuer will not be insolvent, will not have
unreasonably small capital for the business in which it is engaged and will not
incur debts beyond its ability to pay such debts as they mature. There can be no
assurance, however, as to what standard a court would apply in making such
determinations or that a court would agree with the Issuer's conclusions in this
regard.
POSSIBLE INABILITY TO FUND CHANGE OF CONTROL OFFER
Upon a Change of Control, the Issuer will be required to offer to repurchase
all outstanding Notes at 101% of the Accreted Value thereof plus accrued and
unpaid interest and Liquidated Damages, if any, to the date of repurchase.
However, there can be no assurance that sufficient funds will be available at
the time of any Change of Control to make any required repurchases of Notes
tendered or that restrictions in the Credit Facility and the 10 1/8% Senior Note
Indenture will allow the Issuer to make such required repurchases.
Notwithstanding these provisions, the Issuer could enter into certain
transactions, including certain recapitalizations, that would not constitute a
Change of Control but would increase the amount of debt outstanding at such
time. See "Description of Notes--Repurchase at the Option of Holders."
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<PAGE>
USE OF PROCEEDS
The Issuer will not receive any proceeds from the Exchange Offer. The Issuer
used $17 million of the gross proceeds from the issuance of the Old Notes to
redeem the shares of common stock of the Issuer issued to Harrah's and to pay
approximately $1 million in related fees and expenses.
CAPITALIZATION
The following table sets forth information regarding cash and cash
equivalents, short-term debt, and capitalization of the Issuer as of March 31,
1998, and as adjusted to give effect to the Reorganization and the financing
thereof as if each occurred on March 31, 1998. The information presented below
should be read in conjunction with the financial statements and related notes
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT MARCH 31, 1998
-----------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
---------- -----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................................................ $ 4,880 $ 4,880
---------- -----------
---------- -----------
Short-term debt:
Current maturities of long-term debt................................................... $ -- $ --
Current maturities of capital lease obligations of PFR................................. 1,254 1,254
---------- -----------
Total short-term debt................................................................ 1,254 1,254
Long-term debt, less current maturities:
Credit Facility of PFR(1).............................................................. 3,000 3,000
10 1/8% Senior Notes due 2007 of PFR................................................... 130,000 130,000
11 1/4% Senior Discount Notes due 2008................................................. -- 18,009
Capital lease obligations of PFR....................................................... 6,703 6,703
---------- -----------
Total long-term debt................................................................. 139,703 157,712
Total stockholders' investment (deficit)................................................. 11,502 (5,507)
---------- -----------
Total capitalization................................................................. $ 152,459 $ 153,459
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) As of March 31, 1998, approximately $2.4 million of letters of credit were
outstanding under the Credit Facility, and approximately $44.6 million was
available for future borrowings and letters of credit.
24
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA
The historical financial information under the captions "Statement of
Operations Data" for each of the years in the three-year period ended December
31, 1997 and "Balance Sheet Data" as of December 31, 1997, 1996 and 1995 has
been derived from the Issuer's audited consolidated historical financial
statements, which financial statements have been audited by Arthur Andersen LLP,
independent public accountants. The financial statements for each of the years
in the three-year period ended December 31, 1997, and the report thereon are
included elsewhere herein. The historical financial information under the
captions "Statement of Operations Data," "Other Financial Data" and "Balance
Sheet Data" as of March 31, 1998 and for the three months ended March 31, 1998
and 1997, has been derived from the unaudited financial statements which are
included elsewhere herein. In the opinion of the Company, such information
reflects all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results of operations for such periods.
The results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results to be expected for the entire year. The
historical financial information for the years ended December 31, 1994 and 1993
is unaudited and has been derived by adjusting the Issuer's audited consolidated
historical financial statements for such periods to exclude the operations of
Friendly Ice Cream Corporation, a former subsidiary of the Issuer which was
deconsolidated effective January 1, 1995. The summary financial information
should be read in conjunction with "Management's Discussion and Analysis of
Results of Operations and Financial Condition."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Food sales..................... $ 197,090 $ 205,675 $ 228,259 $ 234,164 $ 250,193 $ 57,018 $ 62,774
Franchise revenues and other... 16,032 17,322 19,275 20,092 21,005 4,887 5,174
--------- --------- --------- --------- --------- -------- --------
Total revenues............... 213,122 222,997 247,534 254,256 271,198 61,905 67,948
Cost of sales.................... 163,290 171,703 192,798 195,710 207,231 47,872 52,964
General and administrative
expenses....................... 18,155 22,953 23,428 24,366 27,924 6,179 6,393
Depreciation and amortization.... 11,909 12,119 14,410 15,752 16,031 3,943 4,739
Asset write-down (SFAS No.
121)........................... -- -- 1,900 -- -- -- 500
Provisions for disposition of
assets......................... 4,338 800 609 -- -- -- 295
Minority interest in net earnings
of subsidiary.................. 6,323 6,120 5,026 6,951 7,867 1,414 --
--------- --------- --------- --------- --------- -------- --------
Income from continuing operations
before net interest, income
taxes and extraordinary item... 9,107 9,302 9,363 11,477 12,145 2,497 3,057
Net interest expense............. 3,898 4,380 5,270 5,269 5,176 1,301 3,625
Income taxes..................... 2,835 1,359 1,249 1,693 2,333 418 (283)
Income from discontinued
operations, extraordinary item
and cumulative effect of change
in accounting principle, net of
tax............................ 16,904 358 (686) (506) 4,927 (93) --
--------- --------- --------- --------- --------- -------- --------
Net income (loss) (1)............ $ (14,530) $ 3,205 $ 3,530 $ 5,021 $ (291) $ 871 $ (285)
--------- --------- --------- --------- --------- -------- --------
--------- --------- --------- --------- --------- -------- --------
OTHER FINANCIAL DATA:
EBITDA (2)....................... $ 31,677 $ 29,420 $ 31,118 $ 34,180 $ 36,043 $ 7,854 $ 8,591
EBITDA margin (2)(3)............. 14.9% 13.2% 12.6% 13.4% 13.3% 12.7% 12.6%
Net cash provided by (used in)
operating activities........... $ 28,113 $ 22,985 $ 25,102 $ 23,133 $ 33,100 $ (21) $ 6,847
Capital expenditures:
Maintenance.................... $ 2,023 $ 2,130 $ 3,435 $ 2,987 $ 3,453 $ 204 $ 387
Renovation..................... 4,401 4,118 8,431 4,064 2,790 896 1,300
New restaurant development..... 9,851 20,908 12,626 1,947 6,193 46 1,646
Manufacturing and other........ 3,793 3,643 4,439 2,863 2,666 415 656
--------- --------- --------- --------- --------- -------- --------
Total capital expenditures... $ 20,068 $ 30,799 $ 28,931 $ 11,861 $ 15,102 $ 1,561 $ 3,989
--------- --------- --------- --------- --------- -------- --------
--------- --------- --------- --------- --------- -------- --------
Ratio of EBITDA to net interest
expense (2).................... 8.1x 6.7x 5.9x 6.5x 7.0x 6.0x 2.4x
Ratio of earnings to fixed
charges (4).................... 2.7x 2.5x 2.1x 2.7x 2.9x 2.3x 0.9x
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA DATA: (5)
Net income (loss) from continuing operations before extraordinary item.......... $ 768 $ (446) $ (656)
Net interest expense............................................................ $ 17,152 $ 4,348 $ 4,243
Net cash interest expense....................................................... $ 14,117 $ 3,541 $ 3,436
Ratio of EBITDA to net interest expense (2)..................................... 2.1x 1.8x 2.0x
Ratio of EBITDA to net cash interest expense (2)................................ 2.6x 2.3x 2.5x
Ratio of earnings to fixed charges (4).......................................... 1.3x 0.8x 1.0x
Ratio of long-term debt and capital lease obligations to EBITDA (2)(7)................................. 4.2x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31, 1998
--------------------------------------------------------- -----------------------
1993 1994 1995 1996 1997 ACTUAL PRO FORMA (6)
--------- --------- --------- --------- --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Property and equipment,
net....................... $ 87,488 $ 105,333 $ 117,435 $ 115,089 $ 127,410 $125,988 $125,988
Total assets................ 136,795 155,862 167,520 162,849 208,062 194,190 195,190
Total long-term debt and
capital lease
obligations............... 46,306 50,737 67,713 62,317 136,999 139,703 157,712
Total stockholders'
investment (deficit)...... 698 3,903 7,338 12,359 12,068 11,502 (5,507)
</TABLE>
- ------------------------------
(1) Includes unusual items as follows: year ended December 31, 1993--provision
for disposition of assets ($4.3 million); year ended December 31,
1994--provision for litigation costs ($1.1 million) and provision for
disposition of assets ($0.8 million); year ended December 31, 1995--asset
write-down ($1.9 million), provision for disposition of assets ($0.6
million) and benefit from litigation costs ($0.2 million); year ended
December 31, 1997--tax-related reorganization costs ($0.7 million) and
extraordinary item, net of income taxes ($5.0 million); and three months
ended March 31, 1998--asset write-down (SFAS No. 121) ($0.5 million) and
provision for disposition of assets ($0.3 million).
(2) As used herein, "EBITDA" represents net income plus (i) net interest, (ii)
depreciation and amortization, (iii) income taxes, (iv) provision for
disposition of assets, (v) asset write-down (SFAS No. 121), (vi) provision
for (benefit from) litigation costs, (vii) tax-related reorganization costs
(viii) extraordinary items, (ix) discontinued operations and (x) provision
for minority interest. The Company has included information concerning
EBITDA in this Prospectus because it believes that such information is used
by certain investors as one measure of a company's historical ability to
service debt. EBITDA should not be considered as an alternative to, or more
meaningful than, earnings from operations or other traditional indications
of a company's operating performance.
(3) EBITDA margin represents EBITDA divided by total revenues.
(4) The ratio of earnings to fixed charges is computed by dividing (i) the sum
of income from continuing operations before income taxes and extraordinary
item, minority interest, amortization of previously capitalized interest and
fixed charges (excluding capitalized interest) by (ii) fixed charges. Fixed
charges consist of total interest incurred, amortization of debt financing
costs and the portion of rental expense on operating leases considered to
represent interest cost.
(5) Gives effect to (i) the Going Private Transaction, (ii) the Offering and
(iii) the Reorganization, as if each occurred on January 1, 1997. The pro
forma data has been derived from the unaudited pro forma financial
statements included elsewhere in this Prospectus.
(6) Gives effect to the Offering and the Reorganization, as if each occurred on
March 31, 1998. The pro forma data has been derived from the unaudited pro
forma financial statements included elsewhere in this Prospectus.
(7) For the purposes of this ratio, EBITDA represents EBITDA for the twelve
months ended March 31, 1998.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS OF
THE COMPANY AND THE NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
The Issuer is a holding company whose primary subsidiary is PFR, which is
indirectly wholly-owned by the Issuer. The Issuer is the sole stockholder of PRI
which is a limited partner and the indirect owner of 100% of PFR and the parent
corporation of PFR's general partner, PMC. The Issuer is also the sole
stockholder of TRC Realty Co. The Issuer has no significant assets other than
its direct and indirect equity interests in its subsidiaries.
Prior to December 22, 1997, PFR was a limited partnership 48.6% indirectly
owned (including its general partner's interest) by the Issuer. The remainder of
the Units were owned by the public and traded on the New York Stock Exchange
under the symbol "PFR." PFR's business was conducted through PROC. PFR was the
sole limited partner and owned 99% of PROC, and PMC was the sole general partner
and owned the remaining 1% of PROC. After a majority vote of the holders of the
publicly traded Units, 5.44 million Units held by persons other than the Issuer
and its subsidiaries were converted into the right to receive $14.00 in cash per
Unit upon consummation of the Going Private Transaction. Additionally, PROC was
merged into PFR, and PMC's 1% general partnership interest in PROC was converted
into a limited partnership interest in PFR. Upon consummation of the Going
Private Transaction on December 22, 1997, PFR became an indirect wholly-owned
subsidiary of the Issuer.
The Company through its primary subsidiary, PFR, is a leading operator and
franchisor of full-service, mid-scale restaurants located primarily in the
Midwest, Pennsylvania, upstate New York, and central Florida. As of March 31,
1998, the Company owned and operated 137 full-service restaurants, franchised
345 full-service restaurants and manufactured and distributed bakery products
which were sold to Company-operated restaurants, franchisees and third parties.
The Company's revenues are derived primarily from the operation of full-service
restaurants, franchise revenues and the sale of bakery products produced by
Foxtail. Foxtail offers cookie dough, muffin batters, pancake mixes, pies and
other food products to Company-operated and franchised restaurants through food
service distributors in order to ensure consistency and availability of Perkins'
proprietary products to each restaurant in the system. Additionally, Foxtail
manufactures certain proprietary and non-proprietary products for sale to non-
Perkins operations. Sales from Foxtail to Company-operated restaurants are
eliminated in the statements of operations. For the year ended December 31,
1997, revenues from Company-operated restaurants, Foxtail and franchise revenues
accounted for 83.4%, 8.8% and 7.1% of total revenues, respectively. The
remaining 0.7% of revenues are primarily derived from management fees and lease
income.
Between January 1, 1996 and December 31, 1997, the Company opened six
full-service Perkins restaurants, each of which is based upon the Company's
current prototype building design. The average investment, excluding land and
pre-opening expenses, was approximately $1.1 million. The Company purchased five
of the sites for these six restaurants at an average cost of approximately
$472,000. The sixth site was acquired under a ground lease. Management believes
the average investment for new Company-operated full-service restaurants
scheduled to be built during 1998 will range from $1.1 to $1.3 million and land
cost will range from $350,000 to $500,000 in cases in which the Company
purchases the site. The Company targets a minimum sales to investment ratio of
1:1 or greater for all new Company-operated restaurants for its first year of
operation. Pre-opening expenses consist principally of non-recurring costs, such
as hourly employee recruiting and training, meals, lodging and travel. Average
annual revenues for the year ended December 31, 1997 for all Company-operated
restaurants were approximately $1.7 million.
The Company employs an on-going system of prototype development, testing and
remodeling to maintain operationally efficient, cost-effective and unique
interior and exterior facility design and decor.
27
<PAGE>
An accelerated program to upgrade existing Company-operated restaurants began in
1995 and continues today. The current remodel package features a modern,
distinctive interior and exterior layout that enhances operating efficiencies
and guest appeal. As of March 31, 1998, approximately 87% of Company-operated
restaurants had either been remodeled or initially constructed since January 1,
1994.
During 1997, the Company entered into a joint venture with a Canadian casual
dining operator for the development of a minimum of three Jack Astor's Bar and
Grill restaurants. Jack Astor's Bar and Grill is a casual themed dining concept
with a high-energy, fun atmosphere and menu offerings which include chicken,
pasta, hamburgers and alcoholic beverages. The joint venture's first restaurant
opened in Greensboro, North Carolina on October 6, 1997.
The Issuer also operates an aircraft through TRC Realty Co., its
wholly-owned subsidiary. The aircraft is operated for the benefit of, and all
operating costs are reimbursed by, PMC and Friendly's.
The Company currently sponsors financing programs on competitive terms
designed to provide its franchisees with access to financing options to support
the remodeling of existing restaurants. The financing is provided by two
financial services companies with extensive experience in franchise and cash
flow based lending. The programs were designed to allow each franchisee's
request for financing to be evaluated solely on the basis of the financial
performance of the franchisee without support from the Company. However, under
both programs, the Company has the option to extend differing levels of support
in its sole discretion, if it determines that such support will have a positive
strategic impact on the future growth of the Company. Although not specifically
part of the current programs, both financial services companies are also
offering competitive financing options to both new and existing franchisees for
equipment and real estate financing outside of the current remodel initiative.
In the past, the Company has sponsored financing programs offered by certain
lending institutions to help its franchisees obtain funds for the construction
of new franchised restaurants and to purchase and install in-store bakeries. The
Company provided a limited guaranty of the funds borrowed for such purposes. As
of March 31, 1998, there were approximately $3.6 million in borrowings
outstanding under these programs. The Company has guaranteed $1.2 million of
these borrowings. No additional borrowings are available under these programs.
On February 26, 1998, the Company entered into a separate two-year limited
guarantee of $1.2 million in borrowings of a franchisee which were used to
finance the construction of a new franchise restaurant.
The Company's revenues have increased steadily over the last five years.
System-wide restaurant revenues (including franchised restaurants) have
increased 21.0% from $587.8 million in 1993 to $711.0 million for the year ended
December 31, 1997. Revenues from Company-operated restaurants have increased
22.9% from $183.4 million to $225.5 million and franchise revenues have
increased 24.4% from $15.5 million to $19.3 million, over the same period.
Average revenue per Company-operated restaurant has increased approximately
14.0% from $1.5 million to $1.7 million over the same period. EBITDA (as
defined) for the same periods were $31.7 million and $36.0 million,
respectively, representing a 13.8% increase. Company-operated restaurants have
achieved comparable restaurant sales increases in each of the last 26 quarters.
28
<PAGE>
RESULTS OF OPERATIONS
A summary of the Company's results for the periods indicated are presented
in the following table. All revenues, costs and expenses are expressed as a
percentage of total revenues.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------- ---------------
1997 1996 1995 1998 1997
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues:
Food sales............................ 92.3% 92.1% 92.2% 92.4% 92.1%
Franchise revenues and other.......... 7.7 7.9 7.8 7.6 7.9
------- ------ ------ ------ ------
Total revenues.......................... 100.0 100.0 100.0 100.0 100.0
------- ------ ------ ------ ------
Costs and expenses:
Cost of sales:
Food cost........................... 26.8 26.9 26.7 26.7 26.5
Labor and benefits.................. 31.0 31.1 31.9 31.8 31.2
Operating expenses.................. 18.7 19.0 19.3 19.4 19.6
General and administrative............ 10.3 9.6 9.5 9.4 10.0
Depreciation and amortization......... 5.9 6.2 5.8 7.0 6.4
Interest expense, net................. 1.9 2.1 2.1 5.3 2.1
Asset write-down (SFAS No. 121)....... -- -- 0.8 0.7 --
Provision for disposition of assets... -- -- 0.2 0.4 --
------- ------ ------ ------ ------
Total costs and expenses................ 94.5 94.8 96.3 100.8 95.8
------- ------ ------ ------ ------
5.5 5.2 3.7 (0.8) 4.2
Minority interest in net earnings of
subsidiaries.......................... (2.9) (2.7) (2.0) -- (2.3)
Income from continuing operations before
income taxes and extraordinary item... 2.6 2.4 1.7 (0.8) 1.9
Provision for income taxes.............. (0.9) (0.7) (0.5) 0.4 (0.7)
------- ------ ------ ------ ------
Income (loss) from continuing operations
before extraordinary item............. 1.7 1.8 1.1 (0.4) 1.3
Income from operations of discontinued
division.............................. -- 0.2 0.3 -- 0.2
------- ------ ------ ------ ------
Income (loss) before extraordinary
item.................................. 1.7 2.0 1.4 (0.4) 1.4
Extraordinary item...................... (1.9) -- -- -- --
------- ------ ------ ------ ------
Net income (loss)....................... (0.1)% 2.0% 1.4% (0.4)% 1.4%
------- ------ ------ ------ ------
------- ------ ------ ------ ------
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
REVENUES
Total revenues for the first quarter of 1998 increased approximately 9.8%
over the same period last year due primarily to higher comparable restaurant
sales. Same store comparable sales increased approximately 9.3% over the first
quarter of 1997 due primarily to an increase in comparable guest visits,
selective menu price increases and guest trends toward higher-priced entrees.
The shift in customer preference to higher-priced entrees can be attributed to
the Company's development and promotion of higher-priced menu items. Three
Company-operated restaurants which were not open for the full first quarter of
1997 also contributed to the increase in restaurant food sales during the three
months ended March 31, 1998. These increases were offset by the refranchising of
one Company-operated restaurant during 1997. Management believes remodeling of
Company-operated restaurants, enhanced promotional events and implementation of
new products resulted in the increased customer counts.
Revenues from Foxtail increased approximately 15.4% over the three months
ended March 31, 1997, and constituted approximately 7.5% of the Company's
revenues. The increase in sales is primarily due to additional sales within the
Perkins system.
29
<PAGE>
Franchise revenues, which consist primarily of franchise royalties and sales
fees, increased 12.3% over the first quarter of 1997. This increase is due
primarily to the opening of 21 new franchised restaurants and the sale of one
Company-operated restaurant to a franchisee since January 1, 1997. This increase
is partially offset by the closing of eight underperforming franchised
restaurants during the same period.
COSTS AND EXPENSES
FOOD COST
In terms of total revenues, food cost for the three months ended March 31,
1998, increased 0.2 percentage point over the same period in 1997. Food costs
increased during the current year due primarily to promotion of new seafood
entrees which have a greater food cost than typical menu items. This increase
was offset by decreased egg commodity costs.
LABOR AND BENEFITS
Labor and benefits expense, as a percentage of total revenues, increased 0.6
percentage points for the three months ended March 31, 1998. Hourly labor costs,
primarily cook and server wages, have increased over the prior year due to
higher minimum wage rates and a competitive labor market. A portion of the
increased labor costs was offset by lower employee insurance rates and lower
workers' compensation claims.
The wage rates of the Company's hourly employees are impacted by Federal and
state minimum wage laws. Legislation enacted during 1996 which raised the
Federal minimum wage rate in 1996 and 1997 has had an impact on the Company's
labor costs. These increases have resulted in the Federal minimum wage rate
increasing from $4.25 per hour to $4.75 on October 1, 1996 to $5.15 per hour as
of September 1, 1997 to the present date. Certain states do not allow tip
credits for servers which results in higher payroll costs as well as greater
exposure to increases in minimum wage rates. In the past, the Company has been
able to offset increases in labor costs through selective menu price increases
and improvements in labor productivity. The Company anticipates that it can
offset the majority of the recent increases through selective menu price
increases. However, there is no assurance that future increases can be mitigated
through raising menu prices.
OPERATING EXPENSES
Operating expenses, expressed as a percentage of total revenues for the
first quarter of 1998 decreased 0.2 percentage points from the three months
ended March 31, 1997. This decrease is primarily due to lower utilities expense
due to mild winter weather and lower franchise service fees during the first
quarter of 1998. Franchise service fees decreased due to the termination of two
service fee agreements during 1997. The decrease was partially offset by higher
franchise opening costs due to eight more franchise restaurants opening during
the first quarter of 1998 compared to the first quarter of 1997.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased 3.5% over the three months
ended March 31, 1997. This increase is primarily due to higher restaurant
development costs, training costs and field and office administration costs. In
addition, payroll expense for home office staff has increased over the prior
year.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization for the three months ended March 31, 1998,
increased approximately 20.2% over the same period last year due primarily to
increases in fixed assets and intangibles resulting from accounting adjustments
recorded in December 1997 in connection with the Going Private Transaction.
Additionally, the Company's continuing refurbishment program to upgrade and
maintain existing restaurants and the addition of new Company-operated
restaurants contributed to this increase.
30
<PAGE>
INTEREST, NET
Interest expense for the three months ended March 31, 1998, increased 178.6%
over the same period last year due primarily to increased debt in December 1997
which was used to purchase outstanding public Units and pay for Going Private
Transaction expenses. Interest expense associated with capital lease obligations
has decreased.
PROVISION FOR INCOME TAXES
Benefit for income taxes as a percentage of loss from continuing operations
before income taxes was 49.8% in the first quarter of 1998. In comparison, the
provision for income taxes as a percentage of income from continuing operations
before income taxes was 34.9% for the first quarter of 1997. The percentage
increase was the result of a state income tax refund for approximately $88,000
received in the first quarter of 1998.
OTHER
Results of operations for the three months ended March 31, 1998 reflect a
$500,000 non-cash charge against earnings related to the writedown of certain
assets impaired under SFAS No. 121. In addition, the Company recorded a net loss
of $295,000 related to the disposition of assets; this amount includes a loss of
approximately $740,000 on the disposal of two properties during the quarter and
the recognition of a previously deferred gain of approximately $445,000 under
SFAS No. 66, "Accounting for Sales of Real Estate," related to the sale of
property in 1994.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
REVENUES
Total revenues increased 6.7% over 1996 primarily due to higher comparable
restaurant sales, the net addition of five new franchised restaurants and two
new Company-operated restaurants and increased sales at Foxtail. As a
comparison, 1996 results include an additional day because of leap year.
Comparable sales for Company-operated restaurants increased approximately
6.6% due to a 3.7% increase in average guest check and a 2.9% increase in
customer counts. The increase in average guest check was the result of selective
menu price increases and guest preferences for higher-priced entrees. The shift
in customer preference to higher-priced entrees can be attributed to the
Company's development and promotion of higher-priced menu items. Management
believes remodeling of Company-operated restaurants, increased promotional
events and implementation of new products resulted in the increased customer
counts.
In 1997, Foxtail revenues increased 11.7% over 1996 and constituted
approximately 8.8% of the Company's total revenues. The increase in Foxtail's
revenue can be attributed primarily to price increases effective in August 1996
and January 1997, increased sales outside the Perkins system and an increase in
franchised restaurants' sales. The increase in outside sales is due to the
Company developing external sales in order to maintain plant utilization during
slower production periods.
Franchise revenues, which consist primarily of franchise royalties and
initial license fees, increased 3.8% over the prior year. Although comparable
franchised restaurant sales only increased 1.5% over the prior year, revenues of
franchised restaurants opened during 1995 and 1996 averaged 6.1% higher than the
franchise system average. This performance resulted in the overall improvement
in franchise revenues. Additionally, 13 new franchised restaurants opened during
the year, and one Company-operated restaurant was converted to a franchised
restaurant. Revenues from these openings were partially offset by the closing of
six under-performing franchised restaurants and a decrease in franchise license
fees due to fewer openings in 1997.
31
<PAGE>
COSTS AND EXPENSES
FOOD COST
In terms of total revenues, food cost decreased 0.1 percentage points over
1996. Restaurant division food cost expressed as a percentage of restaurant
division sales, decreased 0.3 percentage points. This decrease resulted from
selective menu price increases and a decline in the costs of certain commodities
including eggs and breads. This decrease was partially offset by higher food
costs associated with pork and poultry products.
LABOR AND BENEFITS
Labor and benefits, as a percentage of total revenues, declined 0.1
percentage points compared to 1996. Worker's compensation and group insurance
claims costs decreased; however, hourly labor costs in the Company's restaurants
rose due to mandated increases in minimum wage rates and wage rate pressures
from low levels of unemployment. As a percentage of revenues, Foxtail labor and
benefit charges are significantly lower than the Company's restaurants. As
Foxtail becomes a more significant component of the Company's total operations,
labor and benefits expense, expressed as a percent of total revenue, should
decrease.
The wage rates of the Company's hourly employees are impacted by Federal and
state minimum wage laws. Legislation which raised the Federal minimum wage rate
in 1996 and has further increased the minimum wage rate in 1997 had an impact on
the Company's labor costs. These increases have resulted in the Federal minimum
wage rate increasing from $4.25 per hour to $4.75 on October 1, 1996 to $5.15
per hour as of September 1, 1997 to the present date. Certain states do not
allow tip credits for servers which results in higher payroll costs as well as
greater exposure to increases in minimum wage rates. In the past, the Company
has been able to offset increases in labor costs through selective menu price
increases and improvements in labor productivity. The Company anticipates that
it can offset the majority of the current increases through selective menu price
increases. However, there is no assurance that future increases can be mitigated
through raising menu prices.
OPERATING EXPENSES
Operating expenses, expressed as a percentage of total revenues, decreased
0.3 percentage points over 1996. Fees payable under royalty arrangements
decreased as a percentage of total revenues due to termination of two such
agreements, and utilities expense decreased due to milder winter weather than
experienced in the previous year. These decreases were partially offset by
increased bad debt expense.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased 14.6% over 1996, primarily due
to increased incentive compensation costs as a result of the Company's improved
performance and due to increased administrative support related to both the
growth at Foxtail and anticipated growth in the number of Company-operated and
franchised restaurants expected to open in 1998. Additionally, 1997 expenses
include approximately $650,000 in reorganization costs associated with analyzing
the alternatives to PFR's becoming a tax-paying entity beginning January 1998.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased approximately 1.8% over 1996 due
primarily to the continuing refurbishment program to upgrade and maintain
existing restaurants as well as the addition of new Company-operated
restaurants.
32
<PAGE>
INTEREST, NET
Interest expense was approximately 1.8% lower than 1996 due to lower average
debt balances and decreased capital lease obligations.
PROVISION FOR INCOME TAXES
Provision for income taxes as a percent of income from continuing operations
before income taxes was 33.5% in 1997 and 27.3% in 1996. The increase was
primarily the result of the benefit in 1996 from the Company's retaining the tax
benefits relating to the disaffiliation of Friendly's for tax purposes.
INCOME FROM OPERATIONS OF DISCONTINUED DIVISION
Income from operations of discontinued division represents the income, net
of income tax expense, of Restaurant Insurance Corporation ("RIC"). RIC was sold
on March 19, 1997.
EXTRAORDINARY ITEM
During 1997, after Unitholder approval, all Units held by persons other than
TRC and its subsidiaries were converted into the right to receive $14.00 in cash
per Unit. In connection with the Going Private Transaction, the Company expensed
$5,020,000 of extraordinary costs, net of income taxes.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
REVENUES
Total revenues increased 2.7% over 1995 due primarily to increased
restaurant food sales, sales at Foxtail and increased franchise royalties. The
increase in restaurant food sales can be primarily attributed to the addition of
three new Company-operated restaurants in 1996 and ten new Company-operated
restaurants in 1995, partially offset by the closing of four Company-operated
restaurants and refranchising of three Company-operated restaurants. Comparable
restaurant sales increased approximately 2.6% over 1995 due primarily to
selective price increases and an increase in comparable guest visits of 0.8%.
Revenues from Foxtail increased approximately 5.8% over 1995 and constituted
approximately 8.4% of the Company's total 1996 revenues. This increase can be
attributed primarily to increased bakery sales at franchised restaurants to
which Foxtail sells various mixes, doughs and pies.
Franchise revenues increased 6.5% over the prior year due primarily to the
addition of nineteen new franchised restaurants. The increase was partially
offset by a decrease in sales for franchised restaurants open for more than one
year. Ten franchised restaurants were closed during 1996 and three Company-
operated restaurants began operations as franchised restaurants during the year.
COSTS AND EXPENSES
FOOD COST
In terms of total revenues, food cost increased 0.2 percentage points over
1995. Restaurant division food cost expressed as a percentage of restaurant
division sales remained relatively constant as compared to 1995. Slight
decreases in commodity costs were partially offset by changes in the menu mix
due to promotions such as steak and eggs, shrimp and turkey. Additionally, the
costs of certain product enhancements were offset by selective menu price
increases.
The cost of Foxtail sales, in terms of total Foxtail revenues, increased
approximately 1.7 percentage points from 1995, due primarily to certain
commodity cost and packaging increases. As a manufacturing operation, Foxtail
typically has higher food costs as a percent of revenues than the Company's
restaurants.
33
<PAGE>
LABOR AND BENEFITS
Labor and benefits expense, as a percentage of total revenues, decreased 0.8
percentage points from 1995, primarily due to improved productivity in the
Company's restaurants and pie manufacturing facility. These expenses also
benefited from reduced claims costs associated with the Company's group health
and workers compensation programs.
OPERATING EXPENSES
Operating expenses, expressed as a percentage of total revenues, decreased
0.3 percentage points from 1995 to 1996. Decreases in direct operating and
pre-opening expenses, as a percent of restaurant division sales, were partially
offset by an increase in repairs and maintenance expense. A decrease in Foxtail
operating expenses, as a percentage of Foxtail revenue, was primarily due to
decreases in net freight costs, repairs and maintenance and advertising expenses
offset by higher promotional cost.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased approximately 4.0% over 1995,
which is primarily the result of an increase in incentive costs due to the
Company's positive operating results in 1996. Additional factors contributing to
this increase were increased administrative support related to growth at Foxtail
and an increase in the Company's match of 401(k) contributions from 25% in 1995
to 50% in 1996.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased approximately 9.3% over 1995 due to
the addition of three new Company-operated restaurants and refurbishments to
upgrade and improve existing restaurants.
INTEREST, NET
Net interest expense was flat compared to 1995. An increase in interest
expense primarily as the result of borrowings to fund capital expenditures for
PFR was offset by a decrease in the interest expense associated with capital
lease obligations and a reduced debt balance for PRI as a result of using cash
distributions from PFR to reduce borrowings outstanding on PRI's revolving line
of credit.
PROVISION FOR INCOME TAXES
Provision for income taxes as a percent of income from continuing operations
before income taxes was 27.3% in 1996 and 30.5% in 1995. The decrease was
primarily the result of the Company's retaining tax benefits relating to the
disaffiliation of Friendly's for tax purposes. This benefit in 1996 was
partially offset by a net increase in the provision for state taxes in 1996 due
to a significant level of state tax refunds received in 1995.
CAPITAL RESOURCES AND LIQUIDITY
Principal uses of cash during the first quarter ended March 31, 1998 were
cash outlays related to the Going Private Transaction, including repurchase of
Units and the Going Private Transaction expenses, and capital expenditures.
Capital expenditures consisted primarily of costs related to remodels of
existing restaurants and equipment purchases for new Company-operated
restaurants. One new Company-operated restaurant was opened in the first quarter
of 1998. Remodels and unit upgrades, as well as new restaurants, constituted
more than 73.9% of the capital expenditures during the first quarter. The
Company's primary sources of funding were cash provided by operations and
revolving credit borrowings.
34
<PAGE>
The following table summarizes capital expenditures for each of the years in
the three-year period ended December 31, 1997 and the three months ended March
31, 1998 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1997 1996 1995 1998 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Maintenance............................ $ 3,453 $ 2,987 $ 3,435 $ 387 $ 204
Renovation............................. 2,790 4,064 8,431 1,300 896
New restaurant development............. 6,193 1,947 12,626 1,646 46
Manufacturing.......................... 714 651 859 442 72
Other.................................. 1,952 2,212 3,580 214 343
--------- --------- --------- --------- ---------
Total Capital Expenditures............. $ 15,102 $ 11,861 $ 28,931 $ 3,989 $ 1,561
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The Company's capital budget for 1998 is $21.4 million. The Company plans to
add six new full-service Company-operated restaurants in 1998. The remaining
capital budget will be primarily applied to remodels of existing restaurants and
restaurant maintenance. The primary source of funding for these projects is
expected to be cash provided by operations. Capital spending could vary
significantly from planned amounts as certain of these expenditures are
discretionary in nature.
As is typical in the restaurant industry, the Company ordinarily operates
with a working capital deficit since the majority of its sales are for cash,
while credit is received from its suppliers. Therefore, operating with a working
capital deficit does not impair the Company's short-term liquidity. At March 31,
1998, this deficit was $14.3 million.
On December 22, 1997, PFR issued $130 million of its 10 1/8% Senior Notes
due December 15, 2007. The proceeds were used to repay outstanding senior notes
and borrowings under PFR's revolving line of credit, purchase Units from the
public and pay expenses relative to PFR's Going Private Transaction. See
"Description of Other Indebtedness."
On December 22, 1997, PFR obtained a secured $50 million credit facility
with a sublimit for up to $5.0 million of letters of credit. The credit facility
matures on January 1, 2003, at which time all amounts become payable. All
amounts under the credit facility will bear interest at floating rates based on
the agent's base rate or Eurodollar rates as defined in the agreement. As of
March 31, 1998, $3.0 million of borrowings and approximately $2.4 million of
letters of credit were outstanding under the Credit Facility. See "Description
of Other Indebtedness."
Prior to the fourth quarter of 1997, PFR had paid regular quarterly cash
distributions to its holders of units of limited partnership interest. Following
the consummation of the Going Private Transaction, PFR does not expect to pay
distributions to its general partner or limited partners except distributions
sufficient to satisfy any tax liabilities of its partners arising out of the
allocation of taxable income or gain from PFR and to pay interest on the Notes.
The 10 1/8% Senior Note Indenture and the Credit Facility limit PFR's ability to
pay distributions to its partners.
The Issuer's and PFR's ability to make scheduled payments of principal of,
or to pay the interest or Liquidated Damages, if any, on, or to refinance, their
respective indebtedness, or to fund planned capital expenditures will depend on
the Company's future performance, which, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond their control. Based upon the current level of
operations, management believes that cash flow from operations and available
cash, together with available borrowings under the Credit Facility, will be
adequate to meet the Company's liquidity needs for the foreseeable future. PFR
and the Issuer may, however, need to refinance all or a portion of the principal
of the Notes and the 10 1/8% Senior Notes on or prior to maturity. There can be
no assurance that the Company will generate sufficient cash flow from
operations, or that future borrowings will be available under the Credit
Facility in an amount sufficient to enable the Issuer
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and PFR to service their respective indebtedness or to fund their other
liquidity needs. In addition, there can be no assurance that the Issuer and PFR
will be able to effect any such refinancing on commercially reasonable terms or
at all.
All significant operations of the Issuer are conducted through PFR and the
Issuer's ability to meet its obligations as they mature are primarily dependent
on PFR's ability to make distributions to the Issuer. The covenants under the
Credit Facility and the 10 1/8% Senior Note Indenture restrict PFR's ability to
make distributions to its owners. These restrictions generally limit
distributions to the amount required to fund the owners' tax liabilities arising
from the income of PFR; fifty percent of the net income of PFR after deduction
for tax distributions; and an additional aggregate of $5 million. See
"Description of Other Indebtedness."
Management currently believes that the distributions allowed under the
Credit Facility and the 10 1/8% Senior Note Indenture will be adequate to allow
the Issuer to meet its obligations for the foreseeable future. However, there
can be no assurance that PFR's future income will be sufficient to allow for
distributions in an amount required to meet all future obligations of the
Issuer.
SYSTEM DEVELOPMENT
The Company plans to open six new full-service Company-operated restaurants
in 1998. The Company expects to aggressively grow its franchised restaurants. In
recent years, the Company has been issuing area development agreements in
selected markets where both new and existing franchisees are qualified to open
multiple locations within three to five years. These development agreements are
expected to complement continued growth among franchisees who prefer to open a
limited number of restaurants in existing and smaller markets.
NEW ACCOUNTING PRONOUNCEMENTS
The Company will adopt SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" during 1998. The Company is still evaluating
the effects of adopting this statement, but does not expect the adoption to have
a material effect on the Company's consolidated financial statements.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities," which the Company is required to adopt in 1999, with earlier
application permitted. SOP 98-5 requires the costs of start-up activities to be
expensed as incurred. Upon adoption of SOP 98-5, the Company will be required to
record a cumulative effect of a change in accounting principle to write off any
unamortized preopening costs that exist on the balance sheet at that date. As of
March 31, 1998, the Company had unamortized preopening costs of $315,000.
IMPACT OF INFLATION
The Company does not believe that its operations are generally affected by
inflation to a greater extent than are the operations of others within the
restaurant industry. In the past, the Company has generally been able to offset
the effects of inflation through selective periodic menu price increases.
IMPACT OF GOVERNMENTAL REGULATION
A majority of the Company's employees are paid hourly rates as determined by
Federal and state minimum wage rate laws. Future increases in these rates could
materially affect the Company's cost of labor.
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SEASONALITY
The Company's revenues are subject to seasonal fluctuations. Customer counts
(and consequently revenues) are higher in the summer months and lower during the
winter months because of the high proportion of restaurants located in northern
states where inclement weather adversely affects guest visits.
YEAR 2000
The Company has analyzed its computer systems and has determined that these
systems are substantially year 2000 compliant. Future costs associated with year
2000 compliance are not expected to be material.
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BUSINESS
The Issuer is a holding company whose primary subsidiary is PFR, which is
indirectly wholly-owned by the Issuer. The Issuer is the sole stockholder of
PRI, which is a limited partner and the indirect owner of 100% of PFR and the
parent corporation of PFR's general partner, PMC. The Issuer is also the sole
stockholder of TRC Realty Co. The Issuer has no significant assets other than
its direct and indirect equity interests in its subsidiaries.
The Company, through its primary subsidiary, PFR, is a leading operator and
franchisor of full-service, mid-scale restaurants located primarily in the
Midwest, Pennsylvania, upstate New York and central Florida. The Company's
restaurants operate under the names Perkins Family
Restaurant-Registered Trademark- and Perkins Family Restaurant and
Bakery-Registered Trademark-. Perkins restaurants offer a full menu assortment
of breakfast, lunch, dinner, snack and dessert items and many are open 24 hours
a day. The business of Perkins was founded in 1958, and since then Perkins has
continued to adapt its menus, product offerings, building designs and decor to
meet changing consumer preferences. A substantial majority of Company-operated
restaurants and franchised restaurants have added in-store bakeries which offer
a premium line of freshly prepared baked goods including muffins, cookies and
pies.
As of March 31, 1998, the Company operated 137 full-service restaurants and
franchised 344 full-service restaurants located in 33 states and five provinces
of Canada. For the year ended December 31, 1997, system-wide restaurant revenues
(including franchised restaurants), Company revenues and Company EBITDA were
$711.0 million, $271.2 million and $36.0 million, respectively. Company-operated
restaurants have achieved comparable restaurant sales increases in each of the
last 26 quarters. The Company continues to focus on increasing its number of
franchised restaurants, which provide a higher margin of cash flow relative to
the required capital investment and create an additional sales outlet for the
products of Foxtail. From 1988 to 1997, the average annual royalties per
franchised restaurant increased from approximately $38,500 to approximately
$56,700 and the number of franchised restaurants increased from 227 to 337.
The Perkins concept is designed to serve a variety of demographically and
geographically diverse customers for a wide range of dining occasions which are
appropriate for the entire family. The Perkins concept appeals to a wide range
of markets and customer tastes with its large, comfortable dining rooms,
flexible kitchens, broad menu, moderate pricing, extended operating hours, table
service and bakery specialties. Perkins offers a wide menu selection of high
quality, moderately priced food and beverage items consisting of traditional
favorites and seasonal specialties. Perkins offers guests a menu of over 140
items ranging in price from $3.09 to $9.29. The Company also approves additional
items to meet regional and local tastes. Perkins' signature menu items include
buttermilk pancakes, omelettes, bread bowl salads, melt sandwiches and
Butterball-Registered Trademark- turkey dinners. Breakfast items, which are
available throughout the day, account for slightly more than half of the entrees
sold in the Company's restaurants.
Perkins restaurants are primarily located in free-standing buildings with
approximately 90 to 250 seats. Recently, the Company and its franchisees have
begun to test the Perkins concept in various non-traditional locations including
travel plazas, malls, hotels and airports. The Company and its franchisees
operate three alternative formats, including limited menu restaurants and a
stand-alone bakery, in addition to full-service stand-alone restaurants. These
alternative formats are operated under the names Perkins Cafe and
Bakery-Registered Trademark-, Perkins Bakery-Registered Trademark- and Perkins
Express-Registered Trademark-.
In addition to operating and franchising Perkins restaurants, the Company
operates Foxtail and is a partner in J.A. Joint Venture LLC, a joint venture for
the development of Jack Astor's Bar and Grill restaurants. Foxtail provides
cookie dough, muffin batter, pancake mixes, pies and other bakery products to
Company-operated restaurants, franchisees and third parties.
Foxtail accounted for 8.8% of 1997 Company revenues. During 1997, the
Company entered into a joint venture with a Canadian casual dining operator for
the development of a minimum of three Jack
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Astor's Bar and Grill restaurants. Jack Astor's Bar and Grill is a casual themed
dining concept with a high-energy, fun atmosphere whose offerings include
chicken, pasta, hamburgers and alcoholic beverages. The joint venture's first
restaurant opened in Greensboro, North Carolina on October 6, 1997.
The Company also operates an aircraft through TRC Realty Co., its
wholly-owned subsidiary. The aircraft is operated for the benefit of, and all
operating costs are reimbursed by PMC and Friendly's.
In the 12 years under the Company's current leadership, a number of
improvements have been made to the Company's operations, including: (i)
upgrading its menu offerings; (ii) unifying the system's name, restaurant
design, marketing programs, purchasing, training and technology; (iii) creating
in-store bakeries; (iv) strengthening the franchise system; (v) creating
Foxtail; and (vi) developing alternative formats. Also over this time period,
PFR has made significant interest payments and distributions to Unitholders
including 44 consecutive quarterly cash distributions to Unitholders between the
time PFR became a publicly-traded limited partnership in 1986 and its becoming
an indirect wholly-owned subsidiary of the Issuer in December 1997.
COMPETITIVE STRENGTHS
ESTABLISHED, HIGH-VALUE RESTAURANT BRAND. Perkins is a well-established,
highly recognized brand in the geographic areas it serves. Perkins offers its
guests a wide variety of over 140 reasonably priced menu items, including fresh
bakery products served in a warm and comfortable dining environment with the
convenience of extended operating hours. As of December 31, 1997, entrees served
in Company-operated restaurants ranged in price from $3.09 to $9.29 for
breakfast, $4.49 to $6.59 for lunch and $6.19 to $9.29 for dinner. The Company
operates a 3,000 square foot test kitchen in Memphis, Tennessee which develops
and tests new menu items. Menus are updated at least three times per year and
supplemented with special menus for holiday and promotional events.
STRONG FRANCHISE NETWORK. The Company has 110 franchisees which operate 344
full service restaurants in 31 states and five Canadian provinces, representing
over 70% of the restaurants in the Perkins system. In addition to providing the
Company with substantial royalty revenues ($18.8 million for the twelve months
ended December 31, 1997), the franchise network allows the Company to
significantly expand the Perkins system without significant capital investment
by the Company. The Company believes that it enjoys good relations with its
franchisees.
UPDATED, MODERN RESTAURANTS. The Company employs an on-going system of
prototype development, testing and remodeling to maintain operationally
efficient, cost-effective and unique interior and exterior facility design and
decor. An accelerated program to upgrade existing Company-operated restaurants
began in 1995 and continues today. The current remodel package features a
modern, distinctive interior and exterior layout that enhances operating
efficiencies and guest appeal. As of March 31, 1998, approximately 87% of
Company-operated restaurants had either been remodeled or initially constructed
since January 1, 1994.
To promote a consistent and current image throughout the Perkins system, the
Company encourages its franchise operators to remodel their restaurants by
providing financial incentives and sponsoring third-party financing programs.
Twenty-two franchised restaurants were remodeled in 1996 and 40 additional
restaurants were remodeled in 1997. The Company expects that franchisees will
remodel an additional 40 restaurants in 1998.
MANAGEMENT EXPERTISE. The Company has an experienced management team with
average tenure with the Company of over seven years and average restaurant
industry experience of 20 years. Donald N. Smith, the Company's Chairman and
Chief Executive Officer, has over 30 years of restaurant experience, over 12 of
which have been with the Company. Richard K. Arras, PMC's President and Chief
Operating Officer, has 18 years of restaurant experience, all of which have been
with the Company.
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EFFICIENT OPERATIONS. The Company uses a combination of current technology,
on-going operational analyses, hourly employee performance programs and the
operating experience of both its own field management and that of its
franchisees to continuously improve the quality, efficiency and execution of its
operating systems. For example, Company-operated restaurants recently
implemented programs to improve labor efficiency, lower food cost and improve
facility utilization during peak periods.
DAYPART BALANCE. Perkins has successfully evolved over the last 40 years
from its origins as a breakfast-oriented pancake house by developing significant
lunch, dinner and late night product offerings. The flexibility of Perkins'
multi-daypart offerings allows each location to meet the needs of its local
market. During 1997, the revenue breakdown by daypart for Company-operated
restaurants was 25% breakfast, 29% lunch, 32% dinner and 14% late night (10:00
p.m. to 6:00 a.m.).
COMMITMENT TO GUEST SATISFACTION. The Company is focused on continually
improving guest satisfaction. The Company regularly surveys customers to
determine their overall satisfaction with their dining experience, conducts
extensive service quality training programs and operates a toll free number to
monitor guests' dining experiences.
MANAGEMENT INFORMATION SYSTEMS. The Company's information systems not only
provide detailed monthly financial statements for each restaurant but daily
operating statistics such as sales, labor, guest check and average table turns.
The systems also generate weekly restaurant profit and loss statements and food
and labor variance analysis. The Company has also developed a labor scheduling
system which calculates the amount of labor necessary to provide optimal guest
service. The Company's systems are substantially year 2000 compliant.
PURCHASING LEVERAGE. The Company aggregates the purchasing requirements of
all of its Company-operated restaurants and over 90% of its franchised
restaurants to obtain purchasing economies of scale for food items, cleaning
supplies, equipment, maintenance services and regional distribution agreements.
In addition, the Company utilizes outside consultants for information regarding
purchases of commodity items and, together with its franchisees, makes
significant purchases of commodity products, such as sirloin steak or shrimp,
which provide the basis for several product-driven marketing programs throughout
the year.
BUSINESS STRATEGY
INCREASE FRANCHISE REVENUES. The Company plans to continue to add
franchised restaurants in existing and new geographic markets. In addition,
management will continue to encourage franchisees to remodel and renovate
restaurants where appropriate. Management believes its franchisees will open
35-40 new restaurants in 1998. During 1997, franchisees opened 13 new
full-service restaurants and six under-performing franchised restaurants were
closed.
SELECTIVELY DEVELOP NEW COMPANY-OPERATED RESTAURANTS. The Company will
continue to develop and operate new restaurants based upon its current
prototype. Management believes the development of successful Company-operated
restaurants supports the continued development of the Perkins franchise system.
The Company opened three new full-service Company-operated restaurants in 1997
and plans to add six new full-service Company-operated restaurants in 1998.
EXPAND NON-TRADITIONAL LOCATIONS AND ALTERNATIVE FORMATS. The Company and
its franchisees have built, on a limited test basis, restaurants within
non-traditional sites including hotels, airports, travel plazas and strip
shopping centers. Within these non-traditional locations, the Company has
recently opened restaurants with alternative formats, such as limited menu
restaurants and a stand-alone bakery, in addition to full-service, stand-alone
restaurants. The Company intends to continue testing non-traditional locations
and further develop alternative formats in conjunction with its franchisees in
cases where appropriate for the Perkins brand and where anticipated financial
returns are acceptable.
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PURSUE COMPLEMENTARY ACQUISITIONS. The Company continually evaluates
potential acquisition opportunities of existing franchised Perkins restaurants
and other restaurant chains. The Company does not currently have any agreements
or understandings to make any acquisitions.
CONCEPT
The Perkins concept is designed to serve a variety of demographically and
geographically diverse customers for a wide range of dining occasions which are
appropriate for the entire family. The Perkins concept appeals to a wide range
of markets and customer tastes with its large comfortable dining rooms, flexible
kitchens, broad menu, moderate pricing, extended operating hours, table service
and bakery specialties.
MENU. Each Perkins restaurant offers a diverse menu of high quality,
moderately priced food and beverage items consisting of traditional favorites
and seasonal specialties. Each Perkins restaurant offers guests a core menu
consisting of certain required menu items that each Company-operated and
franchised restaurant must offer, providing the consistency necessary to support
the Perkins brand. Additional items are offered to meet regional and local
tastes. All menu items served in franchised restaurants must be approved by the
Company's research and development department. Menu offerings continually evolve
to meet changing consumer tastes.
The menu currently features over 140 items comprised of a broad selection of
breakfast, lunch, dinner and bakery products. Signature breakfast items include
premium omelettes, buttermilk pancakes and traditional egg dishes. Breakfast
entrees generally range in price from $3.09 to $9.29. Signature lunch items
include bread bowl salads, melt sandwiches and specialty burgers generally
ranging in price from $4.49 to $6.59. Signature dinner items include chicken
puff pastry pie, country fried steak, New York strip steak and
Butterball-Registered Trademark- turkey and dressing. Price points for dinner
entrees generally range from $6.19 to $9.29. Entree selections are complemented
by appetizers and dessert products. Coffee, iced tea and soft drinks are served
as "Bottomless Beverages"-TM- with free refills. Perkins restaurants do not
generally serve alcoholic beverages.
Most Perkins restaurants have an in-store bakery, with bakery products
offered both for in-house consumption and for carry-out. Bakery breakfast
products include freshly baked Mammoth Muffins-Registered Trademark-, cinnamon
rolls and sticky buns. Bakery desserts include freshly prepared cookies,
brownies, eclairs and pies.
RESTAURANT DESIGN. In 1993, the Company began testing a major prototype
redesign which features a series of expandable and differentiated dining rooms
set around a central kitchen and pantry area. This design reduces the distance
servers travel from food pick-up to guest tables. The interior decor package,
which was introduced in 1995 with related but distinct decor for each dining
area, can be utilized in traditional rectangular buildings and other building
designs. Management believes the new prototype and related decor packages add
significantly to the value perceptions of its guests. In addition, the Company
has developed an exterior design which updates its restaurants while maintaining
an identifiable Perkins image. By selectively modifying key concept identifiers,
such as entry construction, roof lines and window treatments, the Company can
upgrade older restaurants, convert existing buildings used for other purposes
into Perkins restaurants and modify non-traditional locations such as shopping
center locations into easily recognizable, modern Perkins restaurants.
RESTAURANT OPERATIONS AND TRAINING. All restaurants are operated pursuant
to uniform operating standards and specifications relating to the quality and
preparation of menu items, selection of menu items, maintenance and cleanliness
of facilities and employee conduct. The Company's operating standards are based
upon the Perkins Promise-Registered Trademark-, a guarantee of 100% guest
satisfaction. This operating and training system utilizes employee empowerment
and feedback to ensure the delivery of a satisfactory
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dining experience to all guests. All standards and specifications are developed
by the Company, with input from franchisees, and applied on a system-wide basis.
The Company has an extensive eight to twelve-week Management Development
Program for general managers, kitchen managers and other salaried restaurant
managers. This 44-module program consists of in-store, task-oriented training
and formal administrative, customer service and financial training. Upon
completion of this program, management candidates attend Perkins Leadership
Institute, a two-week in-store internship where they can practice skills in a
certified training restaurant. Certified trainers conduct hands-on training for
all hourly restaurant employees using the Foundations Training Program. This
state-of-the-art program utilizes both printed material and video and is
designed to improve the confidence, productivity and skill level of new
employees. The Company provides on-going training for its restaurant employees
on new products and other important topics such as food sanitation and customer
and employee relations.
ADVERTISING. The Company focuses its advertising and marketing efforts on
six to eight food-specific promotions each year. Each promotion features a
specific theme or product. Several commodity buys each year enable the Company
to offer attractive price points on popular products such as steak and eggs or
fried shrimp. Three of the Company's most popular recent promotions have been
the Summer Menu featuring eight new entrees, a new line of "Dill Melt"
sandwiches and an expanded lenten promotion. The Company advertises on a
regional and local basis, utilizing primarily television, radio and print media.
In 1997, the Company spent approximately 4.0% of Company-operated restaurants'
net revenues on advertising, of which 3.1% was contributed to the system
advertising fund which develops and funds the specific system-wide promotions.
Substantially all franchisees are also required to contribute 3.0% of their
gross revenues to the advertising fund. The remainder of the Company's
advertising expenditures are focused on local advertising in areas with
Company-operated restaurants.
AVERAGE CHECK. For the year ended December 31, 1997, the average guest
check for Company-operated restaurants was $5.56.
FRANCHISE OPERATIONS
As of March 31, 1998, the Company had 344 franchised restaurants (excluding
alternative formats) operated by 110 franchisees. The Company actively seeks
experienced multi-unit restaurant operators as franchisees and requires each
franchisee to satisfactorily complete the Company's extensive training program.
Seven of the franchisees operate a total of 146 full-service Perkins
restaurants. The remaining franchisees each currently operate fewer than ten
units.
The majority of the Company's new franchised restaurants are opened by
existing franchisees. Of the 32 new franchised restaurants opened between
January 1996 and December 1997, 22 were opened by existing franchisees. In order
to attract new franchisees, the Company employs direct mail, attends trade
shows, places print advertising in industry-specific publications and receives
referrals. Applicants are screened for financial stability and relevant
management experience and undergo training programs between eight and twelve
weeks, depending on prior experience. In selected markets with candidates of
proven experience and ability, the Company may enter into area development
agreements requiring the applicant to open a specified number of restaurants
during the term of the agreement, which is usually five years or less. The
Company currently has six existing area development agreements covering 19
restaurants through 2002.
As of March 31, 1998, the Company's three largest franchisees operated a
total of 92 restaurants. The respective distribution of restaurants operated by
such franchisees was: 41 restaurants primarily in upstate New York; 30
restaurants in Pennsylvania, Ohio and New York; and 21 restaurants in Ohio and
Kentucky. During 1997, the Company received net royalties and license fees of
approximately $2.2 million, $1.7 million and $1.2 million, respectively, from
these franchisees. See "Risk Factors--Franchise Operations."
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FRANCHISE ARRANGEMENTS. Franchised restaurants operate pursuant to license
agreements generally having an initial term of 20 years and pursuant to which
each franchisee pays the Company a royalty fee (usually 4.0% of gross revenues)
and an advertising contribution (typically 3.0% of gross revenues). New
franchisees currently pay a non-refundable license fee of $40,000 per
restaurant. Franchisees opening their third and subsequent restaurants pay a
non-refundable license fee of $30,000 per restaurant. License agreements are
typically terminable by franchisees on 12 to 15 months prior notice and upon
payment of specified liquidated damages. Franchisees do not typically have
express renewal rights, although franchisees typically apply for and receive new
license agreements at the end of existing contract terms.
DEVELOPMENT OF RESTAURANTS. The Company makes available to franchisees
prototype plans and specifications for a typical restaurant which the franchisee
and its architect adapt to each site. The Company retains the right to approve
all final plans and specifications. Each franchisee, with assistance from the
Company, is responsible for selecting the site for each restaurant within its
territory, subject to Company approval. The Company conducts a physical
inspection, reviews any proposed lease or purchase agreements and makes
available demographic studies. A real estate representative of the Company
assists franchisees in identifying possible sites and trade areas, managing
broker relationships and preparing site packages for submission to the Company
for approval.
DESIGN AND CONSTRUCTION. The Perkins Construction Management Program is
available for a fee to assist franchisees in coordinating the design,
construction and equipping of their restaurants. In conjunction with this
program, the Company provides advice on critical design and contracting
decisions and oversees day-to-day construction work, providing comprehensive
support during all phases of construction.
FINANCING. The Company currently sponsors financing programs on competitive
terms designed to provide its franchisees with access to financing options to
support the remodeling of existing restaurants. The financing is provided by two
financial services companies with extensive experience in franchise and cash
flow based lending. These programs were designed to allow each franchisee's
request for financing to be evaluated solely on the basis of the financial
performance of the franchisee without support from the Company. However, under
both programs, the Company has the option to extend differing levels of support
in its sole discretion, if it determines that such support will have a positive
strategic impact on the future growth of the Company. Although not specifically
part of the current programs, both financial services companies are also
offering competitive financing options to both new and existing franchisees for
equipment and real estate financing outside of the current remodel initiative.
In the past, the Company has sponsored financing programs offered by certain
lending institutions to help its franchisees obtain funds for the construction
of new franchised restaurants and to purchase and install in-store bakeries. The
Company provided a limited guaranty of the funds borrowed for such purposes. As
of March 31, 1998, there were approximately $3.6 million in borrowings
outstanding under these programs. The Company has guaranteed $1.2 million of
these borrowings. No additional borrowings are available under these programs.
On February 26, 1998, the Company entered into a separate two-year limited
guarantee of $1.2 million in borrowings of a franchisee which were used to
finance the construction of a new franchised restaurant.
RESTAURANT OPENING. Thirteen-member New Store Opening Teams ("NSOT") assist
franchisees in opening their first two restaurants. For approximately six weeks,
team members train staff, help operate the restaurant and help the franchisee
establish control over labor and food costs. The NSOT arrives prior to a
restaurant opening to help ensure a successful opening. The only expense to
franchisees for the NSOT services for their first two restaurants is the cost of
travel, lodging and local transportation for the team members during their days
on site. For each additional restaurant opening in which the franchisee utilizes
the services of the NSOT, the franchisee is required to pay $10,000, plus
expenses.
TRAINING. Central to the Perkins system is a comprehensive and continually
evolving training system. All aspects of the program incorporate
state-of-the-art, easy-to-use materials designed to facilitate self-
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teaching whenever possible and to gain maximum guest impact from time spent on
training. Training is provided for all restaurant positions.
FRANCHISE ADVISORY COUNCIL. The Franchise Advisory Council (the "Council")
consists of representatives of 15 franchisees who represent a broad cross
section of the franchise organization from both a size and geographic
perspective. The Council meets three times per year along with the Company's
senior management to review and discuss numerous issues that affect the
franchise system. The Council advises the Company with respect to matters such
as menu development, restaurant design and product and equipment purchasing.
REPORTING AND ROYALTY COLLECTIONS. Franchisees are required to report
monthly sales and other operating information, including monthly financial
statements to the Company. Franchisees make monthly royalty payments based on
sales for the previous month. Payments for royalties are typically received at
the Company's corporate headquarters while the advertising fees are paid
directly to a lockbox account.
ACCOUNTING. The Company provides optional accounting services to
franchisees for a monthly fee. These services include the processing of payroll
and accounts payable and the preparation of monthly financial statements.
QUALITY CONTROL
The Company maintains a high level of quality standards and emphasizes the
importance of these standards in all aspects of its purchasing, training and
management development systems. These systems are promoted not only within
Company-operated restaurants but also throughout the franchise system. The
quality standards of the Company-operated restaurants as well as Foxtail are
monitored by the Company's research and development and quality assurance
staffs. The system standards are detailed in The Confidential Management and
Operating Systems Manual maintained in all Company-operated and franchised
restaurants and are reinforced through on-going training programs at both the
salaried and hourly employee levels.
The Company utilizes several quality control systems. All Company-operated
and franchised restaurants are reviewed periodically throughout the year in
quality assurance audits conducted by multi-unit management level personnel.
Additionally, guest and employee comments are collected through toll-free
telephone lines specifically dedicated to employee and guest feedback. Outside
providers also conduct guest service surveys in each Company-operated restaurant
and a separate formal quarterly consumer tracking study covering both
Company-operated and franchised restaurants is monitored closely by management.
Aspects of each of these programs are utilized in performance evaluation and
incentive compensation determination for all levels of field management
personnel.
OTHER FINANCIAL ARRANGEMENTS
The Company's predecessors entered into agreements with several different
parties under which specified payments are to be made by the Company based on a
percentage of gross sales from certain restaurants and for new restaurants
opened within certain geographic regions. During 1997, the Company paid an
aggregate of $2.5 million under such agreements. In 1997, the Company terminated
two such agreements. Had such agreements been terminated at the beginning of
1997, payments by the Company during 1997 would have been $1.9 million.
PURCHASING
The Company negotiates directly with suppliers for food and beverage
products and raw materials to ensure consistent quality and freshness of
products and to obtain competitive prices. Essential restaurant supplies and
products are available from several sources and the Company is not dependent
upon any one source for its supplies and products. The Company has not
experienced any significant delays in receiving
44
<PAGE>
restaurant products, supplies and equipment. The Company allows its franchisees
to benefit from the purchasing economies it receives by providing and
administering purchasing programs and passing through purchasing rebates to
franchisees. All Company-operated restaurants are supplied through two national
distributors.
PATENTS, TRADEMARKS AND OTHER INTELLECTUAL PROPERTY
The Company believes that its trademarks and service marks, especially the
mark "Perkins-Registered Trademark-," are of substantial economic importance to
its business. These include signs, logos and marks relating to specific menu
offerings in addition to marks relating to the Perkins name. Certain of these
marks are registered in the U.S. Patent and Trademark Office and in Canada.
Common law rights are claimed with respect to other menu offerings and certain
promotions and slogans. The Company has copyrighted architectural drawings for
Perkins restaurants and claims copyright protection for most of its manuals,
menus, advertising and promotional materials. The Company does not have any
patents.
PROPERTIES
The following table lists the location of each of the Company-operated and
franchised restaurants and bakeries as of March 31, 1998 (excluding alternative
formats):
NUMBER OF RESTAURANTS AND BAKERIES
<TABLE>
<CAPTION>
COMPANY-
OPERATED FRANCHISED TOTAL
------------- ------------- -----
<S> <C> <C> <C>
Arizona............................................................................ -- 10 10
Arkansas........................................................................... -- 5 5
Colorado........................................................................... -- 16 16
Delaware........................................................................... -- 1 1
Florida............................................................................ 20 19 39
Georgia............................................................................ -- 1 1
Idaho.............................................................................. -- 8 8
Illinois........................................................................... 8 -- 8
Indiana............................................................................ -- 6 6
Iowa............................................................................... 16 1 17
Kansas............................................................................. 4 3 7
Kentucky........................................................................... -- 4 4
Maryland........................................................................... -- 2 2
Michigan........................................................................... 5 1 6
Minnesota.......................................................................... 40 33 73
Mississippi........................................................................ -- 1 1
Missouri........................................................................... 11 1 12
Montana............................................................................ -- 7 7
Nebraska........................................................................... 5 2 7
New Jersey......................................................................... -- 8 8
New York........................................................................... -- 45 45
North Carolina..................................................................... -- 4 4
North Dakota....................................................................... 3 5 8
Ohio............................................................................... -- 55 55
Oklahoma........................................................................... 3 -- 3
Pennsylvania....................................................................... 7 44 51
South Carolina..................................................................... -- 2 2
South Dakota....................................................................... -- 10 10
Tennessee.......................................................................... 1 11 12
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
COMPANY-
OPERATED FRANCHISED TOTAL
------------- ------------- -----
<S> <C> <C> <C>
Virginia........................................................................... -- 1 1
Washington......................................................................... -- 7 7
Wisconsin.......................................................................... 14 13 27
Wyoming............................................................................ -- 4 4
Canada............................................................................. -- 14 14
--- --- ---
Total.............................................................................. 137 344 481
--- --- ---
--- --- ---
</TABLE>
Most of the restaurants feature a distinctively styled brick or stucco building.
Perkins restaurants are predominantly single-purpose, one-story, free-standing
buildings averaging approximately 5,000 square feet, with a seating capacity of
between 90 and 250 customers.
The following table sets forth certain information regarding
Company-operated restaurants and other properties, as of March 31, 1998:
<TABLE>
<CAPTION>
NUMBER OF PROPERTIES (1)
-------------------------------------
<S> <C> <C> <C>
USE OWNED LEASED TOTAL
- ----------------------------------------------------------------------------------------- ----------- ----------- -----
Offices and Manufacturing Facilities (2)................................................. 1 8 9
Restaurants (3).......................................................................... 56 81 137
Alternative Concepts (4)................................................................. -- 3 3
</TABLE>
- ------------------------
(1) In addition, the Company leases 24 properties, 18 of which are subleased to
others (six of which are subleased to franchisees), two of which are vacant,
and four of which are held for future development. The Company also owns 13
properties, all which are leased to others (11 of which are leased to
franchisees).
(2) The Company's principal office is located in Memphis, Tennessee, and
currently comprises 53,340 square feet of floor area under a lease expiring
on May 31, 2003, subject to renewal by the Company for a maximum of 60
months. In addition, the Company owns a 25,149 square-foot manufacturing
facility in Cincinnati, Ohio and leases two other properties in Cincinnati,
Ohio, consisting of 36,000 square feet and 60,000 square feet for use as
manufacturing facilities.
(3) The average term of the remaining leases is 8 years, excluding renewal
options. The longest lease term will mature in 43 years and the shortest
lease term will mature in approximately 3 years, assuming the exercise of
all renewal options.
(4) The Company leases 4 properties, 3 of which are operating as Perkins Cafe
and Bakeries and 1 of which is under construction. The average term of the
leases is 8 years, excluding renewal options. The longest lease term is 17
years and the shortest lease term will mature in approximately 4 years,
assuming the exercise of all renewal options.
EMPLOYEES
As of December 31, 1997, the Company employed approximately 9,500 persons,
of whom approximately 310 were administrative and manufacturing personnel and
the balance of whom were restaurant personnel. Approximately 69% of the
restaurant personnel are part-time employees. The Company competes in the job
market for qualified restaurant management and operational employees. The
Company maintains ongoing restaurant management training programs and has on its
staff full-time restaurant training managers and a training director. The
Company believes that its restaurant management compensation and benefits
package compares favorably with those offered by its competitors. Management
believes its employee relations are good. None of the Company's employees are
represented by a union.
46
<PAGE>
GOVERNMENT REGULATION
The Company is subject to various federal, state and local laws affecting
its business. Restaurants generally are required to comply with a variety of
regulatory provisions relating to zoning of restaurant sites, sanitation, health
and safety and employment. No material amounts have been or are expected to be
expensed to comply with environmental protection regulations.
The Company is subject to a number of state laws regulating franchise
operations and sales. Those laws impose registration and disclosure requirements
on franchisors in the offer and sale of franchises and, in certain cases, also
apply substantive standards to the relationship between franchisor and
franchisee. The Company must also adhere to Federal Trade Commission regulations
governing disclosures in the sale of franchises.
The wage rates of the Company's hourly employees are affected by federal and
state minimum wage rate laws. Future increases in these rates could materially
affect the Company's cost of labor.
LEGAL PROCEEDINGS
The Company is a party to various legal proceedings in the ordinary course
of business. Management does not believe that these proceedings, either
individually or in the aggregate, are likely to have a material adverse effect
on the Company's financial position or results of operations.
47
<PAGE>
MANAGEMENT
The following individuals are currently serving as directors and executive
officers of the Issuer:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE ISSUER
- ------------------------------------------------ ----------- ---------------------------------------------------------
<S> <C> <C>
Donald N. Smith................................. 57 Chairman of the Board and Chief Executive Officer
Steven L. Ezzes................................. 51 Director
Michael P. Donahoe.............................. 47 Vice President, Controller and Treasurer
Richard J. Estlin............................... 55 Vice President, Strategic Coordination
Steven R. McClellan............................. 43 Vice President, Chief Financial Officer
Donald F. Wiseman............................... 52 Secretary
</TABLE>
The following individuals are currently serving as directors and executive
officers of PMC, the general partner of PFR:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH PMC
- ------------------------------------------------ --- ---------------------------------------------------------
<S> <C> <C>
Donald N. Smith................................. 57 Chairman of the Board and Chief Executive Officer
Lee N. Abrams................................... 63 Director
Steven L. Ezzes................................. 51 Director
Charles A. Ledsinger, Jr........................ 48 Director
D. Michael Meeks................................ 55 Director
Richard K. Arras................................ 46 President and Chief Operating Officer
Michael D. Kelly................................ 51 Executive Vice President, Marketing
Steven R. McClellan............................. 43 Executive Vice President, Chief Financial Officer
Jack W. Willingham.............................. 52 Executive Vice President, Restaurant Development
James F. Barrasso............................... 47 Vice President, Foodservice Development
Michael P. Donahoe.............................. 47 Vice President, Controller
William S. Forgione............................. 44 Vice President, Human Resources
Clyde J. Harrington............................. 39 Vice President, Operations Services
Patrick W. Ortt................................. 52 Vice President, Operations-Eastern Division
Steven J. Pahl.................................. 42 Vice President, Operations--Western Division
Anthony C. Seta................................. 51 Vice President, Research and Development
Robert J. Winters............................... 46 Vice President, Franchise Development
Donald F. Wiseman............................... 52 Vice President, General Counsel and Secretary
</TABLE>
DONALD N. SMITH
Donald N. Smith has been the Chairman of the Board and Chief Executive
Officer of PMC, PRI and the Issuer since 1986. Mr. Smith also has been the
Chairman of the Board and Chief Executive Officer of Friendly's since 1988.
Prior to joining the Issuer, Mr. Smith was President and Chief Executive Officer
of Diversifoods, Inc. from 1983 to October 1985. From 1980 to 1983, Mr. Smith
was a Senior Vice President of PepsiCo, Inc. and was President of its Food
Service Division. Mr. Smith was responsible for the operations of Pizza Hut Inc.
and Taco Bell Corp., as well as North American Van Lines, Lee Way Motor Freight,
Inc., PepsiCo Foods International and La Petite Boulangerie. Prior to 1980, Mr.
Smith was President and Chief Executive Officer of Burger King Corporation and
Senior Executive Vice President and Chief Operations Officer of McDonald's
Corporation.
LEE N. ABRAMS
Lee N. Abrams was elected a Director of PMC in September 1986 and appointed
Chairman of the Audit Committee for PMC in October 1986. He is a senior partner
in the Chicago, Illinois law firm of Mayer, Brown & Platt. He has been
associated with that firm since his graduation from the University of
48
<PAGE>
Michigan Law School in 1957. He specializes in franchise and antitrust law. He
is also a Certified Public Accountant.
STEVEN L. EZZES
Steven L. Ezzes was elected a Director of the Issuer and its subsidiaries in
February 1996. Since May 1998, Mr. Ezzes has been Managing Director of Societe
Generale Securities Corp. From October 1996 to May 1998, Mr. Ezzes was a
Managing Director of Scotia Capital Markets (U.S.A.), Inc. From January 1995 to
October 1996, Mr. Ezzes was a private investor and from May 1992 to January
1995, Mr. Ezzes was a Managing Director of Lehman Brothers Inc. Mr. Ezzes
previously served as a Director of PMC, PRI and the Issuer from January 1991 to
May 1992. Mr. Ezzes is also a director of Friendly's and OzEMail, a company that
provides internet telephony in Australia and New Zealand.
CHARLES A. LEDSINGER, JR.
Charles A. Ledsinger, Jr. was elected a Director of PMC in October 1991.
Since February 1998, Mr. Ledsinger has served as President and Chief Operating
Officer of St. Joe Corporation, a property development company. From May 1997
until February 1998 Mr. Ledsinger served as Senior Vice President and Chief
Financial Officer of St. Joe Corporation. From June 1995 until May 1997, Mr.
Ledsinger was Senior Vice President and Chief Financial Officer of Harrah's and,
from August 1996 to October 1996, Mr. Ledsinger served as Treasurer of Harrah's.
For more than three years prior, Mr. Ledsinger served as Senior Vice President
and Chief Financial Officer of The Promus Companies Incorporated, Harrah's
former parent. Mr. Ledsinger is also a director of Friendly's and of TBC
Corporation, a company specializing in the production and sale of tires and
batteries.
D. MICHAEL MEEKS
D. Michael Meeks was elected a Director of PMC and became a member of the
Audit Committee for PMC in August 1996. Mr. Meeks has been a private investor
for more than the past five years. Mr. Meeks previously served as a director of
the Issuer and its subsidiaries and Friendly's from December 1987 to October
1991.
RICHARD K. ARRAS
Richard K. Arras has been President and Chief Operating Officer of PMC since
November 1988 and has held varying positions with Perkins since 1979. Prior to
being named to his current position, Mr. Arras was Vice President of Operations.
He has also served as a Director of Operations and as a regional manager for
Perkins restaurants in Minnesota.
MICHAEL D. KELLY
Michael D. Kelly was elected Executive Vice President, Marketing of PMC in
March 1993. From January 1991 to February 1993, Mr. Kelly was Vice President,
Marketing for Friendly's. Prior to that, Mr. Kelly was Executive Vice President
of Marketing for Bakers Square for four years. He has also held positions at
Pizza Hut, Inc., Weight Watchers International Inc., Stouffers Corp. and
Fuddruckers Inc.
STEVEN R. MCCLELLAN
Steven R. McClellan has served as Executive Vice President and Chief
Financial Officer of PMC since September 1996 and has served as Vice President
and Chief Financial Officer of the Issuer and PRI since May 1998. From June 1994
to September 1996, Mr. McClellan was Executive Vice President and General
Banking Group Head of First Union National Bank of South Carolina, a subsidiary
of First Union Corporation. For more than two years prior, he was Senior Vice
President of NationsBank.
49
<PAGE>
JACK W. WILLINGHAM
Jack W. Willingham was elected Executive Vice President, Restaurant
Development of PMC in April 1994. From July 1991 to April 1994, Mr. Willingham
served as Vice President, Corporate Development of PMC.
JAMES F. BARRASSO
James F. Barrasso has been Vice President, Foodservice Development of PMC
since February 1994. For more than two years prior, he served as Vice President,
Operations Administration of PMC.
MICHAEL P. DONAHOE
Michael P. Donahoe has been Vice President, Controller of PMC since October
1993. He has also been Vice President, Controller and Treasurer of the Issuer
and PRI since January 1986 and November 1988, respectively. From May 1989 to
October 1993, he was Vice President, Chief Financial Officer and Treasurer of
PMC. He is a Certified Public Accountant.
RICHARD J. ESTLIN
Richard J. Estlin has been Vice President, Strategic Coordination of the
Issuer since September 1997. Mr. Estlin retired as Vice President, Chief
Financial Officer of The UNO-VEN Company in May 1997, a position he held for
more than five years prior.
WILLIAM S. FORGIONE
William S. Forgione was elected Vice President, Human Resources of PMC
effective August 1997. From 1994 to August 1997, he was Vice President, Human
Resources of UT Medical Group, Inc. and from 1992 to 1994, Worldwide Program
Manager for Digital Equipment Corporation.
CLYDE J. HARRINGTON
Clyde J. Harrington was elected Vice President, Operations Services of PMC
in September 1996. From August 1995 to September 1996, he was Director, Systems
Operations of PFR and from March 1995 to August 1995, he served as Director in
Training for PFR. From November 1992 to March 1995, Mr. Harrington served as
Director, Operations for the Restaurant Division of PepsiCo., Inc. and from
March 1992 to November 1992, he served as Director of Delivery Development for
Pizza Hut, Inc.
PATRICK W. ORTT
Patrick W. Ortt was elected Vice President, Operations Eastern Division of
PMC in September 1996. From March 1993 to September 1996, Mr. Ortt served as
Director, Systems Operations of PFR. For more than two years prior, he was Vice
President, Operations of Pasta Lovers Trattoria, Inc.
STEVEN J. PAHL
Steven J. Pahl was elected Vice President, Operations Western Division of
PMC in September 1996. From November 1988 to September 1996, Mr. Pahl served as
Director, Systems Operations of PFR.
ANTHONY C. SETA
Anthony C. Seta was elected Vice President, Research and Development of PMC
in April 1994. From August 1992 to April 1994, he served as Vice President, Food
and Beverage for Blackeyed Pea Restaurants, Inc. For more than a year prior, he
was the owner and chef of an independent restaurant. Mr. Seta also acted as a
consultant to Kenny Rogers Roasters from January 1992 to August 1992.
50
<PAGE>
ROBERT J. WINTERS
Robert J. Winters was elected Vice President, Franchise Development of PMC
in October 1996. From March 1993 to October 1996, he served as Senior Director,
Franchise Development of PMC. For more than a year prior, he was Director,
Training and Development of PMC.
DONALD F. WISEMAN
Donald F. Wiseman has been Vice President, General Counsel and Secretary of
PMC since December 1991 and the Secretary of the Issuer and PRI since September
1997.
EXECUTIVE COMPENSATION
The following table summarizes all compensation paid or accrued for services
rendered to the Company in all capacities during each of the three years in the
period ended December 31, 1997 with respect to the Chief Executive Officer and
the four most highly compensated executive officers whose total annual salary
and bonus exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------- RESTRICTED ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OTHER UNIT AWARD (4) COMPENSATION
- ---------------------------------------- ---- -------- -------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Donald N. Smith......................... 1997 $267,126 $160,000 $ 3,150(2) $-- $--
Chairman & Chief 1996 256,852 119,900 10,304(1)(2) -- 550(5)
Executive Officer of the Issuer, 1995 244,621 -- 10,304(1)(2) -- 550(5)
PRI and PMC
Richard K. Arras........................ 1997 249,171 143,000 9,000(2) -- 4,750(6)
President & Chief Operating Officer 1996 226,788 99,000 18,097(1)(2) -- 6,490(5)(6)
of PMC 1995 216,269 -- 17,529(1)(2) 97,335 3,448(5)(6)
Steven R. McClellan..................... 1997 207,001 83,875 10,055(2)(3) -- 4,750(6)
Exec. Vice President & 1996 42,500 39,650 30,715(1)(2)(3) 120,000 298(5)
Chief Financial Officer of PMC 1995 -- -- -- -- --
Michael D. Kelly........................ 1997 181,836 78,000 9,000(2) -- 4,750(6)
Exec. Vice President Marketing 1996 176,287 60,000 12,726(1)(2) -- 4,808(5)(6)
of PMC 1995 166,250 -- 11,848(1)(2) 64,890 2,772(5)(6)
Jack W. Willingham...................... 1997 172,481 59,250 9,000(2) -- 4,750(6)
Exec. Vice President Restaurant 1996 161,582 56,500 15,135(1)(2) -- 7,630(5)(6)
Development of PMC 1995 153,538 -- 14,345(1)(2) 64,890 5,190(5)(6)
</TABLE>
- ------------------------
(1) Includes premiums paid for medical and disability insurance during 1996 for
the named executive officers in the following amounts: Mr. Smith--$7,364;
Mr. Arras--$10,447; Mr. McClellan--$767; Mr. Kelly--$5,076; and Mr.
Willingham--$7,485. Premiums paid on behalf of the named executive officers
during 1995 were: Mr. Smith--$7,364; Mr. Arras--$10,329; Mr. Kelly--$4,648;
and Mr. Willingham--$7,145.
(2) Includes auto allowance paid to the named executive officers during 1997 in
the following amounts: Mr. Smith--$3,150; Mr. Arras--$9,000; Mr.
McClellan--$9,000; Mr. Kelly--$9,000; and Mr. Willingham--$9,000. During
1996, Mr. Smith received an auto allowance of $2,940; Mr. Arras--$7,650; Mr.
McClellan--$2,550; Mr. Kelly--$7,650; and Mr. Willingham--$7,650. During
1995, Mr. Smith received an auto allowance of $2,940; Mr. Arras--$7,200; Mr.
Kelly--$7,200; and Mr. Willingham-- $7,200.
(3) Includes relocation expenses in the amount of $1,055 and $27,398 for 1997
and 1996, respectively for Mr. McClellan.
(4) The restricted period applicable to each award of Units under Perkins Family
Restaurants, L.P. Restricted Limited Partnership Unit Plan (the "Restricted
Unit Plan") was established by the Plan Committee (the "Committee") and
could not exceed ten (10) years. The Restricted Unit Plan was eliminated
during 1997 and all restricted Units were repurchased by PFR in conjunction
with the Going Private Transaction. Therefore, as of December 31, 1997 no
restricted Units were outstanding. Cash payments related to repurchased
restricted Units during December 1997 were: Mr. Arras--$118,272; Mr.
McClellan--$131,810; Mr. Kelly--$126,448; and Mr. Willingham--$101,248.
51
<PAGE>
(5) Includes premiums paid for group term life insurance. Premiums paid during
1996 for the named executive officers were: Mr. Smith--$642; Mr.
Arras--$1,740; Mr. McClellan--$298; Mr. Kelly--$58; and Mr.
Willingham--$2,880. Premiums paid on behalf of the named executive officers
for 1995 were as follows: Mr. Smith--$642; Mr. Arras--$1,138; Mr.
Kelly--$1,232; and Mr. Willingham--$2,880.
(6) Includes Perkins' discretionary matching contributions allocated to the
named executive officers for the period January 1, 1997 through December 31,
1997 under Perkins Retirement Savings Plan as follows: Mr. Arras--$4,750;
Mr. McClellan--$4,750; Mr. Kelly--$4,750; and Mr. Willingham--$4,750. For
the period January 1, 1996 through December 31, 1996, the contributions were
as follows: Mr. Arras--$4,750; Mr. Kelly --$4,750; and Mr.
Willingham--$4,750. For the period January 1, 1995 through December 31,
1995, matching contributions allocated to the named executives were: Mr.
Arras--$2,310; Mr. Kelly--$1,540; and Mr. Willingham--$2,310.
COMPENSATION OF DIRECTORS
Lee N. Abrams, D. Michael Meeks, Charles A. Ledsinger, Jr. and Steven L.
Ezzes are paid $5,000 for each Board Meeting of PMC they attend. Messrs. Abrams,
Meeks, Ledsinger and Ezzes were paid for five meetings of the Board of PMC in
1997. Also, these directors participated in a telephone board meeting for which
they were paid a fee of $1,500. Mr. Abrams, Mr. Meeks, Mr. Ezzes and Mr.
Ledsinger each received awards of 500 restricted Units on February 4, 1997 under
the Restricted Unit Plan valued at $7,000 on the date of the grant. On December
22, 1997, all Units owned by each director were redeemed in the Going Private
Transaction at $14.00 per Unit resulting in Mr. Abrams receiving $152,600
(10,900 Units), Mr. Ezzes receiving $7,000 (500 Units), Mr. Ledsinger receiving
$7,000 (500 Units) and Mr. Meeks receiving $14,000 (1,000 Units). No
compensation is paid to Directors of the Issuer or PRI.
LONG-TERM INCENTIVE PLAN
During the first quarter of 1998, the Company established a Phantom Stock
Appreciation Rights Plan which permits plan participants, consisting of key
employees of the Company, to share in the growth in the Company's value.
Participants are eligible for awards based on salary level and company
performance thresholds established by the Board of Directors. Awards made in
1998 vest ratably over two years for the officers of the Company. Awards made to
other participants, and to all participants in 1999 and thereafter, vest ratably
over three years. All vested awards are exercisable in cash or, at the option of
the participant, in Company common stock if the Company has become publicly
owned.
OWNERSHIP OF THE ISSUER
As a result of the Reorganization, the Issuer's common stock is owned 50.0%
by Mr. Smith, 42.3% by Equitable and 7.7% by others.
52
<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During 1997 and 1996, Friendly's purchased layer cakes and muffin and
pancake mixes from the Company for which the Company was paid approximately
$975,000 and $1,425,000 respectively. The Company believes that the prices paid
to the Company for these products were no less favorable than the prices that
would have been paid for the same products by a non-affiliated party in an arm's
length transaction.
The Issuer provided Friendly's with certain management services for which
the Issuer was reimbursed $824,000 and $800,000 for the years ended December 31,
1997 and 1996, respectively.
The Company has subleased certain land, buildings and equipment to
Friendly's. During 1997 and 1996, the Company received approximately $322,000
and $328,000, respectively, related to those subleases. The Company believes
that the terms of these subleases are no less favorable to the Company than
could be obtained if the transaction was entered into with an unaffiliated third
party.
TRC Realty Co., a wholly-owned subsidiary of the Issuer, entered into a ten
year operating lease commencing April 14, 1994 for an aircraft, used by PMC and
Friendly's. Pursuant to an agreement ending April 14, 2004, PMC and Friendly's
each are obligated to reimburse monthly an amount equal to 50% of the fixed
costs of the aircraft (consisting primarily of lease payments, pilot salaries,
insurance and hangar rental) plus their proportionate share of variable expenses
(such as fuel and maintenance) based on actual monthly usage of the aircraft.
The total expense reimbursed by Friendly's for the year ended December 31, 1997
was approximately $565,000.
CERTAIN BUSINESS RELATIONSHIPS
Lee N. Abrams, a director of PMC and Chairman of the Audit Committee of PMC,
is a senior partner in the Mayer, Brown & Platt law firm. Mayer, Brown & Platt
represented the Company in several matters during 1996 and 1997, and is
representing the Issuer in connection with the Exchange Offer.
D. Michael Meeks, a director of PMC and a member of its Audit Committee,
acts as a franchise sales consultant for the Company. Mr. Meeks' compensation is
a fixed sum for each new restaurant opened as a result of his referral and a per
diem not to exceed the greater of $1,000 per day or $3,000 per month when
engaged on Company business. He received no payments in 1997 and $2,250 in 1998.
INDEBTEDNESS OF MANAGEMENT
The Issuer has a revolving loan agreement with Donald N. Smith, Chairman of
the Board and Chief Executive Officer of the Issuer. The agreement provides for
a maximum loan of $1,000,000, with interest at the prime rate. Accrued interest
is payable on the last day of each calendar year, and the principal and accrued
but unpaid interest are payable on December 31, 2001. As of March 31, 1998,
there was $966,000 outstanding under this agreement.
53
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
Set forth below is a summary of the terms of the Credit Facility and the
10 1/8% Senior Notes. The summary does not purport to be complete and, where
reference is made to particular provisions of the Credit Facility or the 10 1/8%
Senior Notes, such provisions, including the definition of certain terms, are
incorporated by reference as part of such summaries or terms. The summary is
qualified in its entirety by reference to the Credit Facility and the 10 1/8%
Senior Note Indenture. Copies of the credit agreement (the "Credit Agreement")
relating to the Credit Facility and the 10 1/8% Senior Note Indenture have been
filed as Exhibits to the Registration Statement of which this Prospectus is a
part.
DESCRIPTION OF CREDIT FACILITY
On December 22, 1997, PFR obtained the Credit Facility. The Credit Facility
matures on January 1, 2003 and contains a $5 million sublimit for letters of
credit. Advances under the Credit Facility may be borrowed, repaid and
reborrowed until maturity.
The Credit Facility is secured by a common collateral pool consisting of a
first perfected security interest in substantially all of the assets of PFR,
including but not limited to accounts and notes receivable, inventory,
equipment, real property, stock of subsidiaries and intangible assets (including
patents, trademarks, copyrights, etc.) and is guaranteed by the Issuer and its
successors, PMC, PRI and by all future subsidiaries, if any, of PFR. The
guarantees of the Issuer, PMC and PRI are limited to their respective pledge of
Units in PFR. At all times after an event of default (as defined), and at other
times in the agent bank's discretion, PFR will provide the agent bank with
dominion over its domestic cash receipts through lock box accounts.
Outstanding principal balances under the Credit Facility bear interest at
floating rates equal to the agent's base rate (as defined) or Eurodollar rate
(as defined) plus, in each case, the applicable margin (as defined). Financial
covenants and provisions contained in the Credit Agreement restrict (with
certain exceptions), among other things, PFR's ability to incur indebtedness and
other liabilities, make guarantees, make non-cancellable rental payments due
under operating leases, incur liens, make acquisitions, make investments, pay
dividends and other distributions, merge, sell assets, allow subsidiary
distributions, make voluntary payments of other indebtedness including the
Notes, enter into derivative contracts, enter into transactions with affiliates
and enter into negative pledges. PFR is also subject to covenants regarding
payment of claims and taxes, the conduct of its business, compliance with laws
and contracts, the maintenance of insurance and compliance with ERISA. PFR is
permitted to pay tax distributions to its partners to provide funds for the
payment of such partners' tax liability arising from the taxable income of PFR.
PFR is required to comply with certain financial covenants. The financial
covenants are (i) maintenance of a maximum consolidated leverage ratio (as
defined), (ii) maintenance of a minimum net worth (as defined), (iii)
maintenance of a consolidated cash flow ratio (as defined), (iv) maintenance of
a consolidated EBITDA to interest expense ratio (as defined), and (v) limits on
maximum consolidated capital expenditures (as defined).
The Credit Agreement prohibits PFR and its subsidiaries from:
(i) declaring or paying any dividend or other distribution to its holders of
equity interests (as defined) (other than dividends or distributions
payable solely in the form of equity interests);
(ii) directly or indirectly purchasing, redeeming or retiring any equity
interests in PFR; or
(iii) returning capital to its equity interests (collectively,
"Distributions").
Notwithstanding the foregoing, PFR and its subsidiaries are not prohibited
under the Credit Agreement from making any such Distributions:
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(i) if no default or event of default exists under the Credit Agreement and
none would result from the making of any such Distributions,
subsidiaries of PFR may make Distributions to PFR and PRO RATA to each
holder of such subsidiaries' equity interests;
(ii) to each holder of equity interests in an aggregate amount in any fiscal
year not exceeding an amount sufficient to pay such holder's estimated
federal, state and local income taxes on such holder's share of the
taxable income of PFR for such fiscal year and for any prior fiscal
year that is the subject of an adjustment as a result of a tax audit;
and
(iii) if no default or event of default then exists under the Credit
Agreement or would result from the making of such Distribution, PFR may
make Distributions in an aggregate amount for all such Distributions
made after December 22, 1997 not to exceed 50% of positive Consolidated
Net Income (as defined) of PFR and its subsidiaries after Tax
Distributions (as defined) for the period from January 1, 1998 to the
end of PFR's most recently ended fiscal quarter for which financial
statements are available at the time of the Distribution; and
(iv) up to an aggregate of $5 million after December 22, 1997 if no default
or event of default exists under the Credit Agreement and none would
result from the making of any such Distributions.
Events of default under the Credit Facility include the failure to pay any
interest, principal or other amounts when due, the failure to comply with any
covenants, the breach of representations or warranties, defaults on other
indebtedness, the occurrence of a change of control (as defined), the occurrence
of any judgment defaults, the failure to comply with ERISA requirements and the
bankruptcy or insolvency of PFR.
DESCRIPTION OF THE 10 1/8% SENIOR NOTES
The 10 1/8% Senior Notes are governed by the 10 1/8% Senior Note Indenture.
Interest on the 10 1/8% Senior Notes is payable semi-annually in arrears on
June 15 and December 15 of each year, commencing June 15, 1998. The 10 1/8%
Senior Notes do not have the benefit of any sinking fund obligations, and are
not convertible or exchangeable into any other security.
The 10 1/8% Senior Notes are general unsecured joint and several obligations
of PFR and its wholly-owned finance subsidiary, Perkins Finance Corp. (the
"10 1/8% Senior Note Issuers"), and rank PARI PASSU in right of payment with all
current and future senior indebtedness of the 10 1/8% Senior Note Issuers.
The 10 1/8% Senior Notes are currently redeemable, in whole or in part, at
the option of the 10 1/8% Senior Note Issuers, on or after December 15, 2002, on
the following date at the following percentages: 105.063%, on or after December
15, 2002; at 103.375%, on or after December 15, 2003; at 101.668%, on December
15, 2004; and at 100.000% on December 15, 2005 and thereafter, plus accrued and
unpaid interest thereon, to the redemption date. In addition the 10 1/8% Senior
Note Issuers may redeem the 10 1/8% Senior Notes with the net cash proceeds of
one or more public offerings of PFR's equity securities or the equity securities
of one or more of PFR's direct or indirect parents at 110.125% of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon to the
redemption date, provided that at least 65% of the principal amount of 10 1/8%
Senior Notes originally issued remains outstanding immediately following such
redemption. There is no mandatory redemption.
Upon a change of control (as defined), each holder of 10 1/8% Senior Notes
will have the right to require the 10 1/8% Senior Note Issuers to purchase all
or any part of such holder's 10 1/8% Senior Notes at a price equal to 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest, if
any, thereon to the date of purchase. There can be no assurance that the 10 1/8%
Senior Note Issuers will have adequate funds available to repurchase the 10 1/8%
Senior Notes.
The 10 1/8% Senior Note Indenture contains certain covenants that, among
other things, limit the ability of PFR and its Restricted Subsidiaries (as
defined in the 10 1/8% Senior Note Indenture) to incur
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additional Indebtedness and issue preferred stock, pay distributions or make
other restricted payments, engage in sale and leaseback transactions, create
certain liens, enter into certain transactions with affiliates, sell assets of
PFR or its subsidiaries, incur dividend and other payment restrictions affecting
Restricted Subsidiaries, issue or sell Equity Interests (as defined in the
10 1/8% Senior Note Indenture) of PFR's subsidiaries or enter into certain
mergers and consolidations. In addition, under certain circumstances, PFR will
be required to offer to purchase 10 1/8% Senior Notes at a price equal to 100%
of the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase, with the proceeds of certain Asset
Sales (as defined in the 10 1/8% Senior Note Indenture).
The 10 1/8% Senior Note Indenture prohibits PFR from directly or indirectly:
(i) declaring or paying any dividend or making any other payment or
distribution on account of PFR's equity interests (as defined) (other
than dividends or distributions payable solely in the form of equity
interests);
(ii) purchasing, redeeming or otherwise acquiring or retiring for value any
of PFR's equity interests or any equity interests of any direct or
indirect parent of PFR;
(iii) making any payment on or with respect to, or purchasing, redeeming,
defeasing or otherwise acquiring or retiring for value any indebtedness
(as defined) that is subordinated to the 10 1/8% Senior Notes, except a
payment of interest or principal at the stated maturity of such
indebtedness; or
(iv) make any restricted investment (as defined)
(any of the foregoing, a "10 1/8% Senior Note Restricted Payment"), unless, at
the time of and after giving effect to any such 10 1/8% Senior Note Restricted
Payment:
(a) no default or event of default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) PFR would, at the time of such 10 1/8% Senior Note Restricted
Payment and after giving pro forma effect thereto as if such 10 1/8% Senior
Note Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of
additional indebtedness pursuant to the fixed charge coverage ratio (as
defined) test; and
(c) such 10 1/8% Senior Note Restricted Payment, together with the
aggregate amount of all other 10 1/8% Senior Note Restricted Payment made by
PFR after December 22, 1997 (excluding any 10 1/8% Senior Note Restricted
Payment permitted by (ii), (iii), (iv), (vi), (vii) and (viii) of the
immediately following paragraph), is less than the sum, without duplication,
of (i) 50% of the consolidated net income (as defined) of PFR for the period
(taken as one accounting period) from January 1, 1998 to the end of PFR's
most recently ended fiscal quarter for which internal financial statements
are available at the time of such 10 1/8% Senior Note Restricted Payment
(or, if such consolidated net income for such period is a deficit, less 100%
of such deficit), plus (ii) 100% of the aggregate net cash proceeds received
by PFR since January 1, 1998 as a contribution to its common equity capital
or from the issue or sale of equity interests of PFR or from the issue or
sale of disqualified interests (as defined) or debt securities of PFR that
have been converted into such equity interests (other than equity interests
or convertible debt securities sold to a subsidiary of PFR), plus (iii) to
the extent that any restricted investment that was made after December 22,
1997 is sold for cash or otherwise liquidated or repaid for cash, the lesser
of (A) the cash return of capital with respect to such restricted investment
(less the cost of disposition, if any) and (B) the aggregate amount of such
restricted investment that was treated as a restricted investment when made.
The foregoing provisions do not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the 10 1/8%
Senior Note Indenture; (ii) the redemption, repurchase, retirement, defeasance
or other
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acquisition of any subordinated indebtedness or equity interests of PFR in
exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a subsidiary of PFR) of, other equity interests of PFR
(other than any disqualified interests); provided that the amount of any such
net cash proceeds that are utilized for any such redemption, repurchase
retirement, defeasance or other acquisition is excluded from (c)(ii) in the
immediately preceding paragraph; (iii) the defeasance, redemption, repurchase or
other acquisition of subordinated indebtedness with the net cash proceeds from
an incurrence of permitted refinancing indebtedness; (iv) the payment of any
dividend by a subsidiary of PFR to the holders of its common equity interests on
a pro rata basis; (v) the repurchase, redemption or other acquisition or
retirement for value of any equity interests of PFR or any subsidiary of PFR
held by any member of PFR's (or any subsidiaries') management; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or retired
equity interests shall not exceed $1,000,000 in any twelve-month period and no
default or event of default shall have occurred and be continuing immediately
after such transaction; (vi) the declaration of the Jack Astor vehicle (as
defined) as an unrestricted subsidiary (as defined) on the date that it becomes
a subsidiary of PFR; provided that it otherwise meets the qualifications of an
unrestricted subsidiary; (vii) distributions to partners or owners of PFR in an
aggregate amount during or with respect to any fiscal period commencing after
December 31, 1996 not to exceed the tax amount (as defined) for such period or
for such periods commencing after December 31, 1996 that are subject to
adjustments as a result of audits by tax authorities; (viii) transfers of cash
proceeds from the sale of the 10 1/8% Senior Notes not to exceed, in the
aggregate, $85.0 million, to finance the Going Private Transaction and (ix)
additional restricted payments not to exceed $5.0 million after December 22,
1997.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Exchange Offer is being made by the Issuer to satisfy its obligations
pursuant to the Registration Rights Agreement, which requires the Issuer to use
its best efforts to effect the Exchange Offer. See "-- Registration Rights."
The Issuer is making the Exchange Offer in reliance upon the position of the
staff of the Commission set forth in certain no-action letters addressed to
other parties in other transactions. However, the Issuer has not sought its own
no-action letter and there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer. Based on
these interpretations by the Staff of the Commission, the New Notes issued
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than (i) any such holder that is an
"affiliate" of the Issuer within the meaning of Rule 405 under the Securities
Act; (ii) an Initial Purchaser who acquired the Old Notes directly from the
Issuer solely in order to resell pursuant to Rule 144A of the Securities Act or
any other available exemption under the Securities Act; or (iii) a broker-dealer
who acquired the Old Notes as a result of market making or other trading
activities) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holder's business and such holder is not
participating and has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of such
New Notes. By tendering, each Holder which is not a broker dealer will represent
to the Issuer that, among other things, the person receiving the New Notes,
whether or not such person is the Holder, (i) is not an "affiliate," as defined
in Rule 405 under the Securities Act, of the Issuer, (ii) will acquire the New
Notes in the ordinary course of such person's business, and (iii) is not engaged
in, does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of New Notes. If any Holder or any
such other person has an arrangement or understanding with any person to
participate in a distribution of such New Notes, is engaged in or intends to
engage in a distribution of such New Notes, is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Issuer, or acquired the Old Notes as a
result of market making or other trading activities, then such Holder or any
such other person (i) cannot rely on the applicable interpretations of the staff
of the Commission and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction, unless such sale is made pursuant to an exemption from such
requirements.
Holders of Old Notes not tendered will not have any further registration
rights and the Old Notes not exchanged will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the market for the Old
Notes could be adversely affected.
THE ISSUER MAKES NO RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO
TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT
TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF OLD NOTES MUST MAKE THEIR OWN DECISION WHETHER TO
TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD
NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND
CONSULTING THEIR ADVISORS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND
REQUIREMENTS.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
In connection with the issuance of the Old Notes, the Issuer entered into
the Registration Rights Agreement with the Initial Purchasers of the Old Notes.
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Holders of the New Notes (other than as set forth below) are not entitled to
any registration rights with respect to the New Notes. Pursuant to the
Registration Rights Agreement, Holders of Old Notes are entitled to certain
registration rights. Under the Registration Rights Agreement, the Issuer has
agreed, for the benefit of the Holders of the Old Notes, that it will, at its
cost, (i) on or before July 2, 1998, file the Registration Statement with the
Commission and (ii) use its best efforts to cause such Registration Statement to
be declared effective under the Securities Act before September 15, 1998. The
Registration Statement of which this Prospectus is a part constitutes the
Registration Statement. If (i) the Issuer is not permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any Holder of Transfer Restricted Securities (as
defined) notifies the Issuer within the specified time period that (A) due to a
change in law or policy it is not entitled to participate in the Exchange Offer,
(B) due to a change in law or policy it may not resell the New Notes acquired by
it in the Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Registration Statement is not appropriate or
available for such resales by such holder or (C) it is a broker-dealer and
acquired the Notes directly from the Issuer or an affiliate of the Issuer, the
Issuer will file with the Commission a Shelf Registration Statement (as defined)
to cover resales of the Transfer Restricted Securities by the Holders thereof
who satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. The Issuer will use its best
efforts to cause the applicable registration statement to be declared effective
as promptly as possible by the Commission. For purposes of the foregoing,
"Transfer Restricted Securities" means each Note, until (i) the date of which
such Transfer Restricted Security has been exchanged in the Exchange Offer, (ii)
following the exchange by a broker-dealer in the Exchange Offer of a Transfer
Restricted Security for a New Note, the date on which such New Note is sold to a
purchaser who receives from such broker-dealer on or prior to the date of such
sale a copy of the Prospectus contained in the Registration Statement, (iii) the
date on which such security has been effectively registered under the Securities
Act and disposed of in accordance with the Shelf Registration Statement or (iv)
the date on which such security is distributed pursuant to Rule 144 under the
Act.
The Registration Rights Agreement also provides that, (i) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Issuer will commence the Exchange Offer and use its best efforts to issue on
or prior to 30 business days after the date on which the Registration Statement
is declared effective by the Commission, New Securities in exchange for all
Transfer Restricted Securities tendered prior thereto in the Exchange Offer and
(ii) if obligated to file the Shelf Registration Statement, the Company will
file the Shelf Registration Statement with the Commission on or prior to 30 days
after such filing obligation arises and use their best efforts to cause the
Shelf Registration to be declared effective by the Commission on or prior to 90
days after such obligation arises. The Issuer shall use its best efforts to keep
such Shelf Registration Statement continuously effective, supplemented and
amended until the third anniversary of the Closing Date (as defined) or such
shorter period that will terminate when all the Notes covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement. If (a) the Issuer fails to file any of the registration statements
required by the Registration Rights Agreement on or before the date specified
for such filing, (b) any of such registration statements are not declared
effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (c) the Issuer fails to
consummate the Exchange Offer within 30 business days of the Effectiveness
Target Date with respect to the Registration Statement, or (d) the Shelf
Registration Statement or the Registration Statement is declared effective but
thereafter, subject to certain exceptions, ceases to be effective or usable in
connection with resales of Transfer Restricted Securities during the periods
specified in the Registration Rights Agreement (each such event referred to in
clauses (a) through (d) above a "Registration Default"), then the Issuer will
pay Liquidated Damages to each Holder of Transfer Restricted Securities affected
thereby, with respect to the first 90-day period immediately following the
occurrence of such Registration Default in an amount equal to $.05 per week for
each $1,000 principal amount of Transfer Restricted Securities held by such
Holder. The amount of the Liquidated Damages will increase by an additional $.05
per week with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of Liquidated Damages
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of $.50 per week for each $1,000 principal amount of Transfer Restricted
Securities, as applicable. Following the cure of all Registration Defaults, the
accrual of Liquidated Damages will cease.
Holders of Transfer Restricted Securities will be required to deliver
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time periods
set forth in the Registration Rights Agreement in order to have their Transfer
Restricted Securities included in the Shelf Registration Statement and benefit
from the applicable provisions regarding Liquidated Damages set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is filed as an exhibit to the Registration Statement
of which this Prospectus constitutes a part.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Issuer will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City time, on , 1998; PROVIDED, HOWEVER, that if the Issuer, in
its sole discretion, has extended the period of time for which the Exchange
Offer is open, the term "Expiration Date" means the latest time and date to
which the Exchange Offer is extended; PROVIDED FURTHER that in no event will the
Exchange Offer be extended beyond . The Issuer may extend the Exchange
Offer at any time and from time to time by giving oral or written notice to the
Exchange Agent and by timely public announcement. Without limiting the manner in
which the Issuer may choose to make any public announcement and subject to
applicable law, the Issuer shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a
release to an appropriate news agency. During any extension of the Exchange
Offer, all Old Notes previously tendered pursuant to the Exchange Offer will
remain subject to the Exchange Offer. The Issuer intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations thereunder.
As of the date of this Prospectus, $31,100,000 of Original Principal Amount
at Maturity of the Old Notes is outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about , 1998, to all
Holders of Old Notes known to the Issuer. The Issuer's obligation to accept Old
Notes for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth under "-- Certain Conditions to the Exchange Offer"
below.
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Old Notes and certain rights to receive Liquidated Damages. See
"-- Registration Rights; Liquidated Damages" above. The Old Notes were, and the
New Notes will be, issued under the Indenture and all such Notes are entitled to
the benefits of the Indenture.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof. Any Old Notes not
accepted for exchange for any reason will be returned without expense to the
tendering Holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
The Issuer expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified below under "-- Certain Conditions to the Exchange Offer." The Issuer
will give oral or written notice of any amendment, nonacceptance or termination
to the Holders of the Old Notes as promptly as practicable. Any amendment to the
Exchange Offer will not limit the right
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of Holders to withdraw tendered Old Notes prior to the Expiration Date. See "--
Withdrawal Rights" below.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Issuer of Old Notes by a Holder thereof as set forth below
and the acceptance thereof by the Issuer will constitute a binding agreement
between the tendering Holder and the Issuer upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal. Except as set forth below, a Holder who wishes to tender Old Notes
for exchange pursuant to the Exchange Offer must transmit a properly completed
and duly executed Letter of Transmittal, including all other documents required
by such Letter of Transmittal, to State Street Bank and Trust Company (the
"Exchange Agent") at one of the addresses set forth below under "-- Exchange
Agent" on or prior to the Expiration Date. In addition, either (i) certificates
for such Old Notes must be received by the Exchange Agent along with the Letter
of Transmittal; or (ii) a timely confirmation of a book-entry transfer (a "Book-
Entry Confirmation") of such Old Notes, if such procedure is available, into the
Exchange Agent's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration Date; or
(iii) the Holder must comply with the guaranteed delivery procedures described
below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO THE ISSUER.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered Holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Old Notes are registered in the name of a person other than
the signer of the Letter of Transmittal, the Old Notes surrendered for exchange
must be endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Issuer in their
sole discretion, duly executed by the registered Holder with the signature
thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Issuer in its sole discretion, which determination shall be final and
binding. The Issuer reserves the absolute right to reject any and all tenders of
any particular Old Notes not properly tendered or to not accept any particular
Old Notes which acceptance might, in the judgment of the Issuer or its counsel,
be unlawful. The Issuer also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to any particular Old
Notes either before or after the Expiration Date (including the right to waive
the ineligibility of any Holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer as
to any particular Old Notes either before or after the Expiration Date
(including the Letter of Transmittal and the instructions thereto) by the Issuer
shall be final and binding on all parties. Unless waived, all defects or
irregularities in connection with tenders of Old Notes for exchange must be
cured within such reasonable period of time as the Issuer shall determine.
Neither the Issuer, the Exchange Agent nor any other person shall be under any
duty to give notification of any defect or irregularity with respect to any
tender of Old Notes for exchange, nor shall any of them incur any liability for
failure to give
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such notification. The Exchange Agent intends to use reasonable efforts to give
notification of such defects and irregularities.
If the Letter of Transmittal is signed by a person or persons other than the
registered Holder or Holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered Holder or Holders that appear on the Old
Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of a corporation or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Issuer, proper evidence satisfactory to the Issuers of their authority to so
act must be submitted.
By tendering, each Holder which is not a broker dealer will represent to the
Issuer that, among other things, the person receiving the New Notes, whether or
not such person is the Holder, (i) is not an "affiliate," as defined in Rule 405
under the Securities Act, of the Issuer, (ii) will acquire the New Notes in the
ordinary course of such person's business, and (iii) is not engaged in, does not
intend to engage in, and has no arrangement or understanding with any person to
participate in, a distribution of New Notes. If any Holder or any such other
person is an "affiliate," as defined under Rule 405 of the Securities Act, of
the Issuer, is engaged in or intends to engage in or has an arrangement or
understanding with any person to participate in a distribution of such New Notes
to be acquired pursuant to the Exchange Offer, or acquired the Old Notes as a
result of market making or other trading activities, such Holder or any such
other person (i) cannot rely on the applicable interpretations of the staff of
the Commission and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Issuer will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Old Notes. See "-- Certain Conditions to the Exchange Offer" below. For purposes
of the Exchange Offer, the Issuer shall be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Issuer has given oral or
written notice thereof to the Exchange Agent, with written confirmation of any
oral notice to be given promptly thereafter.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount at maturity equal to that of the
surrendered Old Note. Accordingly, registered Holders of New Notes on the
relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive payment of accrued but unpaid
interest from the most recent interest payment date or, if no interest payment
date has yet occurred from May 18, 1998. Old Notes accepted for exchange will
cease to accrue interest from and after the date of consummation of the Exchange
Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of (i) certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility; (ii) a properly completed and duly executed
Letter of Transmittal; and (iii) all other required documents. If any tendered
Old Notes are not accepted for any reason set forth in the terms and conditions
of the Exchange Offer, or if Old Notes are submitted for a greater amount than
the Holder desires to exchange, such unaccepted or nonexchanged Old Notes will
be returned without
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expense to the tendering Holder thereof (or, in the case of Old Notes tendered
by book-entry transfer into the Exchange Agent's account at the Book Entry
Transfer Facility pursuant to the book-entry procedures described below, such
nonexchanged Old Notes will be credited to an account maintained with such Book-
Entry Transfer Facility designated by the tendering Holder) as promptly as
practicable after withdrawal, rejection of tender or expiration or termination
of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "-- Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
Holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution; (ii) prior to the Expiration Date, the Exchange
Agent has received from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form of the corresponding exhibit to the
Registration Statement of which this Prospectus constitutes a part (by telegram,
telex, facsimile transmission, mail or hand delivery), setting forth the name
and address of the Holder of Old Notes and the amount of Old Notes tendered,
stating that the tender is being made thereby and guaranteeing that within three
New York Stock Exchange ("NYSE") trading days after the date of execution of the
Notice of Guaranteed Delivery, the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) the
certificates for all physically tendered Old Notes, in proper form for transfer,
or a Book-Entry Confirmation, as the case may be, and all other documents
required by the Letter of Transmittal, are received by the Exchange Agent within
three NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of the withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under "--
Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the amount of such Old Notes), and (where certificates
for Old Notes have been transmitted) specify the name in which such Old Notes
are registered, if different from that of the withdrawing Holder. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then prior to the release of such certificates the withdrawing
Holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution. If Old Notes
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have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Issuer, whose determination shall be final and binding
on all parties. Any Old Notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the Exchange Offer. Any Old Notes
which have been tendered for exchange but which are not exchanged for any reason
will be returned to the Holder thereof without cost to such Holder (or, in the
case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account with
such Book-Entry Transfer Facility specified by the Holder) as soon as
practicable after withdrawal, rejection of tender, expiration or termination of
the Exchange Offer. Properly withdrawn Old Notes may be retendered by following
one of the procedures described under "-- Procedures for Tendering Old Notes"
above at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Issuer shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, any of the following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been issued
by, any court or governmental agency or other governmental regulatory or
administrative agency or commission, (i) seeking to restrain or prohibit the
making or consummation of the Exchange Offer or any other transaction
contemplated by the Exchange Offer, or assessing or seeking any damages as a
result thereof, or (ii) resulting in a material delay in the ability of the
Issuer to accept for exchange or exchange some or all of the Old Notes
pursuant to the Exchange Offer; or any statute, rule, regulation, order or
injunction shall be sought, proposed, introduced, enacted, promulgated or
deemed applicable to the Exchange Offer or any of the transactions
contemplated by the Exchange Offer by any government or governmental
authority, domestic or foreign, or any action shall have been taken,
proposed or threatened, by any government, governmental authority, agency or
court, domestic or foreign, that in the sole judgment of the Issuer might
directly or indirectly result in any of the consequences referred to in
clauses (i) or (ii) above or, in the sole judgment of the Issuer, might
result in the holders of New Notes having obligations with respect to
resales and transfers of New Notes which are greater than those described in
the interpretation of the Commission referred to on the cover page of this
Prospectus, or would otherwise make it inadvisable to proceed with the
Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market; (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Issuer to complete the transactions contemplated by the
Exchange Offer; (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit; or (iv) a commencement of a war, armed hostilities
or other similar international calamity directly or indirectly involving the
United States, or, in the case of any of the foregoing existing at the time
of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole that, in the
sole judgment of the Issuers, is or may be adverse to the Issuer, or the
Issuer shall have become aware of
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facts that, in the sole judgment of the Issuer, have or may have an adverse
effect on the value of the Old Notes or the New Notes.
Holders of Old Notes will have the registration rights and the right to
Liquidated Damages described under "-- Registration Rights; Liquidated Damages"
if the Issuer fails to consummate the Exchange Offer.
To the Issuer's knowledge as of the date of this Prospectus, none of the
above events has occurred.
The foregoing conditions are for the sole benefit of the Issuer and may be
asserted by the Issuer regardless of the circumstances giving rise to any such
condition or may be waived by the Issuer in whole or in part at any time and
from time to time in their sole discretion. The failure by the Issuer at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time. In the event the Issuer asserts or
waives a condition to the Exchange Offer which constitutes a material change to
the terms of the Exchange Offer, the Issuer will disclose such change in a
manner reasonably calculated to inform prospective investors of such change, and
will extend the period of the Exchange Offer by five business days.
In addition, the Issuer will not accept for exchange any Old Notes tendered,
and no New Notes will be issued in exchange for any such Old Notes, if at such
time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as the Exchange Agent
for the Exchange Offer. All executed Letters of Transmittal and Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the addresses
set forth below. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notices of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
DELIVER TO: STATE STREET BANK AND TRUST COMPANY, EXCHANGE AGENT:
<TABLE>
<S> <C> <C> <C>
BY REGISTERED OR CERTIFIED BY OVERNIGHT COURIER OR HAND:
MAIL:
State Street Bank State Street Bank *State Street Bank
and Trust Company and Trust Company or and Trust Company
P.O. Box 778 Two International Place 61 Broadway,
Boston, MA 02102-0078 Boston, MA 02110 Concourse Level
Attn: Kelly Mullen Attn: Kelly Mullen Corporate Trust Window
New York, NY 10006
*ONLY DURING BUSINESS HOURS
</TABLE>
BY FACSIMILE FOR ELIGIBLE INSTITUTIONS:
(617) 664-5395
FOR CONFIRMATION CALL:
(617) 664-5587
DELIVERY OF A LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
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FEES AND EXPENSES
The Issuer will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
The Issuer will, however, pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for reasonable out-of-pocket
expenses in connection therewith. The Issuer will also pay brokerage houses and
other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and related documents
to the beneficial owners of Old Notes, and in handling tenders for their
customers. The expenses to be incurred in connection with the Exchange Offer,
including the fees and expenses of the Exchange Agent and printing, accounting,
registration, and legal fees, will be paid by the Issuers and are estimated to
be approximately $100,000.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct the
Issuer to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering Holder will be responsible for the payment of any
applicable transfer tax thereon.
APPRAISAL RIGHTS
HOLDERS OF OLD NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS IN
CONNECTION WITH THE EXCHANGE OFFER.
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Issuer does not currently anticipate that
it will register the Old Notes under the Securities Act. In addition, upon the
consummation of the Exchange Offer holders of Old Notes which remain outstanding
will not be entitled to any rights to have such Old Notes registered under the
Securities Act or to any rights under the Registration Rights Agreement. To the
extent that Old Notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered, or tendered but unaccepted, Old Notes could
be adversely affected. Based upon no-action letters issued by the staff of the
Commission to other parties in other transactions, the Issuer believes the New
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for resale, resold or otherwise transferred by a Holder thereof (other
than any (i) Holder which is an "affiliate" of the Issuer within the meaning of
Rule 405 under the Securities Act; (ii) an Initial Purchaser who acquired the
Old Notes directly from the Issuer solely in order to resell pursuant to Rule
144A of the Securities Act or any other available exemption under the Securities
Act; or (iii) a broker-dealer who acquired the Old Notes as a result of market
making or other trading activities) without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business and such
holder is not participating and has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of such New Notes. However, the Issuer has not sought its own no-action
letter and there can be no assurance that the staff of the Commission would make
a similar determination with respect to the Exchange Offer as in such other
circumstances. Each Holder, other than a broker-dealer, must acknowledge that it
is not engaged in, and
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does not intend to engage in, a distribution of New Notes, and has no
arrangement or understanding to participate in a distribution of New Notes. If
any Holder is an affiliate of the Issuer, is engaged in or intends to engage in
or has any arrangement or understanding with respect to the distribution of the
New Notes to be acquired pursuant to the Exchange Offer, or acquired the Old
Notes as a result of market making or other trading activities, such Holder (i)
could not rely on the relevant determinations of the staff of the Commission and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes must
acknowledge that such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities and that it will deliver
a prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Notes. See "Plan of Distribution." In addition, to comply
with the securities laws of certain jurisdictions, if applicable, the New Notes
may not be offered or sold unless they have been registered or qualified for
sale in such jurisdiction or an exemption from registration or qualification is
available and is complied with. The Issuer has agreed to register or qualify the
sale of the New Notes in such jurisdictions only in limited circumstances and
subject to certain conditions.
ACCOUNTING TREATMENT
The exchange of the New Notes for the Old Notes will have no impact on the
Issuer's accounting records on the date of the exchange. Accordingly, no gain or
loss for accounting purposes will be recognized. Expenses of the Exchange Offer
will be amortized, pro rata, over the term of the New Notes.
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DESCRIPTION OF NOTES
GENERAL
The Old Notes were and the New Notes will be issued pursuant to an Indenture
dated as of May 18, 1998 between the Issuer and State Street Bank and Trust
Company of Connecticut, N.A., as trustee (the "Trustee"). The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The
Notes are subject to all such terms, and holders of the Notes (the "Holders")
are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of the material provisions of the Indenture does
not purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below. Copies
of the proposed form of Indenture and Registration Rights Agreement are filed as
exhibits to the Registration Statement of which this Prospectus is a part. The
definitions of certain terms used in the following summary are set forth below
under "--Certain Definitions." As used in this Prospectus, the term "Issuer"
refers only to The Restaurant Company and not its Subsidiaries.
The Notes are general unsecured obligations of the Issuer and will rank PARI
PASSU in right of payment with all current and future unsecured senior
Indebtedness of the Issuer. However, the Notes will be effectively subordinated
in right of payment to all existing and future secured Indebtedness of the
Issuer and to all liabilities (including Indebtedness) of the Issuer's
Subsidiaries. As of March 31, 1998, on a pro forma basis, the Issuer had no
secured indebtedness and the Issuer's Subsidiaries had $181.0 million of total
liabilities, including $141.0 million of indebtedness.
As of the date hereof, the Issuer has the following Subsidiaries, each of
which will be a Restricted Subsidiary (as defined herein): PRI, PFR, PMC, TRC
Realty Co. and Perkins Finance Corp. Under certain circumstances, the Issuer
will be able to designate future Subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate Original Principal Amount at Maturity to
$31.1 million. The Notes will mature on May 15, 2008. The Old Notes were issued
at a discount to their Original Principal Amount at Maturity and generated gross
proceeds to the Issuer of approximately $18.0 million. Based on the issue price
thereof, the yield to maturity of the Notes is 11 1/4% (computed on a
semi-annual bond equivalent basis), calculated from May 18, 1998. However,
following each successive Semi-Annual Accrual Date until the earlier of the time
the Cash Interest Election is made or May 15, 2003, the yield to maturity of the
Notes for tax purposes for subsequent periods (calculated on a bond equivalent
basis assuming that the redemption price less the issue price with respect to
each Note is treated as interest) will increase such that if no Cash Interest
Election is made prior to May 15, 2003 the yield to maturity of the Notes,
calculated on such bond equivalent basis, will have increased to 11.89% for the
remaining term of the Notes. See "Certain U.S. Tax Consequences to Holders."
Cash interest will not accrue or be payable on the Notes prior to May 15, 2003;
PROVIDED that on any Semi-Annual Accrual Date prior to May 15, 2003, the Issuer
may elect to begin accruing and paying cash interest on the Notes, by giving
notice of such election to the Trustee and the Holders on or prior to such
Semi-Annual Accrual Date (the "Cash Interest Election"). Cash interest on the
Accreted Value of the Notes will accrue at a rate of 11 1/4% per annum from the
earlier of May 15, 2003 or the Semi-Annual Accrual Date with respect to which
the Cash Interest Election is made and will be payable semi-annually in arrears
on each May 15 and November 15, commencing on the earlier of November 15, 2003
or the Interest Payment Date immediately following the Semi-Annual Accrual Date
with respect to which the Cash Interest Election is made, to the holders of
record of the Notes on the close of business on the May 1 and November 1,
respectively, immediately preceding such Interest Payment Date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Cash interest
on overdue Accreted Value, principal, premium, if any, and interest will accrue
at a rate of 12 1/4%. Principal,
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Accreted Value, premium, if any, and interest and Liquidated Damages, if any, on
the Notes will be payable at the office or agency of the Issuer maintained for
such purpose within the City and State of New York or, at the option of the
Issuer, payment of interest and Liquidated Damages, if any, may be made by check
mailed to the Holders of the Notes at their respective addresses set forth in
the register of Holders of Notes; PROVIDED that all payments of principal,
Accreted Value, premium, interest and Liquidated Damages, if any, with respect
to Notes the Holders of which have given wire transfer instructions to the
Issuer will be required to be made by wire transfer of immediately available
funds to the accounts specified by the Holders thereof. Until otherwise
designated by the Issuer, the Issuer's office or agency in New York will be the
office of the Trustee maintained for such purpose. The Notes will initially be
issued in denominations of $1,000 Original Principal Amount at Maturity and
integral multiples thereof.
MANDATORY PAYMENT OF ACCRUED INTEREST
On May 15, 2003, the Issuer will be required to make a payment of accrued
but unpaid interest by redeeming an amount per Note equal to the Accreted Value
of such Note on May 15, 2003 less the original issue price with respect to such
Note at a redemption price equal to 105.625% of the amount redeemed; and the
Principal Amount at Maturity of such Note shall thereafter be reduced by the
amount of such Accreted Value.
OPTIONAL REDEMPTION
The Notes are redeemable, in whole or in part, at the option of the Issuer,
on or after May 15, 2003, upon not less than 30 nor more than 60 days' notice,
at the redemption prices (expressed as percentages of Principal Amount at
Maturity) set forth below plus accrued and unpaid interest and Liquidated
Damages thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on May 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- --------------------------------------------------------------------------------- -----------
<S> <C>
2003............................................................................. 105.625%
2004............................................................................. 103.750%
2005............................................................................. 101.875%
2006 and thereafter.............................................................. 100.000%
</TABLE>
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time pursuant to an
optional redemption, selection of Notes for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed, or, if the Notes are not so
listed, on a pro rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate; PROVIDED that no Notes of $1,000 Principal Amount at
Maturity or less shall be redeemed in part. Notices of redemption shall be
mailed by first class mail at least 30 but not more than 60 days before the
redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the Principal Amount at Maturity thereof to be redeemed. A
new Note in Principal Amount at Maturity equal to the unredeemed portion thereof
will be issued in the name of the Holder thereof upon cancellation of the
original Note. Notes called for redemption become due on the date fixed for
redemption. On and after the redemption date, Accreted Value ceases to accrete
or interest ceases to accrue, as the case may be, on Notes or portions of them
called for redemption.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Issuer to repurchase all or any part (such that any
Note not tendered for purchase shall be in a
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denomination equal to $1,000 Principal Amount at Maturity or an integral
multiple thereof) of such Holder's Notes pursuant to the offer described below
(the "Change of Control Offer") at an offer price in cash equal to 101% of the
Accreted Value thereof plus accrued and unpaid interest thereon, if any, and
Liquidated Damages thereon, if any, to the date of purchase (the "Change of
Control Payment"). Within ten days following any Change of Control, the Issuer
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Notes on the
date specified in such notice, which date shall be no earlier than 30 days and
no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), pursuant to the procedures required by the Indenture and
described in such notice. The Issuer will comply with the requirements of Rule
l4e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Issuer will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate Principal Amount at Maturity of Notes or portions thereof being
purchased by the Issuer. The Paying Agent will promptly mail to each Holder of
Notes so tendered the Change of Control Payment for such Notes, and the Trustee
will promptly authenticate and mail (or cause to be transferred by book entry)
to each Holder a new Note equal in Principal Amount at Maturity to any
unpurchased portion of the Notes surrendered, if any; provided that each such
new Note will be in a Principal Amount at Maturity of $1,000 or an integral
multiple thereof. The Issuer will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Issuer
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Existing Credit Facility provides that certain events which are similar
to a Change of Control constitute a default under the Existing Credit Facility,
and the 10 1/8% Senior Notes Indenture provides that the holders of the 10 1/8%
Senior Notes have the right to require PFR to repurchase the 10 1/8% Senior
Notes if certain events which are similar to a Change of Control occur. Finally,
the Issuer's ability to pay cash to the Holders of Notes upon a repurchase may
be limited by the Issuer's then existing financial resources. See "Risk
Factors--Change of Control."
The Issuer will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Issuer and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Issuer and its Restricted Subsidiaries,
taken as a whole, to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than a Permitted Holder, (ii) the adoption of a plan
relating to the liquidation or dissolution of the Issuer, (iii) the consummation
of any transaction (including, without limitation, any merger or consolidation)
the result of which is that any "person" (as defined above), other than a
Permitted Holder, becomes the "beneficial owner" (as such term is defined in
Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of
Capital Interests of the Issuer entitling the owners thereof to 45% or more of
the
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income or profits of the Issuer or (iv) the first day on which a majority of the
members of the Board of Directors of the Issuer are not Continuing Directors.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Issuer and its Restricted Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Notes to require
the Issuer to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Issuer and
its Restricted Subsidiaries taken as a whole to another Person or group may be
uncertain.
"BOARD OF DIRECTORS" means (i) with respect to any Person that is a
corporation, the board of directors of such Person or any authorized committee
of such board of directors, and (ii) with respect to any Person that is a
partnership or a limited liability company, the board of directors of the
general partner (or similar Person) of such Person or any authorized committee
of such board of directors.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Issuer who (i) was a member of such Board of
Directors on the date of the Indenture, (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election, or (iii) was nominated or ratified for election to
such Board of Directors by a Permitted Holder.
"PERMITTED HOLDER" means (i) each of Donald N. Smith and The Equitable Life
Assurance Society of the United States and (ii) any Affiliate of either Donald
N. Smith and/or The Equitable Life Assurance Society of the United States.
ASSET SALES
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Issuer
(or the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) except in the case of a Permitted Non-Cash
Transaction, at least 75% of the consideration therefor received by the Issuer
or such Restricted Subsidiary is in the form of cash; PROVIDED that the amount
of (x) any liabilities (as shown on the Issuer's or such Restricted Subsidiary's
most recent balance sheet) of the Issuer or any Restricted Subsidiary (other
than contingent liabilities and liabilities that are by their terms subordinated
to the Notes or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the Issuer
or such Restricted Subsidiary from further liability and (y) any securities,
notes or other obligations received by the Issuer or any such Restricted
Subsidiary from such transferee that are contemporaneously (subject to ordinary
settlement periods) converted by the Issuer or such Restricted Subsidiary into
cash (to the extent of the cash received) shall be deemed to be cash for
purposes of this provision; and PROVIDED, FURTHER, that if cash consideration
from any such Asset Sale is received by a Restricted Subsidiary which is unable
to transfer such cash consideration to the Issuer (by means of a dividend,
distribution or otherwise) by reason of any legal or contractual restriction
affecting such Restricted Subsidiary, such cash consideration shall be deemed to
constitute Net Proceeds only to the extent such Restricted Subsidiary is
permitted from time to time to transfer such cash consideration to the Issuer.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Issuer or the applicable Restricted Subsidiary may apply such Net Proceeds
(a) to permanently repay Indebtedness (and to correspondingly reduce commitments
with respect thereto) of (x) any Restricted Subsidiary or (y) the Issuer (if
such Indebtedness of the Issuer is not subordinated in right of payment to the
Notes); PROVIDED that the amount of Net Proceeds utilized to repay any such
Indebtedness of the Issuer shall not exceed
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such Indebtedness's Pro Rata Share of such Net Proceeds, or (b) to the
acquisition of a majority of the assets of, or a majority of the voting Capital
Interests of, another Permitted Business, the making of a capital expenditure or
the acquisition of other tangible long-term assets, in each case, that are used
or useful in a Permitted Business of the Issuer or a Restricted Subsidiary.
Pending the final application of any such Net Proceeds, the Issuer may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds
from Asset Sales that are not applied or invested as provided in the first
sentence of this paragraph will be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $5.0 million, the Issuer will be
required to make an offer to all Holders of Notes (an "Asset Sale Offer") to
purchase the maximum Accreted Value of Notes that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
Accreted Value thereof plus accrued and unpaid interest thereon, if any, and
Liquidated Damages thereon, if any. to the date of purchase, in accordance with
the procedures set forth in the Indenture. To the extent that any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Issuer may use
such Excess Proceeds for any purpose not otherwise prohibited by the Indenture.
If the aggregate Accreted Value of Notes tendered into such Asset Sale Offer
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Issuer's or
any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
the Issuer or any of its Restricted Subsidiaries) or to the direct or indirect
holders of the Issuer's or any of its Restricted Subsidiaries' Equity Interests
in their capacity as such (other than dividends or distributions payable in
Equity Interests (other than Disqualified Interests) of the Issuer or to the
Issuer or a Restricted Subsidiary of the Issuer); (ii) purchase, redeem or
otherwise acquire or retire for value (including, without limitation, in
connection with any merger or consolidation involving the Issuer) any Equity
Interests of the Issuer or any direct or indirect parent of the Issuer (other
than any such Equity Interests owned by the Issuer or any Wholly-Owned
Restricted Subsidiary of the Issuer); (iii) make any payment on or with respect
to, or purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes except a payment of interest or
principal at Stated Maturity; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) at the time of such Restricted Payment and after giving pro forma
effect thereto as if such Restricted Payment had been made at the beginning
of the applicable four-quarter period, (x) in the case of a Restricted
Payment identified in clauses (i), (ii) and (iii) above, the Issuer would
have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test and the Issuer Coverage
Ratio test set forth in the first paragraph of the covenant described below
under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Equity Interests" and (y) in the case of a Restricted Payment identified in
clause (iv) above, a Restricted Subsidiary would have been able to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant described below
under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Equity Interests"; and
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(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Issuer and its Restricted Subsidiaries
after the date of the Indenture (excluding Restricted Payments permitted by
clauses (ii), (iii), (iv), (vi), (vii) and (ix) of the second succeeding
paragraph), is less than the sum, without duplication, of (i) 50% of the
Consolidated Net Income of the Issuer for the period (taken as one
accounting period) from the beginning of the first fiscal quarter commencing
after the date of the Indenture (the "Measurement Date") to the end of the
Issuer's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds received by the
Issuer since the Measurement Date as a contribution to its common equity
capital or from the issue or sale of Equity Interests of the Issuer (other
than Disqualified Interests) or from the issue or sale of Disqualified
Interests or debt securities of the Issuer that have been converted into
such Equity Interests (other than Equity Interests (or Disqualified
Interests or convertible debt securities) sold to a Subsidiary of the
Issuer), plus (iii) to the extent that any Restricted Investment that was
made after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition, if
any) and (B) the aggregate amount of such Restricted Investment that was
treated as a Restricted Payment when made.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the Issuer
and its Restricted Subsidiaries in the Subsidiary so designated will be deemed
to be Restricted Payments at the time of such designation and will reduce the
amount available for Restricted Payments under the first paragraph of this
covenant. All such outstanding Investments will be deemed to constitute
Investments in an amount equal to the fair market value of such Investments at
the time of such designation. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
The foregoing provisions do not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of subordinated Indebtedness or Equity Interests of the Issuer or of
Equity Interests of a Restricted Subsidiary in exchange for, or out of the net
cash proceeds of the substantially concurrent sale (other than to a Subsidiary
of the Issuer) of, other Equity Interests of the Issuer (other than any
Disqualified Interests); PROVIDED that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (c) (ii) of the preceding
paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend or
distribution by a Subsidiary of the Issuer to the holders of its common Equity
Interests on a pro rata basis; (v) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Issuer or any
Subsidiary of the Issuer held by any member of the Issuer's (or any of its
Subsidiaries') management; PROVIDED that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$1,000,000 in any twelve-month period and no Default or Event of Default shall
have occurred and be continuing immediately after such transaction; (vi) the
declaration of the Jack Astor Vehicle as an Unrestricted Subsidiary on the date
that it becomes a Subsidiary of the Issuer; PROVIDED that it otherwise meets the
qualifications of an Unrestricted Subsidiary; (vii) transfers of cash proceeds
from the sale of the Notes not to exceed, in the aggregate, $17.0 million, to
finance the purchase of Equity Interests of the Company as set forth in the
Offering Memorandum under the caption "Use of Proceeds"; (viii) so long as no
Default or Event of Default shall have occurred or be continuing immediately
after such transaction, the repurchase of Equity Interests of the Issuer from
its equityholders as of the Issue Date (or their respective Affiliates) in an
aggregate amount not to exceed $20.0 million if, after giving effect to such
transaction, the Issuer would be able to incur $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test and the
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Issuer Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Equity Interests"; (ix) any payment to the Issuer or any Restricted
Subsidiary; and (x) additional Restricted Payments not to exceed $5.0 million
after the date of the Indenture.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Issuer or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $1.0 million. Not later than the date of making any Restricted
Payment, the Issuer shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by the covenant "Restricted Payments" were
computed, together with a copy of any fairness opinion or appraisal required by
the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED EQUITY INTERESTS
The Indenture provides that the Issuer will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Issuer will not issue any Disqualified Interests and
will not permit any of its Subsidiaries to issue preferred Equity Interests
(including Disqualified Interests); PROVIDED, HOWEVER, that: (a) the Issuer may
incur Indebtedness (including Acquired Debt) or issue Disqualified Interests if
each of the Fixed Charge Coverage Ratio and the Issuer Coverage Ratio for the
Issuer's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Equity Interests are issued would
have been at least 2 to 1, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Equity Interests had been issued, as the
case may be, at the beginning of such four-quarter period; and (b) any of the
Issuer's Restricted Subsidiaries may incur Indebtedness (including any Acquired
Debt) or issue preferred Equity Interests (including Disqualified Equity
Interests) if the Fixed Charge Coverage Ratio for the Issuer's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such Equity Interests are issued would have been at least 2 to 1,
determined on a pro forma basis (including pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Equity Interests had been issued, as the case may be, at the beginning of such
four quarter period.
The Indenture also provides that the Issuer will not incur any Indebtedness
that is contractually subordinated in right of payment to any other Indebtedness
of the Issuer unless such Indebtedness is also contractually subordinated in
right of payment to the Notes on substantially identical terms; provided,
however, that no Indebtedness of the Issuer shall be deemed to be contractually
subordinated in right of payment to any other Indebtedness of the Issuer solely
by virtue of being unsecured.
The provisions of the first paragraph of this covenant will not prohibit the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Issuer and its Subsidiaries of revolving
credit Indebtedness and letters of credit (with letters of credit being
deemed to have a principal amount equal to the maximum potential liability
of the Issuer and its Subsidiaries thereunder) under Credit Facilities;
provided that the aggregate principal amount of all revolving credit
Indebtedness and letters of credit outstanding under Credit Facilities after
giving effect to such incurrence does not exceed an amount equal to $50.0
million;
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(ii) the incurrence by the Issuer and its Restricted Subsidiaries of
Existing Indebtedness;
(iii) the incurrence by the Issuer of Indebtedness represented by the
Notes;
(iv) the incurrence by the Issuer or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Issuer or such Restricted Subsidiary, in an aggregate
principal amount (together with any Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any Indebtedness incurred pursuant
to this clause (iv)) not to exceed $5.0 million at any time outstanding;
(v) the incurrence by the Issuer or any of its Restricted Subsidiaries
of Indebtedness in connection with the acquisition of assets or a new
Restricted Subsidiary; PROVIDED that such Indebtedness was incurred by the
prior owner of such assets or such Restricted Subsidiary prior to such
acquisition by the Issuer or one of its Restricted Subsidiaries and was not
incurred in connection with, or in contemplation of, such acquisition by the
Issuer or one of its Restricted Subsidiaries; and PROVIDED FURTHER that the
principal amount (or accreted value, as applicable) of such Indebtedness,
together with any other outstanding Indebtedness incurred pursuant to this
clause (v) and any Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause (v),
does not exceed $10 million;
(vi) the incurrence by the Issuer or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace, Indebtedness incurred
pursuant to clause (ii) or (iii) above or this clause (vi) or any
Indebtedness that was permitted by the Indenture to be incurred pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
this covenant;
(vii) the incurrence by the Issuer or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Issuer and any of its
Wholly-Owned Subsidiaries; PROVIDED, HOWEVER, that (i) if the Issuer is the
obligor on such Indebtedness, such Indebtedness is expressly subordinated to
the prior payment in full in cash of all Obligations with respect to the
Notes and (ii)(A) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other than the
Issuer or a Subsidiary thereof and (B) any sale or other transfer of any
such Indebtedness to a Person that is not either the Issuer or a
Wholly-Owned Restricted Subsidiary thereof shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Issuer or such
Restricted Subsidiary, as the case may be, that was not permitted by this
clause (vii);
(viii) the incurrence by the Issuer or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of this Indenture to be outstanding;
(ix) the guarantee by the Issuer or any Restricted Subsidiary of
Indebtedness of a Restricted Subsidiary of the Issuer that was permitted to
be incurred by another provision of this covenant;
(x) the incurrence by the Issuer's Unrestricted Subsidiaries of
Non-Recourse Debt, PROVIDED, HOWEVER, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Issuer that was not permitted by this clause (x);
(xi) Indebtedness consisting of Permitted Investments of the kind
described in clause (f) of the definition of "Permitted Investments"; and
(xii) the incurrence by the Issuer or any of its Restricted Subsidiaries
of additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (xii), not to exceed $5.0
million.
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For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xii) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Issuer shall, in
its sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant. Accrual of interest, accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in the form
of additional Indebtedness with the same terms, and the payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock shall not constitute an incurrence of Indebtedness for
purposes of this covenant; provided, in each such case, that the amount thereof
is included in Fixed Charges of the Issuer as accrued.
LIENS
The Indenture provides that the Issuer will not, directly or indirectly,
create, incur, assume or suffer to exist any Lien securing Indebtedness or trade
payables on any asset now owned or hereafter acquired by it, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale and leaseback transaction;
PROVIDED that the Issuer and any Restricted Subsidiary may enter into a sale and
leaseback transaction if (i) the Issuer or such Restricted Subsidiary could have
(a) incurred Indebtedness in an amount equal to the Attributable Debt relating
to such sale and leaseback transaction pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant described above
under the caption "--Incurrence of Additional Indebtedness and Issuance of
Preferred Equity Interests" and (b) in the case of a sale and leaseback
transaction by the Issuer, incurred a Lien to secure such Indebtedness pursuant
to the covenant described above under the caption "--Liens," (ii) the gross cash
proceeds of such sale and leaseback transaction are at least equal to the fair
market value (as determined in good faith by the Board of Directors and set
forth in an Officers' Certificate delivered to the Trustee) of the property that
is the subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and the Issuer or
such Restricted Subsidiary applies the proceeds of such transaction in
compliance with, the covenant described above under the caption "--Asset Sales."
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Issuer or any of its Restricted Subsidiaries on its
Capital Interests or with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any Indebtedness owed to the Issuer or any
of its Restricted Subsidiaries, (ii) make loans or advances to the Issuer or any
of its Restricted Subsidiaries or (iii) transfer any of its properties or assets
to the Issuer or any of its Restricted Subsidiaries. However, the foregoing
restrictions will not apply to encumbrances or restrictions existing under or by
reason of (a) the Indenture and the Notes, (b) applicable law, (c) any
instrument governing Indebtedness or Capital Interests of a Person acquired by
the Issuer or any of its Restricted Subsidiaries as in effect at the time of
such acquisition (except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, PROVIDED that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of the Indenture to be incurred, (d) customary
non-assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (e) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in clause (iii) above on
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the property so acquired, (f) any agreement for the sale of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary pending
its sale, (g) Permitted Refinancing Indebtedness, PROVIDED that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive, taken as a whole, than those contained in the
agreements governing the Indebtedness being refinanced, (h) secured Indebtedness
otherwise permitted to be incurred pursuant to the provisions of the covenant
described above under the caption "--Liens" that limits the right of the debtor
to dispose of the assets securing such Indebtedness, (i) restrictions on cash or
other deposits or net worth imposed by customers under contracts entered into in
the ordinary course of business, (j) the 10 1/8% Senior Notes Indenture and the
10 1/8% Senior Notes as in effect on the date of the Indenture and (k) the
Existing Credit Facility or one or more other Credit Facilities; PROVIDED that
such encumbrances and restrictions are not materially more restrictive than
those contained in the Existing Credit Facility as in effect on the date of the
Indenture.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Issuer may not consolidate or merge with or
into (whether or not the Issuer is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Issuer is the surviving corporation
or the entity or the Person formed by or surviving any such consolidation or
merger (if other than the Issuer) or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state thereof or
the District of Columbia; (ii) the entity or Person formed by or surviving any
such consolidation or merger (if other than the Issuer) or the entity or Person
to which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Issuer under the
Registration Rights Agreement, the Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) the Issuer or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Issuer), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made, (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Issuer immediately
preceding the transaction and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test and the Issuer Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Equity Interests." The Indenture specifically permits the
Issuer or any Restricted Subsidiary to consolidate or merge with or into the
Issuer or any other Restricted Subsidiary.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Issuer or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Issuer or such Restricted Subsidiary
with an unrelated Person and (ii) the Issuer delivers to the Trustee (a) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has either been approved by a majority of the disinterested
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members of the Board of Directors or has been approved in an opinion issued by
an accounting, appraisal or investment banking firm of national standing as
being fair to the Holders from a financial point of view and (b) with respect to
any Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered into by the
Issuer or any of its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of the Issuer or such Restricted
Subsidiary, (ii) transactions between or among the Issuer and/or its Restricted
Subsidiaries, (iii) payment of reasonable directors fees, (iv) any agreement in
effect on the date of the Indenture or any amendment thereto or transaction
contemplated thereby (and any replacement or amendment of any such agreement so
long as any such amendment or replacement thereof is not materially less
favorable to the Holders than the original agreement in effect on the date of
the Indenture), and (v) Restricted Payments that are permitted by the provisions
of the Indenture described above under the caption "Restricted Payments."
LIMITATION ON ISSUANCES AND SALES OF CAPITAL INTERESTS IN WHOLLY-OWNED
SUBSIDIARIES
The Indenture provides that the Issuer (i) will not, and will not permit any
Wholly-Owned Restricted Subsidiary of the Issuer to, transfer, convey, sell,
lease or otherwise dispose of any Capital Interests in any Wholly-Owned
Restricted Subsidiary of the Issuer to any Person (other than the Issuer or a
Wholly-Owned Restricted Subsidiary of the Issuer), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Capital Interests in
such Wholly-Owned Restricted Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in accordance
with the covenant described above under the caption "--Asset Sales," and (ii)
will not permit any Wholly-Owned Restricted Subsidiary of the Issuer to issue
any of its Equity Interests (other than, if necessary, Capital Interests
constituting directors' qualifying shares) to any Person other than to the
Issuer or a Wholly-Owned Restricted Subsidiary of the Issuer.
BUSINESS ACTIVITIES
The Issuer will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Issuer and its Restricted Subsidiaries taken as a
whole.
PAYMENTS FOR CONSENT
The Indenture provides that neither the Issuer nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Issuer will furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if the
Issuer were required to file such Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" that describes
the financial condition and results of operations of the Issuer and its
consolidated Subsidiaries (showing in reasonable detail, either on the face of
the financial statements or in the
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footnotes thereto and in Management's Discussion and Analysis of Financial
Condition and Results of Operations, the financial condition and results of
operations of the Issuer and its Restricted Subsidiaries separate from the
financial condition and results of operations of the Unrestricted Subsidiaries
of the Issuer) and, with respect to the annual information only, a report
thereon by the Issuer's certified independent accountants and (ii) all current
reports that would be required to be filed with the Commission on Form 8-K if
the Issuer were required to file such reports, in each case within the time
periods specified in the Commission's rules and regulations. In addition,
following the consummation of the exchange offer contemplated by the
Registration Rights Agreement, whether or not required by the rules and
regulations of the Commission, the Issuer will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Issuer has agreed that, for so long as any Notes remain outstanding, it will
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes; (ii) default in payment when due
of the Accreted Value or principal of or premium, if any, on the Notes; (iii)
failure by the Issuer to comply with the provisions described under the captions
"--Change of Control," "--Asset Sales," "--Restricted Payments" or "--Incurrence
of Indebtedness and Issuance of Preferred Equity Interests"; (iv) failure by the
Issuer for 60 days after notice to comply with any of its other agreements in
the Indenture or the Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Issuer or any of its
Subsidiaries (or the payment of which is guaranteed by the Issuer or any of its
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of the Indenture, which default (a) is caused by a failure to pay
the accreted value or principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $5.0
million or more; (vi) failure by the Issuer or any of its Subsidiaries to pay
final judgments aggregating in excess of $5.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days; or (vii) certain events of
bankruptcy or insolvency with respect to the Issuer or any of its Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in Principal Amount at Maturity of the then outstanding Notes
may declare the Accreted Value of all the Notes, together with accrued and
unpaid interest, if any, thereon and Liquidated Damages, if any, thereon to be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, with
respect to the Issuer, any Significant Subsidiary or any group of Subsidiaries
that, taken together, would constitute a Significant Subsidiary, all outstanding
Notes will become due and payable without further action or notice. Holders of
the Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in Principal
Amount at Maturity of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of Accreted Value, principal or
interest) if it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Issuer with the
intention of avoiding payment of the premium that the
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Issuer would have had to pay if the Issuer then had elected to redeem the Notes
pursuant to the optional redemption provisions of the Indenture, an equivalent
premium shall also become and be immediately due and payable to the extent
permitted by law upon the acceleration of the Notes. If an Event of Default
occurs prior to May 15, 2003 by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Issuer with the intention of avoiding the
prohibition on optional redemption of the Notes prior to May 15, 2003, then the
premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate Principal Amount at Maturity of the
Notes then outstanding by notice to the Trustee may on behalf of the Holders of
all of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the Accreted Value or principal of, the Notes.
The Issuer is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuer is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, partner, incorporator or stockholder of the
Issuer or any Subsidiary of the Issuer, as such, shall have any liability for
any obligations of the Issuer under the Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each
Holder of Notes by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuer may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due from the trust
referred to below, (ii) the Issuer's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Issuer's obligations in connection
therewith and (iv) the Legal Defeasance provisions of the Indenture. In
addition, the Issuer may, at its option and at any time, elect to have the
obligations of the Issuer released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages on
the outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Issuer must specify whether the Notes are
being defeased to maturity or to a particular redemption date; (ii) in the case
of Legal Defeasance, the Issuer shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Issuer has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of
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counsel shall confirm that, the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Issuer shall have delivered to the Trustee an opinion of counsel
in the United States reasonably acceptable to the Trustee confirming that the
Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit; (v) such
Legal Defeasance or Covenant Defeasance will not result in a breach or violation
of, or constitute a default under any material agreement or instrument (other
than the Indenture) to which the Issuer or any of its Subsidiaries is a party or
by which the Issuer or any of its Subsidiaries is bound; (vi) the Issuer must
have delivered to the Trustee an opinion of counsel to the effect that after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; (vii) the Issuer must deliver to the
Trustee an Officers' Certificate stating that the deposit was not made by the
Issuer with the intent of preferring the Holders of Notes over the other
creditors of the Issuer with the intent of defeating, hindering, delaying or
defrauding creditors of the Issuer or others; and (viii) the Issuer must deliver
to the Trustee an Officers' Certificate and an opinion of counsel, each stating
that all conditions precedent provided for relating to the Legal Defeasance or
the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Issuer may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Issuer is not required to transfer or exchange any Note selected
for redemption. Also, the Issuer is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in Principal Amount at Maturity of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in Principal Amount at Maturity of the
then outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
Principal Amount at Maturity of Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Note or alter the provisions with respect to the
redemption of the Notes (other than provisions relating to the covenants
described above under the caption "--Repurchase at the Option of Holders"),
(iii) reduce the rate of or change the time for payment of interest on any Note,
(iv) modify the definition of Accreted Value, Original Principal Amount at
Maturity or Principal Amount at Maturity in any manner adverse to the Holders,
(v) waive a Default or Event of Default in the payment of Accreted
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Value or principal of or premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a majority in
aggregate Principal Amount at Maturity of the Notes and a waiver of the payment
default that resulted from such acceleration), (vi) make any Note payable in
money other than that stated in the Notes, (vii) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of Accreted Value or principal of or
premium, if any, or interest on the Notes, (viii) waive a redemption payment
with respect to any Note (other than a payment required by one of the covenants
described above under the caption "-- Repurchase at the Option of Holders") or
(ix) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Issuer and the Trustee may amend or supplement the Indenture or the Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes
in addition to or in place of certificated Notes, to provide for the assumption
of the Issuer's obligations to Holders of Notes in the case of a merger or
consolidation or sale of all or substantially all of the Issuer's assets, to
make any change that would provide any additional rights or benefits to the
Holders of Notes or that does not adversely affect the legal rights under the
Indenture of any such Holder, or to comply with requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuer, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in Principal Amount at Maturity of the then
outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that if an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Offering Memorandum may obtain a copy of the
Indenture, the Registration Rights Agreement or any agreement governing
Indebtedness described under "Description of Other Indebtedness" without charge
by writing to The Restaurant Company, 6075 Poplar Avenue, Suite 800, Memphis,
Tennessee 38119, Attention: Chief Financial Officer.
BOOK-ENTRY, DELIVERY AND FORM
The Old Notes were originally offered and sold to qualified institutional
buyers in reliance on Rule 144A ("Rule 144A Notes"). Except as set forth below,
Notes are originally issued in registered, global form in minimum denominations
of $1,000 Original Principal Amount at Maturity and integral multiples of $1,000
Original Principal Amount at Maturity in excess thereof. Notes will be issued at
the closing of the Offering (the "Closing") only against payment in immediately
available funds.
The Notes are represented by one or more Notes in registered, global form
without interest coupons (collectively, the "Global Notes"). The Global Notes
are deposited upon issuance with the Trustee as custodian for The Depository
Trust Company ("DTC"), in New York, New York, and registered in the
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name of DTC or its nominee, in each case for credit to an account of a direct or
indirect participant in DTC as described below. Through and including the 40th
day after the later of the commencement of the Offering and the Closing (such
period through and including such 40th day, the "Restricted Period"), beneficial
interests in the Regulation S Global Notes may be held only through the
Euroclear System ("Euroclear") and Cedel, S.A. ("Cedel") (as indirect
participants in DTC), unless transferred to a person that takes delivery through
a Rule 144A Global Note in accordance with the certification requirements
described below. Beneficial interests in the Rule 144A Global Notes may not be
exchanged for beneficial interests in the Regulation S Global Notes at any time
except in the limited circumstances described below. See "--Exchanges Between
Regulation S Notes and Rule 144A Notes."
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"--Exchange of Book-Entry Notes for Certificated Notes." Except in the limited
circumstances described below, owners of beneficial interests in the Global
Notes will not be entitled to receive physical delivery of Certificated Notes
(as defined below).
The Old Notes (including beneficial interests in the Global Notes) are
subject to certain restrictions on transfer and bear a restrictive legend as
described under "Notice to Investors." In addition, transfers of beneficial
interests in the Global Notes are subject to the applicable rules and procedures
of DTC and its direct or indirect participants (including, if applicable, those
of Euroclear and Cedel), which may change from time to time.
Initially, the Trustee is acting as Paying Agent and Registrar. The Notes
may be presented for registration of transfer and exchange at the offices of the
Registrar.
DEPOSITARY PROCEDURES
The following description of the operations and procedures of DTC, Euroclear
and Cedel are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement systems
and are subject to changes by them from time to time. The Issuer takes no
responsibility for these operations and procedures and urge investors to contact
the system or their participants directly to discuss these matters.
DTC has advised the Issuer that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests in, and transfers of ownership interests
in, each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised the Issuer that, pursuant to procedures established by
it, (i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the Principal
Amount at Maturity of the Global Notes and (ii) ownership of such interests in
the Global Notes will be shown on, and the transfer of ownership thereof will be
effected only through. records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with respect
to other owners of beneficial interest in the Global Notes).
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Investors in the Global Notes may hold their interests therein directly
through DTC, if they are Participants in such system, or indirectly through
organizations (including Euroclear and Cedel) which are Participants in such
system. Investors in the Regulation S Global Notes must initially hold their
interests therein through Euroclear or Cedel, if they are participants in such
systems, or indirectly through organizations that are participants in such
systems. After the expiration of the Restricted Period (but not earlier),
investors may also hold interests in the Regulation S Global Notes through
Participants in the DTC system other than Euroclear and Cedel. Euroclear and
Cedel will hold interests in the Regulation S Global Notes on behalf of their
participants through customers' securities accounts in their respective names on
the books of their respective depositories, which are Morgan Guaranty Trust
Company of New York, Brussels office, as operator of Euroclear, and Citibank,
N.A., as operator of Cedel. All interests in a Global Note, including those held
through Euroclear or Cedel, may be subject to the procedures and requirements of
DTC. Those interests held through Euroclear or Cedel may also be subject to the
procedures and requirements of such systems. The laws of some states require
that certain persons take physical delivery in definitive form of securities
that they own. Consequently, the ability to transfer beneficial interests in a
Global Note to such persons will be limited to that extent. Because DTC can act
only on behalf of Participants, which in turn act on behalf of Indirect
Participants and certain banks, the ability of a person having beneficial
interests in a Global Note to pledge such interests to persons or entities that
do not participate in the DTC system, or otherwise take actions in respect of
such interests, may be affected by the lack of a physical certificate evidencing
such interests.
Except as described below, owners of interests in the Global Notes will not
have Notes registered in their names, will not receive physical delivery of
Notes in certificated form and will not be considered the registered owners or
"Holders" thereof under the Indenture for any purpose.
Payments in respect of the Accreted Value or principal of, premium, if any,
Liquidated Damages, if any, and interest on a Global Note registered in the name
of DTC or its nominee will be payable to DTC in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Issuer and the
Trustee will treat the persons in whose names the Notes, including the Global
Notes. are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, neither
the Issuer, the Trustee nor any agent of the Issuer or the Trustee has or will
have any responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to or payments made on
account of beneficial ownership interests in the Global Notes, or for
maintaining, supervising or reviewing any of DTC's records or any Participant's
or Indirect Participant's records relating to the beneficial ownership interests
in the Global Notes or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants. DTC has
advised the Issuer that its current practice, upon receipt of any payment in
respect of securities such as the Notes (including principal and interest), is
to credit the accounts of the relevant Participants with the payment on the
payment date, in amounts proportionate to their respective holdings in the
Principal Amount at Maturity of beneficial interest in the relevant security as
shown on the records of DTC unless DTC has reason to believe it will not receive
payment on such payment date. Payments by the Participants and the Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the responsibility of
DTC, the Trustee or the Issuer. Neither the Issuer nor the Trustee will be
liable for any delay by DTC or any of its Participants in identifying the
beneficial owners of the Notes, and the Issuer and the Trustee may conclusively
rely on and will be protected in relying on instructions from DTC or its nominee
for all purposes.
Except for trades involving only Euroclear and Cedel participants, interest
in the Global Notes are expected to be eligible to trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will,
therefore, settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its Participants. See "--Same Day Settlement and
Payment."
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Subject to the transfer restrictions set forth under "Notice to Investors,"
transfers between Participants in DTC will be effected in accordance with DTC's
procedures, and will be settled in same day funds, and transfers between
participants in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the Notes
described herein, crossmarket transfers between the Participants in DTC, on the
one hand, and Euroclear or Cedel participants, on the other hand, will be
effected through DTC in accordance with DTC's rules on behalf of Euroclear or
Cedel, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Cedel, as the case may be, by the counterparty in such system in accordance with
the rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Cedel, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by delivering
or receiving interests in the relevant Global Note in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Cedel participants may
not deliver instructions directly to the depositories for Euroclear or Cedel.
DTC has advised the Issuer that it will take any action permitted to be
taken by a Holder of Notes only at the direction of one or more Participants to
whose account DTC has credited the interests in the Global Notes and only in
respect of such portion of the aggregate Principal Amount at Maturity of the
Notes as to which such Participant or Participants has or have given such
direction. However, if there is an Event of Default under the Notes, DTC
reserves the right to exchange the Global Notes for legended Notes in
certificated form, and to distribute such Notes to its Participants.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Notes among Participants in DTC,
Euroclear and Cedel, they are under no obligation to perform or to continue to
perform such procedures, and such procedures may be discontinued at any time.
Neither the Issuer nor the Trustee nor any of their respective agents 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.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive Notes in registered
certificated form ("Certificated Notes") if (i) DTC (x) notifies the Issuer that
it is unwilling or unable to continue as depositary for the Global Notes and the
Issuer thereupon fails to appoint a successor depositary or (y) has ceased to be
a clearing agency registered under the Exchange Act, (ii) the Issuer, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
the Certificated Notes or (iii) there shall have occurred and be continuing a
Default or Event of Default with respect to the Notes. In addition, beneficial
interests in a Global Note may be exchanged for Certificated Notes upon request
but only upon prior written notice given to the Trustee by or on behalf of DTC
in accordance with the Indenture. In all cases, Certificated Notes delivered in
exchange for any Global Note or beneficial interests therein will be registered
in the names, and issued in any approved denominations, requested by or on
behalf of the depositary (in accordance with its customary procedures) and will
bear the applicable restrictive legend referred to in "Notice to Investors,"
unless the Issuer determines otherwise in compliance with applicable law.
EXCHANGE OF CERTIFICATED NOTES FOR BOOK-ENTRY NOTES
Notes issued in certificated form may not be exchanged for beneficial
interests in any Global Note unless the transferor first delivers to the Trustee
a written certificate (in the form provided in the Indenture) to the effect that
such transfer will comply with the appropriate transfer restrictions applicable
to such Notes. See "Notice to Investors."
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SAME-DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including Accreted Value, principal, premium, if any, interest
and Liquidated Damages, if any) be made by wire transfer of immediately
available funds to the accounts specified by the Global Note Holder. With
respect to Notes in certificated form, the Issuer will make all payments of
Accreted Value, principal, premium, if any, interest and Liquidated Damages, if
any, by wire transfer of immediately available funds to the accounts specified
by the Holders thereof or, if no such account is specified, by mailing a check
to each such Holder's registered address. The Notes represented by the Global
Notes are expected to be eligible to trade in the PORTAL market and to trade in
the Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Notes will, therefore, be required by the
Depositary to be settled in immediately available funds. The Issuer expects that
secondary trading in any certificated Notes will also be settled in immediately
available funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant in
DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing day
(which must be a business day for Euroclear and Cedel) immediately following the
settlement date of DTC. DTC has advised the Issuer that cash received in
Euroclear or Cedel as a result of sales of interests in a Global Note by or
through a Euroclear or Cedel participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACCRETED VALUE" as of any date (the "Specified Date") means, with respect
to each $1,000 Original Principal Amount at Maturity of Notes:
(i) if the Specified Date is one of the following dates (each a
"Semi-Annual Accrual Date"), the amount set forth opposite such date below:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRETED
ACCRUAL DATE VALUE
- ------------------------------------------------------------------------------- -------------
<S> <C>
May 18, 1998................................................................... 579.07
Nov 15, 1998................................................................... 611.10
May 15, 1999................................................................... 645.47
Nov 15, 1999................................................................... 681.78
May 15, 2000................................................................... 720.13
Nov 15, 2000................................................................... 760.64
May 15, 2001................................................................... 803.43
Nov 15, 2001................................................................... 848.62
May 15, 2002................................................................... 896.35
Nov 15, 2002................................................................... 946.77
May 15, 2003................................................................... $ 1,000.00;
</TABLE>
(ii) if the Specified Date occurs between two Semi-Annual Accrual Dates,
the sum of (a) the Accreted Value for the Semi-Annual Accrual Date
immediately preceding the Specified Date and (b) an amount equal to the
product of (x) the Accreted Value for the immediately following Semi-Annual
Accrual Date less the Accreted Value for the immediately preceding
Semi-Annual Accrual Date and (y) a fraction, the numerator of which is the
number of days actually elapsed from the
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immediately preceding Semi-Annual Accrual Date to the Specified Date and the
denominator of which is 180; and
(iii) if the Specified Date is after May 15, 2003 and all accrued but
unpaid interest has been paid, $579.07;
PROVIDED, HOWEVER, that if the Issuer makes the Cash Interest Election, the
Accreted Value shall be, and remain through May 15, 2003, the Accreted Value as
of the Semi-Annual Accrual Date on which the Cash Interest Election is made.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with or in contemplation
of such other Person merging with or into or becoming a Subsidiary of such
specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly Controlling or Controlled by or under direct or indirect common
Control with such specified Person. For purposes of this definition, "Control"
(including, with correlative meanings, the terms "Controlling," "Controlled by"
and "under common Control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be Control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation. by way of a sale and
leaseback) other than sales of inventory and leases (or subleases) of restaurant
facilities and related equipment to franchisees, in each case in the ordinary
course of business consistent with past practices (PROVIDED that the sale,
lease, conveyance or other disposition of all or substantially all of the assets
of the Issuer and its Subsidiaries taken as a whole will be governed by the
provisions of the Indenture described above under the caption "--Change of
Control" and/or the provisions described above under the caption "--Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset Sale
covenant), and (ii) the issue or sale by the Issuer or any of its Subsidiaries
of Equity Interests of any of the Issuer's Subsidiaries, in the case of either
clause (i) or (ii), whether in a single transaction or a series of related
transactions (a) that have a fair market value in excess of $1.0 million or (b)
for net proceeds in excess of $1.0 million. Notwithstanding the foregoing, the
following items shall not be deemed to be Asset Sales: (i) a transfer of assets
by the Issuer to a Wholly-Owned Restricted Subsidiary or by a Wholly-Owned
Restricted Subsidiary to the Issuer or to another Wholly-Owned Restricted
Subsidiary, (ii) an issuance of Equity Interests by a Wholly-Owned Restricted
Subsidiary to the Issuer or to another Wholly-Owned Restricted Subsidiary, and
(iii) a Restricted Payment that is permitted by the covenant described above
under the caption "--Restricted Payments."
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of interest
implicit in such transaction, determined in accordance with GAAP) of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in such sale and leaseback transaction (including any period
for which such lease has been extended or may, at the option of the lessor, be
extended).
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL INTERESTS" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company,
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partnership or membership interests (whether general or limited) and (iv) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any lender party to the Existing Credit Facility or
with any domestic commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within six months after the date of acquisition and (vi) money market
funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i)--(v) of this definition.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
asset sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for federal, state, local and
foreign income taxes payable by such Person and its Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP plus (iii)
consolidated interest expense, net of interest income, of such Person and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred in
respect of letters of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period), minority interests in the earnings of PFR prior to December 22, 1997,
and other non-cash expenses (excluding any such non-cash expense to the extent
that it represents an accrual of or reserve for cash expenses in any future
period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) noncash items increasing such
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization of, a Subsidiary of a Person shall be added to Consolidated Net
Income to compute Consolidated Cash Flow only to the extent (and in the same
proportion) that the Net Income of such Subsidiary was included in calculating
the Consolidated Net Income of such Person. In addition, if Consolidated Cash
Flow is being calculated for purposes of calculating the Issuer Coverage Ratio
for all purposes of the Indenture, the provision for taxes based on income or
profits of, and the depreciation and amortization of, a Subsidiary of a Person
shall be added to Consolidated Net Income to compute Consolidated Cash Flow only
if a corresponding amount would be permitted at the date of determination to be
dividended or distributed to the Issuer by such Subsidiary without prior
approval, pursuant to the terms of its charter and all agreements, instruments,
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judgments, decrees, orders, statutes, rules and government regulations
applicable to that Subsidiary or its equityholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly-Owned Restricted
Subsidiary thereof that is a Guarantor, (ii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded, (iii) the cumulative effect of a change
in accounting principles shall be excluded and (iv) the Net Income (but not
loss) of any Unrestricted Subsidiary shall be excluded to the extent not
distributed to the Issuer or one of its Restricted Subsidiaries. In calculating
Consolidated Net Income for purposes of calculating Consolidated Cash Flow for
purposes of calculating the Issuer Coverage Ratio for all purposes of the
Indenture, the net income of a Restricted Subsidiary shall be excluded to the
extent that the declaration of dividends or similar distributions by such
Restricted Subsidiary of that net income is not at the time permitted, directly
or indirectly, by reason of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Restricted Subsidiary or its equityholders.
"CONSOLIDATED NET WORTH" means, (a) with respect to a partnership as of any
date, the capital accounts attributable to all common and preferred partnership
interests (other than Disqualified Interests) of such partnership as of such
date, determined on a consolidated basis in accordance with GAAP, and (b) with
respect to any other Person as of any date, the sum of (i) the consolidated
equity of the common stockholders of such Person and its consolidated
Subsidiaries as of such date plus (ii) the respective amounts reported on such
Person's balance sheet as of such date with respect to any series of preferred
equity (other than Disqualified Interests) that by its terms is not entitled to
the payment of dividends unless such dividends may be declared and paid only out
of net earnings in respect of the year of such declaration and payment, but only
to the extent of any cash received by such Person upon issuance of such
preferred equity, less (x) all write-ups (other than write-ups resulting from
foreign currency translations and write-ups of tangible assets of a going
concern business made within 12 months after the acquisition of such business)
subsequent to the date of the Indenture in the book value of any asset owned by
such Person or a consolidated Subsidiary of such Person, (y) all investments as
of such date in unconsolidated Subsidiaries and in Persons that are not
Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP
"CONTROL" has the meaning set forth in the definition of "Affiliate."
"CREDIT FACILITIES" means, with respect to the Issuer and the Restricted
Subsidiaries, one or more debt facilities (including, without limitation, the
Existing Credit Facility) or commercial paper facilities with banks or other
institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DISQUALIFIED INTERESTS" means any Capital Interests that, by its terms (or
by the terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; PROVIDED, HOWEVER, that any Capital Interests that
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would constitute Disqualified Interests solely because the holders thereof have
the right to require the Issuer to repurchase such Capital Interests upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Interests if the terms of such Capital Interests provide that the
Issuer may not repurchase or redeem any such Capital Interests pursuant to such
provisions unless such repurchase or redemption complies with the covenant
described above under the caption--Certain Covenants-- Restricted Payments."
"EQUITY INTERESTS" means Capital Interests and all warrants, options or
other rights to acquire Capital Interests (but excluding any debt security that
is convertible into, or exchangeable for, Capital Interests).
"EXISTING CREDIT FACILITY" means the Credit Agreement dated as of December
22, 1997 among PFR, BankBoston N.A. as agent and the lenders party thereto and
any related notes, collateral documents, letters of credit and guarantees,
including any appendices, exhibits or schedules to any of the foregoing (as the
same may be in effect from time to time), in each case, as such agreements may
be amended, modified, supplemented or restated from time to time (whether with
the original agents and lenders or other agents or lenders or otherwise, and
whether provided under the original credit agreement or other credit agreements
or otherwise.
"EXISTING INDEBTEDNESS" means (i) Indebtedness under the 10 1/8% Senior
Notes in aggregate principal amount not to exceed $150.0 million (and any
guarantees thereof) and (ii) up to $15.0 million in aggregate principal amount
of Indebtedness of the Issuer and its Subsidiaries (other than Indebtedness
under the Existing Credit Facility) in existence on the date of the Indenture,
until such amounts are repaid.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
referrent Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees or redeems any Indebtedness (other than revolving credit borrowings)
or issues or redeems preferred equity subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated but prior
to the date on which the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred equity, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Issuer or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (ii) of the
proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"FIXED CHARGES" means, with respect to any Person for any period, (a) the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments associated
with Capital Lease Obligations, imputed interest with respect to Attributable
Debt, commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net payments (if any)
pursuant to Hedging
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Obligations) and (ii) the consolidated interest of such Person and its
Restricted Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Indebtedness of another Person that is Guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (whether or not such Guarantee
or Lien is called upon) and (iv) the product of (x) all dividend payments,
whether or not in cash, on any series of preferred equity of such Person or any
of its Restricted Subsidiaries, times (y) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, less
(b) the consolidated interest income of such Person and its Restricted
Subsidiaries,in each case, on a consolidated basis and in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or is such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, as in effect from time to time.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any Indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
"INTEREST PAYMENT DATE" means each May 15 and November 15, commencing on the
earlier of November 15, 2003 or the May 15 or November 15 next succeeding the
Semi-Annual Accrual Date with respect to which the Cash Interest Election is
made.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Issuer or any Subsidiary of the Issuer sells or otherwise disposes of any
Equity Interests of any direct or indirect Subsidiary of the Issuer such that,
after giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Issuer, the Issuer shall be deemed to have made an Investment
on the date of any such sale or disposition equal to the fair market value of
the Equity Interests of such Subsidiary not
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sold or disposed of in an amount determined as provided in the final paragraph
of the covenant described above under the caption "--Restricted Payments."
"ISSUER COVERAGE RATIO" means, with respect to the Issuer for any period,
the ratio of Consolidated Cash Flow of the Issuer for such period to Issuer
Fixed Charges for such period. In the event the Issuer incurs, assumes,
Guarantees or redeems any of its Indebtedness (other than revolving credit
borrowings) or issues or redeems preferred equity subsequent to the commencement
of the period for which the Issuer Coverage Ratio is being calculated but prior
to the date on which the event for which the calculation of the Issuer Coverage
Ratio is made (the "ICR Calculation Date"), then the Issuer Coverage Ratio shall
be calculated giving pro forma effect to such incurrence, assumption, Guarantee
or redemption of Indebtedness, or such issuance or redemption of preferred
equity, as if the same had occurred at the beginning of the applicable four
quarter period. In addition, for purposes of making the computation referred to
above, (i) acquisitions that have been made by the Issuer or any of its
Restricted Subsidiaries, including mergers and consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the ICR Calculation Date
shall be deemed to have occurred on the first day of the four quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (ii) of the proviso set forth in the definition
of Consolidated Net Income, (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the ICR Calculation Date, shall be excluded
and (iii) the Issuer Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the ICR Calculation Date, shall be excluded, but only to the extent
that the obligations giving rise to such Issuer Fixed Charges will not be
obligations of the Issuer following the ICR Calculation Date.
"ISSUER FIXED CHARGES" means, with respect to the Issuer for any period, (a)
the sum, without duplication, of (i) the unconsolidated interest expense of the
Issuer for such period, whether paid or accrued (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), (ii) the interest of the Issuer (on an unconsolidated basis) that
was capitalized during such period, (iii) any interest expense on Indebtedness
(other than Indebtedness under Credit Facilities) of another Person that is
Guaranteed by the Issuer or secured by a Lien on assets of the Issuer (whether
or not such Guarantee is called upon) and (iv) the product of (x) all dividend
payments, whether or not in cash, on any series of preferred equity of the
Issuer times (y) a fraction, the numerator of which is one and the denominator
of which is one minus the combined federal, state and local statutory tax rate
of the Issuer, expressed as a decimal less (b) the unconsolidated interest
income of the Issuer, in each case calculated in accordance with GAAP.
"JACK ASTOR VEHICLE" means J.A. Joint Venture, LLC, a Delaware limited
liability company engaged solely in the business of creating, owning, developing
and operating Jack Astor's Bar and Grill restaurants.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or other-wise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"LIQUIDATED DAMAGES" has the meaning assigned to that term in the
Registration Rights Agreement.
"NET INCOME" means, with respect to any Person for any period, the net
income (loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of dividends on preferred
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equity interests, excluding, however, to the extent included in calculating such
Net Income: (a) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with (x) any Asset
Sale (including, without limitation, dispositions pursuant to sale and leaseback
transactions) or (y) the disposition of any securities by such Person or any of
its Restricted Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries and (b) any extraordinary or
nonrecurring gain (but not loss), together with any related provision for taxes
on such extraordinary or nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the Issuer or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Issuer
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Issuer of any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Issuer or any of its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"ORIGINAL PRINCIPAL AMOUNT AT MATURITY" means $31.1 million in the aggregate
for all of the Notes and, with respect to each Note, the Original Principal
Amount at Maturity as set forth on such Note.
"PERMITTED BUSINESS" means the business of owning, operating and franchising
restaurants and other businesses that are ancillary or related thereto.
"PERMITTED INVESTMENTS" means (a) any investment in the Issuer or in a
Wholly-Owned Restricted Subsidiary of the Issuer (other than an Investment in
the Jack Astor Vehicle if it is subsequently to be declared an Unrestricted
Subsidiary); (b) any Investment in Cash Equivalents; (c) any Investment by the
Issuer or any Restricted Subsidiary of the Issuer in a Person, if as a result of
such Investment (i) such Person becomes a Wholly-Owned Restricted Subsidiary of
the Issuer that is engaged in a Permitted Business or (ii) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Issuer or a
Wholly-Owned Restricted Subsidiary of the Issuer and that is engaged in a
Permitted Business; (d) any Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "--Repurchase at
the Option of Holders--Asset Sales"; (e) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified
Interests) of the Issuer; (f) additional Investments in the Jack Astor Vehicle,
either by way of capital contribution or loan to, or Guarantee of Indebtedness
of the Jack Astor Vehicle; PROVIDED that the aggregate amount of such capital
contributions and loans, together with the aggregate principal amount of any
such Indebtedness that is so Guaranteed, does not exceed $10.0 million at any
time outstanding (with each such Investment being measured as of the date it was
made and without giving effect to subsequent changes in value); (g) any
Investments in promissory notes acquired in a Permitted Non-Cash Transaction,
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PROVIDED that not more than $5.0 million in aggregate principal amount of such
promissory notes remains outstanding after giving effect to such Investment
(excluding any such promissory notes outstanding on the date of the Indenture);
and (h) other Investments in any Person having an aggregate fair market value
(measured on the date each such Investment was made and without giving effect to
subsequent changes in value), when taken together with all other Investments
made pursuant to this clause (h) since the date of the Indenture, not to exceed
$2.0 million.
"PERMITTED LIENS" means (i) Liens securing Indebtedness under Credit
Facilities that were permitted by the terms of the Indenture to be incurred;
(ii) Liens in favor of the Issuer; (iii) Liens on property of a Person existing
at the time such Person is merged into or consolidated with the Issuer; PROVIDED
that such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Issuer; (iv) Liens on property existing at
the time of acquisition thereof by the Issuer, PROVIDED that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
Indebtedness (including Capital Lease Obligations) permitted by clause (iv) of
the third paragraph of the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Equity Interests" covering only the assets acquired with
the proceeds of such Indebtedness; (vi) Liens to secure additional Capital Lease
Obligations that were permitted to be incurred pursuant to the Fixed Charge
Coverage Ratio test set forth in the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Equity Interests" covering only the
assets acquired with the proceeds of such Indebtedness, up to an aggregate of
$15.0 million in principal amount at any one time outstanding; and (vii) Liens
existing on the date of the Indenture.
"PERMITTED NON-CASH TRANSACTION" means (i) any sale, lease or other
disposition of restaurants and related equipment for consideration consisting of
cash and/or promissory notes of the acquiror of such assets, provided that not
more than $5.0 million in aggregate principal amount of such promissory notes
remains outstanding after giving effect to such transaction (excluding any such
promissory notes outstanding on the date of the Indenture) and (ii) any sale,
lease or other disposition of assets that are no longer used by the Issuer or
any of its Restricted Subsidiaries in a Permitted Business.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Issuer or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Issuer or any of its Restricted Subsidiaries (other than
interIssuer Indebtedness): PROVIDED that: (i) the principal amount (or accreted
value, if applicable) of such Permitted Refinancing Indebtedness does not exceed
the principal amount of (or accreted value, if applicable), plus accrued
interest on, the Indebtedness so extended, refinanced. renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith); (ii) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
then the Permitted Refinancing Indebtedness must have a final maturity date
later than the final maturity date of, and be subordinated in right of payment
to, the Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Issuer or by the Restricted Subsidiary who is the
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"PRINCIPAL AMOUNT AT MATURITY" means, with respect to each $1,000 Original
Principal Amount at Maturity of the Notes, (i) if no Cash Interest Election has
been made, $1,000, or (ii) if the Cash Interest Election is made, the Accreted
Value of such Notes on the Semi-Annual Accrual Date on which the Cash Interest
Election is made and (iii) after giving effect to the payment contemplated under
"--Mandatory Payment of Accrued Interest" $579.07.
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"PRO RATA SHARE" means, with respect to any Indebtedness of the Issuer not
subordinated in right of payment to the Notes, on any date of determination, a
fraction, the numerator of which is the principal amount or accreted value, as
the case may be, of such Indebtedness and the denominator of which is the
aggregate accreted value and principal amount, as applicable, of all
Indebtedness of the Issuer not subordinated in right of payment to the Notes
(including the Accreted Value of the Notes on such date of determination).
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SEMI-ANNUAL ACCRUAL DATE" has the meaning set forth in the definition of
"Accreted Value."
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Interests entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
there) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Issuer or any Restricted Subsidiary of the Issuer unless
the terms of any such agreement, contract, arrangement or understanding are no
less favorable to the Issuer or such Restricted Subsidiary than those that might
be obtained at the time from Persons who are not Affiliates of the Issuer; (c)
is a Person with respect to which neither the Issuer nor any of its Restricted
Subsidiaries has any direct or indirect obligation (x) to subscribe for
additional Equity Interests or (y) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results; (d) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of the Issuer or any of its
Restricted Subsidiaries; and (e) has at least one director on its board of
directors that is not a director or executive officer of the Issuer or any of
its Restricted Subsidiaries and has at least one executive officer that is not a
director or executive officer of the Issuer or any of its Restricted
Subsidiaries, except that clauses (a)-(d) shall not be applicable to the Jack
Astor Vehicle. Any such designation by the Board of Directors shall be evidenced
to the Trustee by filing with the Trustee a certified copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the covenant described above under the caption "Certain
Covenants--Restricted Payments." If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary of the Issuer as
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of such date (and, if such Indebtedness is not permitted to be incurred as of
such date under the covenant described under the caption "Incurrence of
Indebtedness and Issuance of Preferred Stock," the Issuer shall be in default of
such covenant). The Board of Directors of the Issuer may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Issuer of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under the covenant described under the caption "Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock,"
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period, and (ii) no Default or Event of
Default would be in existence following such designation.
"VOTING STOCK" of any Person as of any date means the Capital Interests of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Interests or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly-Owned Restricted
Subsidiaries of such Person or such Person and one or more Wholly-Owned
Restricted Subsidiaries of such Person.
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CERTAIN U.S. TAX CONSEQUENCES TO HOLDERS
The following discussion is a summary of the material U.S. federal income
tax consequences of the Exchange Offer to Holders of Notes that are U.S. persons
(as defined below) and of the material U.S. federal income tax consequences of
the acquisition, ownership and disposition of the Notes, but does not purport to
be a complete analysis of all potential tax effects. The discussion is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings and pronouncements and
judicial decisions all in effect as of the date hereof, all of which are subject
to change at any time, and any such change may be applied retroactively in a
manner that could adversely affect a Holder of the Notes. The discussion does
not address all of the federal income tax consequences that may be relevant to a
Holder in light of such Holder's particular circumstances or to Holders subject
to special rules, such as certain financial institutions, tax-exempt entities,
insurance companies, dealers in securities, traders in securities who elect to
mark to market, and persons holding the Notes as part of a "straddle," "hedge"
or "conversion transaction." Moreover, the effect of any applicable state, local
or foreign tax laws is not discussed. The discussion deals only with Notes held
as "capital assets" within the meaning of Section 1221 of the Code. In addition,
this discussion is limited to the U.S. federal income tax consequences to
initial holders that purchase the Notes at their issue price (as defined below)
pursuant to the Offering.
As used herein, the term "U.S. person" means a beneficial owner of a Note
who or which is for U.S. federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation or partnership created or organized in
the United States or under the laws of the United States or of any State, (iii)
an estate the income of which is subject to U.S. federal income taxation
regardless of its source, or (iv) a trust if (a) a court within the United
States is able to exercise primary supervision over the administration of the
trust and (b) one or more U.S. persons have the authority to control all
substantial decisions of the trust.
The Issuer has not sought and will not seek any rulings from the IRS with
respect to any position discussed below. There can be no assurance that the IRS
will not take a different position from the Issuer concerning the tax
consequences of the acquisition, ownership or disposition of the Notes or that
any such position would not be sustained.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO
THE APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW TO THEIR PARTICULAR
SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX
LAWS.
CONSEQUENCES OF THE EXCHANGE OFFER TO EXCHANGING AND NONEXCHANGING HOLDERS
The exchange of an Old Note for a New Note pursuant to the Exchange Offer
will not be taxable to an exchanging Holder for U.S. federal income tax
purposes. As a result (i) an exchanging Holder will not recognize any gain or
loss on the exchange; (ii) the holding period for the New Note will include the
holding period for the Old Note; and (iii) the basis of the New Note will be the
same as the basis for the Old Note.
The Exchange Offer will result in no federal income tax consequences to a
nonexchanging Holder of Old Notes.
TREATMENT OF STATED INTEREST
A Holder will not be required to report separately as taxable income actual
distributions of stated interest with respect to the Notes; such stated interest
will be included in income as original issue discount ("OID") under the method
described in the following section.
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ORIGINAL ISSUE DISCOUNT
The Notes will be issued with OID for federal income tax purposes. OID is
equal to the excess of the stated redemption price at maturity of the Notes over
the issue price of the Notes. The issue price of a Note is the first price at
which a substantial amount of the Notes are sold to the public (excluding sales
to bond houses, brokers or similar persons or organizations acting in the
capacity as underwriters, placement agents or wholesalers). The stated
redemption price at maturity of the Notes will equal the total of all payments
required to be made thereon, other than payments of "qualified stated interest."
Qualified stated interest generally is stated interest that is unconditionally
payable in cash or property (other than debt instruments of the issuer) at least
annually at a single fixed rate. Since no interest is required to be paid in
cash on the Notes until May 15, 2003, the Notes should be treated as having been
issued without any qualified stated interest. Accordingly, the sum of all
interest payable pursuant to the stated interest rate on the Notes over the
entire term should be treated as part of the Notes' stated redemption price at
maturity.
A Holder of a Note will be required to include OID in income as ordinary
interest periodically over the term of a Note before receipt of the cash or
other payment attributable to such income. In general, a Holder must include in
gross income for federal income tax purposes the sum of the daily portions of
OID with respect to the Notes for each day during the taxable year or portion of
a taxable year on which such Holder holds the Notes ("Accrued OID"). The daily
portion is determined by allocating to each day of any accrual period within a
taxable year a pro rata portion of an amount equal to the adjusted issue price
of the Note at the beginning of the accrual period multiplied by the yield to
maturity of the Note. For purposes of computing OID, the Issuer will use
six-month accrual periods which end on the date in the calendar year
corresponding to the maturity date of the Notes and the date six months prior to
such maturity date, with the exception of the initial accrual period, but
Holders are not required to use the same accrual period if proper disclosure is
made to the IRS. The adjusted issue price of a Note at the beginning of any
accrual period is the issue price of the Note increased by the Accrued OID for
all prior accrual periods (less any cash payments on the Notes). The yield to
maturity of a Note is the discount rate that, when used in computing the present
value of all payments to be made on a Note, produces an amount equal to the
issue price of the Note. When computing the yield to maturity of the Notes,
Treasury Regulations assume that the Issuer will take action to minimize its
cost of borrowing. Thus, the initial yield to maturity on the Notes will be
computed assuming that the Issuer will make the Cash Interest Election on the
first Semi-Annual Accrual Date. If the Issuer does not make the Cash Interest
Election on the first Semi-Annual Accrual Date, solely for purposes of computing
OID, the Notes will be deemed reissued for a new debt instrument which has a
yield to maturity computed assuming that the Issuer will make the Cash Interest
Election on the next Semi-Annual Accrual Date. On each subsequent Semi-Annual
Accrual Date that the Issuer does not make the Cash Interest Election there will
be a deemed reissuance of the Notes at a higher yield to maturity than the prior
period. Under these rules, if no cash interest election is made, Holders
generally will have to include in gross income increasingly greater amounts of
OID in each successive accrual period until the mandatory payment of accrued
interest is made on May 15, 2003. Since such payments reduce the adjusted issue
price of the Notes, OID for subsequent periods will be less than the OID in
prior periods. Each payment made under a Note will be treated first as a payment
of OID to the extent of OID that has accrued as of the date of payment and has
not been allocated to prior payments and second as a payment of principal.
In the event the Issuer makes the Cash Interest Election, the payments of
interest made pursuant to the Cash Interest Election should be treated first, as
payments of accrued OID, and second, as payments of principal.
The Company does not intend to treat the possibility of an optional
redemption or repurchase of the Notes as giving rise to any additional accrual
of OID or recognition of ordinary income upon redemption, sale or exchange of a
Note. Holders may wish to consider that United States Treasury Regulations
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regarding the treatment of certain contingencies were recently issued and may
wish to consult their advisers in this regard.
TAXABLE DISPOSITION OF NOTES
Generally, any sale or redemption of Notes will result in taxable gain or
loss equal to the difference between the amount of cash or other property
received and the Holder's adjusted tax basis in the Notes. A Holder's adjusted
tax basis generally will be the cost of the Note to the Holder, increased by any
Accrued OID with respect to any Note included in such Holder's gross income and
decreased by the amount of any cash payments received by such Holder regardless
of whether such payments are denominated as interest. Any gain or loss upon a
sale or disposition of a Note by an original Holder will generally be capital
gain or loss. In general, the maximum tax rate for non-corporate taxpayers on
long-term capital gains is 20% for most capital assets (including the Notes)
held for more than 18 months. Capital gain of non-corporate taxpayers on such
assets having a holding period of more than one year but not more than 18 months
will be subject to a maximum tax rate of 28%.
BACKUP WITHHOLDING
A Holder may be subject, under certain circumstances, to backup withholding
at a 31% rate with respect to "reportable payments" on the Notes. This
withholding generally applies only if the Holder (i) fails to furnish his or her
social security or other taxpayer identification number ("TIN"); (ii) furnishes
an incorrect TIN; (iii) is notified by the IRS that he or she has failed to
report properly payments of interest and dividends and the IRS has notified the
Company that the Holder is subject to backup withholding; or (iv) fails, under
certain circumstances, to provide a certified statement, signed under penalty of
perjury, that the TIN provided is his or her correct number and that he or she
is not subject to backup withholding. Any amount withheld from payment to a
Holder under the backup withholding rules is allowable as a credit against such
Holder's federal income tax liability, provided that the required information is
furnished to the IRS. Certain Holders (including, among others, corporations and
foreign individuals who comply with certain certification requirements) are not
subject to backup withholding. Holders should consult their tax advisors as to
their qualifications for exemption from backup withholding and the procedure for
obtaining such an exemption.
INFORMATION REPORTING
The Issuer is required to furnish certain information to the IRS and will
furnish annually to record Holders of the Notes information with respect to OID
accruing on the Notes during the calendar year. The information with respect to
OID accruing on the Notes will be based on the adjusted issue price of the Notes
and will be applicable as if the Holder is an original Holder of the Notes who
purchased the Notes at the issue price. Holders who purchase Notes for an amount
other than the adjusted issue price and/or on a date other than the last day of
an accrual period will be required to determine for themselves the amount of
OID, if any, they are required to include in gross income for federal income tax
purposes.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in connection
with the Exchange Offer must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. The Issuer has
agreed that for a period of 180 days after the Expiration Date, it will make
available a prospectus meeting the requirements of the Securities Act to any
broker-dealer for use in connection with any such resale. In addition, until
, 1998, all dealers effecting transactions in the New Notes may be
required to deliver a prospectus.
The Issuer will receive no proceeds in connection with the Exchange Offer.
New Notes received by broker-dealers for their own account pursuant to the
Exchange Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the New Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers and dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such New Notes. Any broker-dealer that resells New Notes that
were received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such New Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of New Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Issuer by Mayer, Brown &
Platt, Chicago, Illinois. Lee N. Abrams, a Director of PMC and Chairman of the
Audit Committee of PMC, is a senior partner at Mayer, Brown & Platt. Mayer,
Brown & Platt represents the Issuer and its affiliates with respect to various
matters from time to time and is representing the Issuer in connection with the
Exchange Offer.
INDEPENDENT PUBLIC ACCOUNTANTS
The Issuer's consolidated financial statements as of December 31, 1997, 1996
and 1995 and for each of the three years in the period ended December 31, 1997,
included in this Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as stated in their report appearing herein.
AVAILABLE INFORMATION
The Issuer is not subject to the periodic reporting and other informational
requirements of the Securities Exchange Act. The Issuer has agreed that, whether
or not it is required to do so by the rules and regulations of the Commission,
for so long as any of the Notes remain outstanding, it will furnish to the
holders of the Notes and file with the Commission (unless the Commission will
not accept such a filing) (i) all quarterly and annual financial information
that would be required to be contained in a filing with the Commission on Forms
10-Q and 10-K if the Issuer were required to file such forms, including a
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and, with respect to the annual information only, a report thereon by
the Issuer's certified independent accountants and (ii) all reports that would
be required to be filed with the Commission on Form 8-K if the Issuer were
required to file such reports, in each case within the time periods specified in
the Commission's rules and regulations. In addition, for so long as any of the
Notes remain outstanding, the Issuer has agreed to make
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available to any prospective purchaser of the Notes or beneficial owner of the
Notes in connection with any sale thereof the information required by Rule
144A(d)(4) under the Securities Act.
The Issuer has filed with the Commission a registration statement on Form
S-4 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement.
PFR is currently subject to the periodic reporting and other informational
requirements of the Exchange Act, and in accordance therewith PFR has filed
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the
Commission's Regional Offices at 7 World Trade Center, New York, New York 10048
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials may be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a Web site (http://www.sec.gov) that contains reports and information
statements and other information regarding registrants, such as PFR, that file
electronically with the Commission.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
THE RESTAURANT COMPANY AND SUBSIDIARIES
Report of Independent Public Accountants............................................. F-2
Consolidated Balance Sheets as of December 31, 1997 and 1996 and March 31, 1998
(unaudited)........................................................................ F-3
Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and
1995 and the three months ended March 31, 1998 and 1997 (unaudited)................ F-4
Consolidated Statements of Stockholders' Investment for the years ended December 31,
1997, 1996 and 1995................................................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and
1995 and the three months ended March 31, 1998 and 1997 (unaudited)................ F-6
Notes to Consolidated Financial Statements........................................... F-7
Unaudited Consolidated Pro Forma Financial Statements................................ F-23
Unaudited Consolidated Pro Forma Statement of Operations for the year ended December
31, 1997........................................................................... F-24
Unaudited Consolidated Pro Forma Statement of Operations for the three months ended
March 31, 1998..................................................................... F-25
Unaudited Consolidated Pro Forma Balance Sheet as of March 31, 1998.................. F-26
Notes to Unaudited Consolidated Pro Forma Financial Statements....................... F-27
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
The Restaurant Company:
We have audited the accompanying consolidated balance sheets of The
Restaurant Company (a Delaware corporation) and subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of operations,
stockholders' investment and cash flows for each of the three years in the
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that out audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The
Restaurant Company and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Memphis, Tennessee,
June 15, 1998.
F-2
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- MARCH 31,
1997 1996 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................................. $ 16,027 $ 3,870 $ 4,880
Receivables, less allowance for doubtful accounts of $846, $430 and
$614.................................................................... 9,482 7,389 7,483
Inventories, at the lower of first-in, first-out cost or market........... 4,236 4,240 4,152
Prepaid expenses and other current assets................................. 2,047 2,183 2,448
Deferred income taxes..................................................... 470 526 470
---------- ---------- -----------
Total current assets.................................................. 32,262 18,208 19,433
---------- ---------- -----------
PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation and
amortization.............................................................. 127,410 115,089 125,988
NET ASSETS OF DISCONTINUED OPERATIONS -- 3,322 --
INTANGIBLE ASSETS AND DEFERRED CHARGES, net of accumulated amortization of
$27,591, $26,451 and $28,140.............................................. 47,303 24,958 47,173
OTHER ASSETS................................................................ 1,087 1,272 1,596
---------- ---------- -----------
$ 208,062 $ 162,849 $ 194,190
---------- ---------- -----------
---------- ---------- -----------
CURRENT LIABILITIES:
Current maturities of long-term debt...................................... $ -- $ 5,408 $ --
Current maturities of capital lease obligations........................... 1,301 1,683 1,254
Accounts payable.......................................................... 11,415 10,536 11,816
Accrued expenses.......................................................... 36,302 15,473 20,657
Distributions payable..................................................... -- 1,771 --
---------- ---------- -----------
Total current liabilities............................................. 49,018 34,871 33,727
---------- ---------- -----------
CAPITAL LEASE OBLIGATIONS, less current maturities.......................... 6,999 8,573 6,703
LONG-TERM DEBT, less current maturities..................................... 130,000 53,744 133,000
DEFERRED INCOME TAXES AND OTHER............................................. 9,977 21,336 9,258
MINORITY INTEREST IN SUBSIDIARIES........................................... -- 31,966 --
COMMITMENTS AND CONTINGENCIES (Notes 5 and 11)..............................
STOCKHOLDERS' INVESTMENT:
Common stock, $.01 par value, 100,000 shares authorized, 17,550, 17,550
and 17,460 issued and outstanding....................................... 1 1 1
Additional paid-in capital................................................ 18,252 18,252 17,971
Accumulated deficit....................................................... (6,185) (5,894) (6,470)
---------- ---------- -----------
12,068 12,359 11,502
---------- ---------- -----------
$ 208,062 $ 162,849 $ 194,190
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------- --------------------
1997 1996 1995 1998 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Food sales.................................................... $ 250,193 $ 234,164 $ 228,259 $ 62,774 $ 57,018
Franchise revenues and other.................................. 21,005 20,092 19,275 5,174 4,887
--------- --------- --------- --------- ---------
271,198 254,256 247,534 67,948 61,905
--------- --------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of sales:
Food cost................................................... 72,559 68,456 66,204 18,136 16,384
Labor and benefits.......................................... 84,027 78,970 78,916 21,628 19,328
Operating expenses.......................................... 50,645 48,284 47,678 13,200 12,160
General and administrative.................................... 27,924 24,366 23,428 6,393 6,179
Depreciation and amortization................................. 16,031 15,752 14,410 4,739 3,943
Interest expense, net......................................... 5,176 5,269 5,270 3,625 1,301
Asset writedown (SFAS No. 121)................................ -- -- 1,900 500 --
Provision for disposition of assets........................... -- -- 609 295 --
--------- --------- --------- --------- ---------
256,362 241,097 238,415 68,516 59,295
--------- --------- --------- --------- ---------
14,836 13,159 9,119 (568) 2,610
MINORITY INTEREST IN NET EARNINGS OF SUBSIDIARIES............... (7,867) (6,951) (5,026) -- (1,414)
--------- --------- --------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM............................................ 6,969 6,208 4,093 (568) 1,196
(PROVISION FOR) BENEFIT FROM INCOME TAXES....................... (2,333) (1,693) (1,249) 283 (418)
--------- --------- --------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY
ITEM.......................................................... 4,636 4,515 2,844 (285) 778
DISCONTINUED OPERATIONS:
Income from discontinued operations of Restaurant Insurance
Corporation, net of income taxes of $50, $272, $318, $-- and
$50......................................................... 93 506 686 -- 93
--------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM......................... 4,729 5,021 3,530 (285) 871
EXTRAORDINARY ITEM, Going Private Transaction, net of income tax
benefit of $2,180............................................. (5,020) -- -- -- --
--------- --------- --------- --------- ---------
NET INCOME (LOSS)............................................... $ (291) $ 5,021 $ 3,530 $ (285) $ 871
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1994................................. $ 1 $ 18,252 $ (125,953) $ (107,700)
Net income................................................... -- -- 3,530 3,530
Equity benefit due to deconsolidation of subsidiary.......... -- -- 111,508 111,508
----------- ----------- ------------ -----------
Balance at December 31, 1995................................. 1 18,252 (10,915) 7,338
Net income................................................... -- -- 5,021 5,021
----------- ----------- ------------ -----------
Balance at December 31, 1996................................. 1 18,252 (5,894) 12,359
Net loss..................................................... -- -- (291) (291)
----------- ----------- ------------ -----------
Balance at December 31, 1997................................. $ 1 $ 18,252 $ (6,185) $ 12,068
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------- ----------------------
1997 1996 1995 1998 1997
---------- --------- --------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................................... $ (291) $ 5,021 $ 3,530 $ (285) $ 871
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization..................... 16,031 15,752 14,410 4,739 3,943
Extraordinary item................................ 5,020 -- -- -- --
Minority interest in net earnings of
subsidiaries.................................... 7,867 6,951 5,026 -- 1,414
Other noncash income and expense items, net....... 3,154 (9,117) 1,152 (127) 319
Earnings from discontinued operations............. (93) (506) (686) -- (93)
Net changes in other operating assets and
liabilities..................................... 1,412 5,032 (839) 1,725 (6,475)
Asset writedown (SFAS No. 121).................... -- -- 1,900 500 --
Provision for disposition of assets............... -- -- 609 295 --
---------- --------- --------- ----------- ---------
Total adjustments..................................... 33,391 18,112 21,572 7,132 (892)
---------- --------- --------- ----------- ---------
Net cash provided by (used in) operating activities... 33,100 23,133 25,102 6,847 (21)
---------- --------- --------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for property and equipment.................. (15,102) (11,861) (28,931) (3,989) (1,561)
Proceeds from the sale of property and equipment...... 1,513 573 889 12 --
Proceeds from the sale of Restaurant Insurance
Corporation......................................... 2,300 -- -- -- 2,300
Other, net............................................ 234 1,755 723 (69) 237
---------- --------- --------- ----------- ---------
Net cash provided by (used in) investing activities... (11,055) (9,533) (27,319) (4,046) 976
---------- --------- --------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt.......................... 194,800 21,750 59,125 11,500 9,600
Principal payments on long-term debt.................. (123,952) (25,282) (48,836) (8,500) (10,152)
Principal payments under capital lease obligations.... (1,956) (2,074) (1,981) (343) (464)
Distributions to unitholders of Perkins Family
Restaurants, L.P.................................... (7,040) (7,080) (7,038) -- (1,772)
Deferred financing costs.............................. (5,474) -- -- (536) --
Purchase of minority interest......................... (66,266) -- -- (16,069) --
---------- --------- --------- ----------- ---------
Net cash (used in) provided by financing activities... (9,888) (12,686) 1,270 (13,948) (2,788)
---------- --------- --------- ----------- ---------
Increase (decrease) in cash and cash equivalents...... 12,157 914 (947) (11,147) (1,833)
---------- --------- --------- ----------- ---------
CASH AND CASH EQUIVALENTS:
Balance, beginning of year............................ 3,870 2,956 3,903 16,027 3,870
---------- --------- --------- ----------- ---------
Balance, end of year.................................. $ 16,027 $ 3,870 $ 2,956 $ 4,880 $ 2,037
---------- --------- --------- ----------- ---------
---------- --------- --------- ----------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION--
The Restaurant Company ("TRC" or the "Company") is a Delaware corporation
whose principal stockholders prior to May 1998 (See note 17, Subsequent Event),
were Harrah's Operating Company, a subsidiary of Harrah's Entertainment, Inc.
("Harrah's"), Donald N. Smith ("Smith"), and The Equitable Life Assurance
Society of the United States ("Equitable"). As of May 1998, Smith owns 50.0% of
TRC and Equitable owns 42.3%. The remaining portion of TRC is owned by
stockholders not owning more than 7.7%. TRC's operations consist principally of
its ownership interest in Perkins Family Restaurants, L.P. ("PFR").
PERKINS FAMILY RESTAURANTS, L.P.--
Simultaneous with the formation of TRC in 1985, all of the outstanding stock
of Perkins Restaurants, Inc. ("PRI"), formerly held by a predecessor of
Harrah's, was transferred to TRC. PRI's business consisted of the operation and
franchising of Perkins Family Restaurants.
In July 1986, PRI formed a Delaware limited partnership, Perkins Family
Restaurants, L.P., which succeeded to the business operations of PRI. PFR is
managed by Perkins Management Company, Inc. ("PMC"). PMC, a wholly-owned
subsidiary of PRI, is the sole general partner and owns 2.9% of PFR including a
1% general partner interest and a 1.9% limited partner interest. PRI owns
approximately 98.1% of the Limited Partnership Units ("Units") of PFR. PFR
reimburses PMC for all of its direct and indirect costs (principally general and
administrative costs) allocable to PFR.
PFR operates and franchises family-style restaurants which serve a wide
variety of high quality, moderately priced breakfast, lunch, and dinner entrees,
snacks and bakery products. Perkins restaurants provide table service, and many
are open 24 hours a day (except Christmas day and certain late night hours in
selected markets), seven days a week. The full-service restaurants are located
in 33 states with the largest number in Minnesota, Ohio, New York, Pennsylvania,
and Florida. There are thirteen franchised restaurants located in Canada. PFR
also offers cookie doughs, muffin batters, pancake mixes, pies and other food
products for sale to restaurants operated by PFR and franchisees and bakery and
food service distributors through Foxtail Foods ("Foxtail"), PFR's manufacturing
division.
FRIENDLY ICE CREAM CORPORATION--
In 1988, TRC and another investor acquired all of the stock of Friendly Ice
Cream Corporation ("FICC") and its subsidiaries. Subsequent to this acquisition,
Friendly Holding Corporation ("FHC") was formed to hold the outstanding common
stock of FICC. TRC owned 83.75% of FHC's common stock at December 31, 1995.
In connection with a restructuring of its major credit agreements, FHC was
merged into FICC on March 22, 1996, and ceased to exist. Subsequently, FICC
issued its lenders 1,181.6 new shares of its common stock, or 50% of the shares
issued and outstanding. Also in March 1996, TRC distributed its shares of FICC
common stock to TRC's stockholders. Management has reflected the deconsolidation
of FHC in the accompanying financial statements as if it had occurred January 1,
1995.
F-7
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
RESTAURANT INSURANCE CORPORATION--
Restaurant Insurance Corporation ("RIC"), formerly a wholly-owned subsidiary
of TRC, was incorporated on May 24, 1993 to reinsure 100% of the risk from the
insurer of FICC up to $500,000 per occurrence on policies relating to FICC's
operations. Types of coverage reinsured include workers' compensation,
employer's liability and auto liability. RIC was sold in March 1997 and is
accounted for in the accompanying financial statements as a discontinued
operation. See Note 14.
BASIS OF PRESENTATION--
The accompanying financial statements include the consolidated results of
TRC and subsidiaries for the fiscal years ended December 31, 1997, 1996 and
1995. All material intercompany transactions have been eliminated in
consolidation.
Certain prior year amounts have been reclassified to conform with current
year presentation.
ESTIMATES--
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS--
The Company considers all investments with an original maturity of three
months or less to be cash equivalents.
FRANCHISE REVENUE--
Franchisees of PFR are required to pay an initial fee when each franchise is
granted. These fees are not recognized as income until the restaurants open. PFR
also receives franchise royalties ranging from one to six percent of the gross
sales of each franchised restaurant. These royalties are recorded as income
monthly.
ADVERTISING--
PFR expenses the costs of producing and communicating advertising. Net
advertising expense was $10,784,000, $10,629,000 and $10,462,000 for the fiscal
years 1997, 1996 and 1995, respectively.
PROPERTY AND EQUIPMENT--
Major renewals and betterments are capitalized; replacements, maintenance
and repairs which do not extend the lives of assets are charged to operations as
incurred.
F-8
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PREOPENING COSTS--
Historically, new store preopening costs have been deferred and amortized
over twelve months starting when the restaurant opens. In April 1998, the
American Institute of Certified Public Accountants issued Statement of Position
("SOP") 98-5, "Reporting on the Costs of Start-Up Activities," which the Company
is required to adopt in 1999, with earlier application permitted. SOP 98-5
requires the costs of start-up activities to be expensed as incurred. Upon
adoption of SOP 98-5, the Company will be required to record a cumulative effect
of a change in accounting principle to write off any unamortized preopening
costs that exist on the balance sheet at that date. As of December 31, 1997, the
Company had unamortized preopening costs of $345,000.
IMPAIRMENT OF LONG-LIVED ASSETS--
Pursuant to Statement of Financial Accounting Standards ("SFAS") No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," the Company evaluates the recoverability of assets (including
intangibles) when events and circumstances indicate that assets might be
impaired. For such assets, the Company determines impairment by comparing the
undiscounted future cash flows estimated to be generated by these assets to
their respective carrying amounts.
CASH DISTRIBUTIONS--
PFR recognizes cash distributions payable to its partners as of the
declaration dates. Cash distributions of $0.975, $1.30 and $1.30 per Unit were
declared during 1997, 1996 and 1995, respectively.
(2) THE GOING PRIVATE TRANSACTION:
Prior to December 22, 1997, PFR was a limited partnership 48.6% indirectly
owned (including its general partner's interest) by TRC. The remainder of the
Units were owned by the public and traded on the New York Stock Exchange under
the symbol "PFR." PFR's business was conducted through Perkins Restaurants
Operating Company, L.P. ("PROC"), a Delaware limited partnership. PFR was the
sole limited partner and owned 99% of PROC, and PMC was the sole general partner
and owned the remaining 1% of PROC. Upon a majority vote of the holders of the
publicly traded Units, 5.44 million Units held by persons other than TRC and its
subsidiaries were converted into the right to receive $14.00 in cash per Unit
(the "Going Private Transaction"). Additionally, PROC was merged into PFR, and
PMC's 1% general partnership interest in PROC was converted into a limited
partnership interest in PFR. Upon consummation of the Going Private Transaction
on December 22, 1997, PFR became an indirect wholly-owned subsidiary of TRC.
F-9
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) THE GOING PRIVATE TRANSACTION: (CONTINUED)
TRC's treatment of the transaction as an acquisition of a minority interest
of a subsidiary resulted in accounting adjustments in accordance with the
purchase method of accounting as a step acquisition. The effect of these
adjustments is summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Total purchase price of Units (including direct costs of $1,569).................. $ 77,758
Less: Minority interest in PFR.................................................... (36,677)
----------
Total......................................................................... $ 41,081
----------
----------
Allocated as follows:
Property and equipment............................................................ $ 13,830
Franchise agreements.............................................................. 10,630
Goodwill.......................................................................... 5,909
Deferred taxes.................................................................... 10,712
----------
Total......................................................................... $ 41,081
----------
----------
</TABLE>
Franchise agreements will be amortized using the straight-line method over
the remaining life of each specific franchise agreement (generally 1 to 20
years). Goodwill will be amortized using the straight-line method over 40 years.
The $10.7 million net reduction in deferred taxes primarily results from the
elimination of deferred taxes relating to PRI's investment basis in PFR.
As the Going Private Transaction occurred on December 22, 1997, the
accounting adjustments did not have a material impact on the results of
operations for the year ended December 31, 1997. Expenses of $7,200,000 incurred
in connection with the Going Private Transaction are reflected as an
extraordinary item in the accompanying Consolidated Statements of Operations,
net of associated income tax benefits.
The following unaudited pro forma results of operations for 1997 and 1996
give effect to the Going Private Transaction, excluding the extraordinary item,
as if it had occurred at the beginning of those periods. This pro forma
information does not necessarily represent what the results would have been had
the Going Private Transaction occurred at the beginning of each period
presented.
<TABLE>
<CAPTION>
(UNAUDITED)
<S> <C> <C>
1997 1996
---------- ----------
Revenues.............................................................. $ 271,198 $ 254,256
Net income............................................................ $ 2,136 $ 1,570
</TABLE>
F-10
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) SUPPLEMENTAL CASH FLOW INFORMATION:
The increase or decrease in cash and cash equivalents due to changes in
operating assets and liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------------------------- --------------------
1997 1996 1995 1998 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(Increase) decrease in:
Receivables............................ $ (3,359) $ 1,547 $ (894) $ 1,446 $ (1,265)
Inventories............................ 4 110 (243) 84 232
Prepaid expenses and other current
assets............................... (126) (971) (1,113) (528) (886)
Other assets........................... (427) (368) (43) (452) (263)
Increase (decrease) in:
Accounts payable....................... 2,063 1,015 471 402 (1,637)
Accrued expenses....................... 3,461 3,091 (350) 782 (2,744)
Other liabilities...................... (204) 608 1,333 (9) 88
--------- --------- --------- --------- ---------
$ 1,412 $ 5,032 $ (839) $ 1,725 $ (6,475)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Other supplemental cash flow information was as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED ENDED MARCH 31,
DECEMBER 31,
------------------------------- --------------------
1997 1996 1995 1998 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash paid for interest........................ $ 5,294 $ 5,637 $ 5,621 $ 210 $ 1,307
Income taxes paid............................. 2,159 14,173 329 71 42
Income tax refunds received................... 354 2,230 364 690 44
</TABLE>
During 1996, PFR acquired property, primarily restaurant equipment, through
a master capital lease agreement, totaling $1,565,000.
F-11
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following as of December 31 (in
thousands):
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Owned--
Land and land improvements........................................ $ 34,469 $ 28,202
Buildings......................................................... 73,109 65,873
Leasehold improvements............................................ 33,942 29,743
Equipment......................................................... 62,722 54,390
Construction in progress.......................................... 1,472 1,657
----------- -----------
205,714 179,865
Less--
Accumulated depreciation and amortization......................... (83,052) (70,932)
----------- -----------
122,662 108,933
----------- -----------
Leased--
Buildings......................................................... 23,972 24,945
Equipment......................................................... 1,532 1,564
----------- -----------
25,504 26,509
Less--
Accumulated amortization.......................................... (20,756) (20,353)
----------- -----------
4,748 6,156
----------- -----------
$ 127,410 $ 115,089
----------- -----------
----------- -----------
</TABLE>
F-12
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) PROPERTY AND EQUIPMENT: (CONTINUED)
Depreciation and amortization for financial reporting purposes is computed
primarily using the straight-line method based on the shorter of either the
estimated useful lives or the lease terms of the property, as follows:
<TABLE>
<CAPTION>
YEARS
---------
<S> <C>
Owned:
Land improvements................................................................... 3-20
Buildings........................................................................... 20-30
Leasehold improvements.............................................................. 7-20
Equipment........................................................................... 3-7
Leased:
Buildings........................................................................... 20-25
Equipment........................................................................... 6
</TABLE>
(5) LEASES:
As of December 31, 1997, there were 136 restaurants operated by PFR, as
follows:
68 with both land and building leased
56 with both land and building owned
12 with the land leased and building owned
As of December 31, 1997, there were 32 restaurants either leased or
subleased to others by PFR as follows:
15 with both land and building leased
13 with both land and building owned
4 with the land leased and building owned
Most of PFR's restaurant leases have a primary term of 20 years and
generally provide for two to four renewals of five years each. Certain leases
provide for minimum payments plus a percentage of sales in excess of stipulated
amounts.
TRC Realty Co., a wholly-owned subsidiary of TRC, has an operating lease for
an airplane which expires in May 2004.
F-13
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) LEASES: (CONTINUED)
Future minimum lease payments on leases that have initial or remaining terms
in excess of one year as of December 31, 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- -----------
<S> <C> <C>
1998.................................................................... $ 2,110 $ 6,674
1999.................................................................... 1,905 6,386
2000.................................................................... 1,549 5,790
2001.................................................................... 1,468 5,410
2002.................................................................... 1,205 4,658
Thereafter.............................................................. 3,600 18,025
--------- -----------
Total minimum lease payments............................................ 11,837 $ 46,943
-----------
-----------
Less:
Amounts representing interest......................................... (3,537)
---------
Capital lease obligations............................................. $ 8,300
---------
---------
</TABLE>
PFR's capital lease obligations have effective interest rates ranging from
7.1% to 16.1% and are payable in monthly installments through 2011.
Future minimum gross rental receipts as of December 31, 1997 were as follows
(in thousands):
<TABLE>
<CAPTION>
AMOUNTS RECEIVABLE AS
----------------------
LESSOR SUBLESSOR
--------- -----------
<S> <C> <C>
1998...................................................... $ 1,059 $ 1,446
1999...................................................... 1,069 1,295
2000...................................................... 1,080 1,051
2001...................................................... 1,041 1,053
2002...................................................... 925 937
Thereafter................................................ 7,603 3,216
--------- -----------
Total minimum lease rentals............................... $ 12,777 $ 8,998
--------- -----------
--------- -----------
</TABLE>
The net rental expense included in the accompanying Consolidated Statements
of Operations for operating leases was as follows for the years ended December
31 (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Minimum rentals................................................................... $ 6,116 $ 5,747 $ 5,470
Contingent rentals................................................................ 1,280 1,114 1,004
Less sublease rentals............................................................. (1,195) (1,244) (1,185)
--------- --------- ---------
$ 6,201 $ 5,617 $ 5,289
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-14
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) INTANGIBLE ASSETS AND DEFERRED CHARGES:
Intangible assets and deferred charges, net of accumulated amortization,
were as follows as of December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Excess of cost over fair value of net assets acquired, being amortized
evenly over 30 to 40 years............................................ $ 28,544 $ 23,627
Present value of estimated future franchise royalty fee income being
amortized evenly over the remaining lives of the franchise
agreements............................................................ 10,909 423
Deferred financing costs being amortized over the remaining life of the
debt agreements....................................................... 5,793 127
Other................................................................... 2,057 781
--------- ---------
$ 47,303 $ 24,958
--------- ---------
--------- ---------
</TABLE>
The Company periodically reevaluates the realizability of its excess cost
over fair value of net assets acquired by comparing the unamortized balance with
projected undiscounted cash flows from operations. The realizability of
intangible assets related to future royalty fee income is also assessed
periodically based on the performance of the applicable franchised restaurants.
(7) ACCRUED EXPENSES:
Accrued expenses consisted of the following as of December 31 (in
thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Payroll and related benefits............................................ $ 9,006 $ 7,543
Property, real estate and sales taxes................................... 2,427 2,006
Insurance............................................................... 1,093 1,232
Rent.................................................................... 1,407 1,165
Unredeemed Units and Going Private Transaction costs.................... 17,801 --
Franchise equipment deposits............................................ 1,428 --
Advertising............................................................. 572 530
Other................................................................... 2,568 2,997
--------- ---------
$ 36,302 $ 15,473
--------- ---------
--------- ---------
</TABLE>
F-15
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) LONG-TERM DEBT:
Long-term debt consisted of the following as of December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
PFR--
Unsecured Senior Notes:
10.125%, interest payable semi-annually, due December 15, 2007....... $ 130,000 $ --
7.19%, due in quarterly installments beginning December 13, 1997
through December 13, 2005.......................................... -- 20,000
8.60%, due in quarterly installments through July 1, 2002............ -- 10,650
6.99%, due in quarterly installments through July 1, 2003............ -- 3,950
Revolving credit agreement, due June 30, 1997.......................... -- 13,000
Term loan, due in quarterly installments through June 30, 1998......... -- 5,000
---------- ---------
130,000 52,600
---------- ---------
PRI--
Revolving credit agreement, interest at LIBOR plus 1%, due September
30, 1999............................................................. -- 5,500
TRC--
Note payable, interest at 9.50%, due in monthly installments through
July 1, 1997......................................................... -- 1,052
---------- ---------
130,000 59,152
Less amount due within one year........................................ -- (5,408)
---------- ---------
$ 130,000 $ 53,744
---------- ---------
---------- ---------
</TABLE>
On December 22, 1997, PFR issued $130,000,000 of 10.125% Unsecured Senior
Notes ("the Notes") due December 15, 2007. The proceeds were used to repay
outstanding senior notes and borrowings under PFR's revolving line of credit,
purchase Units from the public and pay related expenses relative to the Going
Private Transaction.
On December 22, 1997, PFR obtained a $50,000,000 secured revolving line of
credit facility (the "Credit Facility") with a sublimit for up to $5,000,000 of
letters of credit. The Credit Facility matures on January 1, 2003, at which time
all amounts become payable. Any amounts borrowed under the Credit Facility will
bear interest at floating rates based on the agent's base rate or Eurodollar
rates as defined in the agreement. As of December 31, 1997, no borrowings and
approximately $3,050,000 of letters of credit were outstanding under the Credit
Facility.
In connection with the issuance of the Notes and obtaining the Credit
Facility, PFR incurred deferred financing costs of approximately $6,028,000
which are being amortized over the terms of the debt agreements.
In order to manage interest costs, PFR entered into an interest rate swap
agreement in 1994. The notional amount protected by this transaction decreases
quarterly and the LIBOR component is adjusted quarterly. The agreement expires
June 30, 1998. PFR also maintained a participating interest rate swap and cap
agreement. The swap and cap agreement expired on June 30, 1997.
The remaining derivative financial instrument has an inherent element of
risk that the counterparties may be unable to meet the terms of the agreement.
PFR has minimized such risk exposure by limiting the counterparties to major
financial institutions.
F-16
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) LONG-TERM DEBT: (CONTINUED)
Based on the borrowing rates currently available for debt with similar terms
and maturities, the approximate fair market value of PFR's long-term debt as of
December 31 was as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
10.125% Unsecured Senior Notes......................................... $ 130,000 $ --
7.19% Unsecured Senior Notes........................................... -- 19,412
8.60% Unsecured Senior Notes........................................... -- 10,842
6.99% Unsecured Senior Notes........................................... -- 3,830
Interest Rate Swap Agreement........................................... 11 126
Participating Interest Rate Swap and Cap Agreement..................... -- 51
</TABLE>
The values associated with the interest rate swaps represent the estimated
contract values as reported to PFR by the commercial bank that is the
counterparty to these agreements. Because PFR's revolving line of credit and
term loan borrowings outstanding at December 31, 1996 bore interest at current
market rates, management believes that the related liabilities reflected in the
accompanying Consolidated Balance Sheets approximated fair market value.
Pursuant to both the Notes and the Credit Facility, PFR must maintain
specified financial ratios and is subject to certain restrictions which limit
additional indebtedness. At December 31, 1997, PFR was in compliance with all
such requirements.
Interest expense capitalized in connection with PFR's construction
activities amounted to approximately $78,000, $136,000 and $153,000 for the
years ended December 31, 1997, 1996 and 1995, respectively.
(9) INCOME TAXES:
TRC and its subsidiaries file a consolidated Federal income tax return. For
state purposes, each subsidiary generally files a separate return. PFR is not a
tax-paying entity; therefore, PRI includes its allocable share of PFR's taxable
income in its income tax return.
The following is a summary of the components of the provision for income
taxes for the years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal....................................................... $ 2,961 $ 12,044 $ --
State and local............................................... 213 414 (81)
--------- --------- ---------
3,174 12,458 (81)
--------- --------- ---------
Deferred:
Federal....................................................... (767) (10,625) 1,022
State and local............................................... (74) (140) 308
--------- --------- ---------
(841) (10,765) 1,330
--------- --------- ---------
$ 2,333 $ 1,693 $ 1,249
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-17
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) INCOME TAXES: (CONTINUED)
A reconciliation of the statutory Federal income tax rate to the Company's
effective income tax rate is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Federal.......................................................... 34.0% 35.0% 35.0%
Federal income tax credits....................................... (4.9) (8.2) (6.6)
FICC distribution................................................ -- (5.4) --
State income taxes, net of Federal taxes......................... 3.3 2.9 7.0
State tax refunds, net of Federal taxes.......................... (2.8) -- (8.2)
Nondeductible expenses and other................................. 3.9 3.0 3.3
--- --- ---
33.5% 27.3% 30.5%
--- --- ---
--- --- ---
</TABLE>
The following is a summary of the significant components of the Company's
deferred tax position as of December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1996
------------------------ ------------------------
CURRENT NONCURRENT CURRENT NONCURRENT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Capital leases......................................... $ -- $ 1,354 $ -- $ 849
Accrued expenses and reserves.......................... 345 370 473 83
Inventory.............................................. 125 -- 53 --
----- ----------- ----- -----------
Deferred tax assets.................................. 470 1,724 526 932
----- ----------- ----- -----------
Investment in affiliates............................... -- -- -- (17,012)
Depreciation and amortization.......................... -- (5,269) -- (1,134)
Other.................................................. -- (2,120) -- (60)
----- ----------- ----- -----------
Deferred tax liabilities............................. -- (7,389) -- (18,206)
----- ----------- ----- -----------
$ 470 $ (5,665) $ 526 $ (17,274)
----- ----------- ----- -----------
----- ----------- ----- -----------
</TABLE>
In March 1996, TRC distributed all of its FICC stock to TRC's stockholders,
and FICC ceased to be a member of the U.S. consolidated group of which TRC is
the common parent. As a result of the distribution of the FICC stock, TRC
incurred a tax liability of approximately $19,499,000 before consideration of
available credits.
(10) RELATED PARTY TRANSACTIONS:
TRC has a revolving loan agreement with Smith. The agreement provides for a
maximum loan of $1,000,000, with interest at the prime rate. Accrued interest is
payable on the last day of each calendar year, and the principal and accrued but
unpaid interest are payable on December 31, 1998. As of December 31, 1997, Smith
owed $946,000 under this agreement.
FICC subleases certain land, buildings and equipment from PFR. During the
years ended December 31, 1997, 1996 and 1995 sublease income was $322,000,
$328,000 and $318,000, respectively.
F-18
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(10) RELATED PARTY TRANSACTIONS: (CONTINUED)
In 1994, TRC Realty Co. entered into a ten year operating lease for an
aircraft, for use by both FICC and PMC. FICC shares equally with PMC in
reimbursing TRC Realty for leasing, tax and insurance expenses. In addition,
FICC also incurs actual usage costs. Total expense reimbursed by FICC for the
years ended December 31, 1997, 1996 and 1995 was $565,000, $568,000 and
$620,000, respectively.
FICC purchased certain food products used in the normal course of business
from Foxtail. For the years ended December 31, 1997, 1996 and 1995, purchases
were $975,000, $1,425,000 and $1,909,000, respectively.
TRC provided FHC and FICC with certain management services for which TRC was
reimbursed $824,000, $800,000 and $785,000 for the years ended December 31,
1997, 1996 and 1995, respectively.
(11) COMMITMENTS AND CONTINGENCIES:
In 1994, PFR recorded a provision of $1,079,000 for damages associated with
two separate lawsuits brought against PFR. During the second quarter of 1995,
PFR settled one of the suits for $190,000 less than the original provision and
the excess accrual was reversed. The second suit was settled in October 1995 for
the amount originally accrued.
The Company is a party to various legal proceedings in the ordinary course
of business. Management does not believe it is likely that these proceedings,
either individually or in the aggregate, will have a material adverse effect on
the consolidated financial statements of TRC and its subsidiaries.
In the past, PFR has sponsored financing programs offered by certain lending
institutions to assist its franchisees in procuring funds for the construction
of new franchised restaurants and to purchase and install in-store bakeries. PFR
provides a limited guaranty of funds borrowed. At December 31, 1997, there were
approximately $3,640,000 in borrowings outstanding under these programs. PFR has
guaranteed $1,200,000 of these borrowings. No additional borrowings are
available under these programs.
In early 1998, PFR entered into a separate two year limited guarantee of
$1,200,000 in borrowings of a franchisee which were used to construct a new
franchise restaurant.
PFR's largest franchisee operates 41 restaurants, 37 of which are leased
from unaffiliated lessors, pursuant to a temporary license agreement which
expires September 30, 1998. In May 1998, the franchisee filed a petition for
reorganization under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the Western District of New York. PFR and the
franchisee have entered into a Stipulation and Order Authorizing Standstill and
Extension Agreement which was approved by the Bankruptcy Court on June 17, 1998
authorizing the continuing temporary operation of the franchisee's restaurants.
The franchisee has advised PFR that it has entered into an agreement in
principle with an operator of truck stops and travel plazas for the acquisition
of all of the franchisee's assets related to its Perkins Family Restaurants. If
approved by the Bankruptcy Court, the acquiror will become a franchisee of PFR
and provide funds for remodeling existing restaurants. PFR also expects to
receive sufficient funds to cover its unreserved receivable from the franchisee.
During the past three years, the franchisee's average net royalty payments to
PFR were approximately $1.8 million. At December 31, 1997, the franchisee was
delinquent in its royalty obligations in the amount of approximately $550,000,
of which $300,000 has been reserved.
The majority of PFR's franchise revenues are generated from franchisees
owning less than 5% of total franchised restaurants and, therefore, the loss of
any one of these franchisees would not have a material
F-19
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(11) COMMITMENTS AND CONTINGENCIES: (CONTINUED)
impact on the results of PFR's operations. As of December 31, 1997, three
franchisees owned 93 of the 337 restaurants franchised by PFR. During 1997, PFR
received net royalties and license fees of approximately $2,224,000, $1,681,000
and $1,239,000 from these franchisees. While the exit of one of these
franchisees from the system would not have a material impact on the future
revenues of PFR, such an occurrence would not disrupt the normal functioning of
PFR.
PFR's ability to make scheduled payments of principal of, or to pay the
interest or liquidated damages, if any, on, or to refinance, its indebtedness
(including the Notes), or to fund planned capital expenditures will depend on
its future performance, which, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond its control. Based upon the current level of operations, management
believes that cash flow from operations and available cash, together with
available borrowings under the New Credit Facility, will be adequate to meet
PFR's liquidity needs for the foreseeable future. PFR may, however, need to
refinance all or a portion of the principal of the Notes on or prior to
maturity. There can be no assurance that PFR will generate sufficient cash flow
from operations, or that future borrowings will be available under the New
Credit Facility in an amount sufficient to enable PFR to service its
indebtedness, including the Notes, or to fund its other liquidity needs. In
addition there can be no assurance that PFR will be able to effect any such
refinancing on commercially reasonable terms or at all.
(12) UNIT PLAN:
The Perkins Family Restaurants, L.P. Restricted Limited Partnership Unit
Plan ("Unit Plan") was initially adopted in October 1987. Awards of restricted
Units under the Unit Plan were made to officers and key employees of PMC, PRI
and their affiliates as well as certain members of PMC's Board of Directors. A
committee composed of those non-employee directors of PMC (the "Committee") was
appointed to administer the Unit Plan. At the time of each award, the Committee
determined the applicable award restrictions, including, without limitation, i)
a restricted period (not to exceed ten years) during which the Units could not
be sold, transferred or pledged and ii) the date(s) on which restrictions on all
or a portion of the Units awarded would lapse. To the extent declared, cash
distributions were paid on all Units awarded under the Unit Plan even during the
restricted period.
In conjunction with the Going Private Transaction, all Units under the Unit
Plan, including those Units for which the restrictions had not lapsed, were
repurchased by PFR and the Unit Plan was eliminated.
(13) EMPLOYEE BENEFITS:
The Perkins Retirement Savings Plan (the "PFR Plan"), as amended and
restated effective January 1, 1992, was established for the benefit of all
eligible employees, both hourly and salaried, of the participating companies, as
defined. At December 31, 1997, participating companies were PFR, PMC, TRC Realty
and TRC. The PFR Plan gives all eligible employees the opportunity to invest
from 1% to 15% of their annual compensation subject to legal maximums. During
1995, PFR, PMC and TRC Realty matched contributions at a rate of 25% up to the
first 6% deferred by each participant. During 1997 and 1996, PFR and PMC elected
to match contributions at a rate of 50% up to the first 6% deferred by each
participant. All employee contributions are fully vested. Employer contributions
are vested on a tiered scale based upon an employee's length of vesting service,
not to exceed five years. PFR expensed approximately $615,000, $554,000 and
$243,000 related to this plan in 1997, 1996 and 1995, respectively.
F-20
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(14) DISCONTINUED OPERATIONS:
On March 19, 1997, the Company sold its restaurant insurance operations,
RIC, for $1,300,000 in cash and a note receivable of $1,000,000. The gain on
sale was immaterial. The prior year financial statements have been restated to
include the Company's former restaurant insurance business as discontinued
operations.
Summarized results of discontinued operations were as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net revenues..................................................... $ 1,186 $ 4,975 $ 7,210
Operating expenses............................................... 1,043 4,197 6,206
--------- --------- ---------
Income before income taxes....................................... 143 778 1,004
Provision for income taxes....................................... 50 272 318
--------- --------- ---------
Net income from discontinued operations.......................... $ 93 $ 506 $ 686
--------- --------- ---------
--------- --------- ---------
</TABLE>
(15) ASSET WRITE-DOWN (SFAS NO. 121):
During 1995, PFR identified three restaurant properties which were not
expected to generate undiscounted future cash flows sufficient to cover the
carrying value of the underlying assets related to these properties. As required
under SFAS No. 121, the carrying amounts of the assets associated with these
restaurant properties were written down to their fair market values as estimated
based on PFR's experience in disposing of similar under-performing properties,
negotiations with lessors of the subject properties and historical industry
lease rates for similarly performing real estate. The resulting non-cash charge,
as identified on the accompanying financial statements, reduced 1995 net income
by $1,900,000 of which $1,290,000 was related to assets to be disposed of. The
remaining amounts were due to write-downs of long-term assets deemed by PFR to
be impaired. The major components of the charge were as follows (in thousands):
<TABLE>
<S> <C>
Reduction of the carrying values of operating assets to fair market
values............................................................ $ 1,428
Net present value of noncancelable lease commitments, less estimated
sublease income................................................... 367
Other disposal costs, including commissions......................... 105
---------
$ 1,900
---------
---------
</TABLE>
Management is continuing to pursue subleasing one of the properties. The
carrying amounts of all owned and leased assets related to this property were
concluded to have no fair market value. A provision for future losses was
recorded to reflect the net present value of the future lease payments less
estimated sublease income on this property. PFR's results of operations include
losses related to this property of $185,000, $197,000 and $277,000 for the years
ended December 31, 1997, 1996, and 1995, respectively.
During the first quarter of 1998, PFR identified five restaurant properties
which were not expected to generate undiscounted future cash flows sufficient to
cover the carrying value of the underlying assets related to these properties.
As required under SFAS No. 121, the carrying amounts of the assets associated
with these restaurant properties were written down to their estimated fair
market values. The resulting non-cash charge reduced first quarter 1998 income
by $500,000.
F-21
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(16) QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
<TABLE>
<CAPTION>
(IN THOUSANDS)
INCOME BEFORE
GROSS EXTRAORDINARY NET INCOME
1997 REVENUES PROFIT (A) ITEM (LOSS)
- -------------- ---------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
1st Quarter $ 61,939 $ 14,333 $ 871 $ 871
2nd Quarter 66,985 16,164 998 998
3rd Quarter 71,983 17,585 1,705 1,705
4th Quarter 70,291 15,885 1,155 (3,865)(b)
---------- ----------- ------ -----------
$ 271,198 $ 63,967 $ 4,729 $ (291)
---------- ----------- ------ -----------
---------- ----------- ------ -----------
</TABLE>
<TABLE>
<CAPTION>
INCOME BEFORE
GROSS EXTRAORDINARY NET INCOME
1996 REVENUES PROFIT (A) ITEM (LOSS)
- -------------- ---------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
1st Quarter $ 60,276 $ 13,064 $ 743 $ 743
2nd Quarter 64,127 15,080 1,105 1,105
3rd Quarter 66,909 16,484 1,474 1,474
4th Quarter 62,944 13,918 1,699 1,699
---------- ----------- ------ -----------
$ 254,256 $ 58,546 $ 5,021 $ 5,021
---------- ----------- ------ -----------
---------- ----------- ------ -----------
</TABLE>
- ------------------------
(a) Represents total revenues less cost of sales.
(b) Includes extraordinary item, Going Private Transaction costs of $5,020.
(17) SUBSEQUENT EVENT:
On May 7, 1998, the Company and Harrah's entered into an agreement whereby
the Company redeemed 100% of Harrah's interest in the Company (the
"Reorganization"). Approximately $18.0 million was required to consummate the
Reorganization and pay related expenses. The Reorganization was funded by the
issuance of $18.0 million of 11.25% Senior Discount Notes due 2008 with an
aggregate original principal amount at maturity of $31.1 million.
F-22
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
The accompanying unaudited consolidated pro forma financial statements have
been prepared to reflect: (a) the issuance of the Notes, (b) the application of
the proceeds of the foregoing, as set forth in "Use of Proceeds", (c) the
Reorganization and (d) the Going Private Transaction (such transactions being
collectively referred to herein as "the Transactions"). The accompanying
unaudited consolidated pro forma statements of operations for the year ended
December 31, 1997 and the three months ending March 31, 1998, have been prepared
as if the Transactions had occurred as of the beginning of 1997. The
accompanying unaudited consolidated pro forma balance sheet has been prepared as
if the Transactions had occurred as of March 31, 1998.
The unaudited consolidated pro forma financial statements should be read in
conjunction with the consolidated financial statements of the Company and the
related notes thereto and management's discussion thereof included elsewhere in
this Prospectus. Additionally, the unaudited consolidated pro forma financial
statements do not purport to represent what the Company's results of operations
or financial position would have been had the Transactions occurred as of the
assumed dates indicated above or to project the Company's results of operations
or financial position in any future period.
F-23
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------- ---------
<S> <C> <C> <C>
REVENUES:
Food Sales............................ $ 250,193 $ -- $250,193
Franchise and Other................... 21,005 -- 21,005
---------- ------------- ---------
271,198 -- 271,198
COST AND EXPENSES:
Cost of sales:
Food cost........................... 72,559 -- 72,559
Labor and benefits.................. 84,027 -- 84,027
Operating expenses.................. 50,645 -- 50,645
General and administrative............ 27,924 (720)(a) 27,204
Depreciation and amortization......... 16,031 2,349(b) 18,380
Interest, net......................... 5,176 11,976(c) 17,152
---------- ------------- ---------
256,362 13,605 269,967
---------- ------------- ---------
14,836 (13,605) 1,231
MINORITY INTEREST IN NET EARNINGS OF
SUBSIDIARIES.......................... (7,867) 7,867(e) --
---------- ------------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND EXTRAORDINARY ITEM... 6,969 (5,738) 1,231
PROVISION FOR INCOME TAXES.............. (2,333) 1,870(f) (463)
---------- ------------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE
EXTRAORDINARY ITEM.................... $ 4,636 $(3,868) $ 768
---------- ------------- ---------
---------- ------------- ---------
</TABLE>
See accompanying Notes to Unaudited Consolidated Pro Forma Financial Statements.
F-24
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------- -----------
<S> <C> <C> <C>
REVENUES:
Food sales............................................................. $ 62,774 $ -- $ 62,774
Franchise and other.................................................... 5,174 -- 5,174
----------- ----- -----------
67,948 -- 67,948
COST AND EXPENSES:
Cost of sales:
Food cost............................................................ 18,136 -- 18,136
Labor and benefits................................................... 21,628 -- 21,628
Operating expenses................................................... 13,200 -- 13,200
General and administrative............................................. 6,393 -- 6,393
Depreciation and amortization.......................................... 4,739 -- 4,739
Interest, net.......................................................... 3,625 618(d) 4,243
Loss on/Provision for disposition of assets............................ 295 -- 295
Asset write-down (SFAS No. 121)........................................ 500 -- 500
----------- ----- -----------
68,516 618 69,134
----------- ----- -----------
LOSS BEFORE INCOME TAXES............................................... (568) (618) (1,186)
BENEFIT FROM INCOME TAXES.............................................. 283 247(f) 530
----------- ----- -----------
NET LOSS............................................................... $ (285) $ (371) $ (656)
----------- ----- -----------
----------- ----- -----------
</TABLE>
See accompanying Notes to Unaudited Consolidated Pro Forma Financial Statements.
F-25
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- -------------- ---------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............. $ 4,880 $ -- $ 4,880
Receivables, net...................... 7,483 -- 7,483
Inventories........................... 4,152 -- 4,152
Prepaid expenses and other current
assets.............................. 2,448 -- 2,448
Deferred income taxes................. 470 -- 470
---------- -------------- ---------
Total current assets.............. 19,433 -- 19,433
Property and Equipment, net............. 125,988 -- 125,988
Intangible Assets and Deferred
Charges............................... 47,173 1,000(g) 48,173
Other Assets............................ 1,596 -- 1,596
---------- -------------- ---------
$ 194,190 $ 1,000 $195,190
---------- -------------- ---------
---------- -------------- ---------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current maturities of capital lease
obligations......................... $ 1,254 $ -- $ 1,254
Accounts payable...................... 11,816 -- 11,816
Accrued expenses...................... 20,367 -- 20,367
Deferred income taxes................. 290 -- 290
---------- -------------- ---------
Total current liabilities......... 33,727 -- 33,727
Capital Lease Obligations, less current
maturities............................ 6,703 -- 6,703
Long-Term Debt, less current
maturities............................ 133,000 18,009(g) 151,009
Deferred Income Taxes and Other......... 9,258 -- 9,258
Stockholders' Investment:
Common stock.......................... 1 -- 1
Additional paid-in capital............ 17,971 (17,009)(g) 962
Accumulated deficit................... (6,470) -- (6,470)
---------- -------------- ---------
11,502 (17,009) (5,507)
---------- -------------- ---------
$ 194,190 $ 1,000 $195,190
---------- -------------- ---------
---------- -------------- ---------
</TABLE>
See accompanying Notes to Unaudited Consolidated Pro Forma Financial Statements.
F-26
<PAGE>
THE RESTAURANT COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
(a) To eliminate amortization of deferred compensation related to restricted
Units repurchased in connection with the Going Private Transaction.
(b) To record additional amortization and depreciation related to purchase
accounting adjustments recorded in connection with the Going Private
Transaction resulting in a write-up of property and equipment and
intangibles. The calculation of such amounts is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AMOUNT OF AVERAGE PRO FORMA
WRITE-UP LIFE ADJUSTMENT
----------- ------------- -----------
<S> <C> <C> <C>
Property and equipment.................................... $ 13,830 9 $ 1,537
Franchise agreements...................................... 10,630 16 664
Goodwill.................................................. 5,909 40 148
-----------
$ 2,349
-----------
-----------
</TABLE>
(c) To record interest on the 10.125% Senior Notes issued in connection with the
Going Private Transaction of $13,163 ($130,000 @ 10.125%), interest on the
Notes issued in connection with the Reorganization of $2,083 ($18,009 @
11.25%, compounded semi-annually), accretion of 5.625% mandatory redemption
premium of $94, amortization of debt financing costs of $858 and eliminate
$4,224 of interest and amortization of debt financing costs on pre-existing
debt which was refinanced in connection with the Going Private Transaction.
(d) To record interest on the Notes and previously accrued interest issued in
connection with the Reorganization of $565 ($18,009 @ 11.25% and $2,083 @
11.25%), accretion of 5.625% mandatory redemption premium of $28 and
amortization of debt financing costs of $25.
(e) To eliminate minority interest in the net earnings of PFR as a result of the
Going Private Transaction.
(f) To record income tax effects of pro forma adjustments.
(g) To record the issuance of the Notes ($18,009) and the application of the
proceeds therefrom as follows:
<TABLE>
<S> <C>
Effect the Reorganization.......................................... $ 17,009
Deferred financing costs........................................... 1,000
---------
Total $ 18,009
---------
---------
</TABLE>
F-27
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR ANY 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 ANY OF THE INITIAL PURCHASERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE
TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. 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>
<S> <C>
Summary............................... 1
Risk Factors.......................... 17
Use of Proceeds....................... 24
Capitalization........................ 24
Selected Historical and Pro Forma
Financial and Other Data............ 25
Management's Discussion and Analysis
of Results of Operations and
Financial Condition................. 27
Business.............................. 38
Management............................ 48
Certain Transactions.................. 53
Description of Other Indebtedness..... 54
The Exchange Offer.................... 58
Description of Notes.................. 68
Certain U.S. Tax Consequences to
Holders............................. 97
Plan of Distribution.................. 100
Legal Matters......................... 100
Independent Public Accountants........ 100
Available Information................. 100
Index to Financial Statements......... F-1
</TABLE>
The Restaurant Company
11 1/4% Series B Senior Discount Notes
Due 2008
---------------------
PROSPECTUS
JUNE , 1998
---------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 8 of the Issuer's By-Laws provides that it shall indemnify its
officers, directors, employees and agents to the fullest extent permitted by the
General Corporation Law of Delaware.
Section 145 of the Delaware General Corporation Law, as amended, provides as
follows:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney's fees) actually and reasonably
incurred by him in connection therewith.
4. Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
II-1
<PAGE>
5. Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the board of directors deems appropriate.
6. The indemnification and advancement of expenses provided by, or granted
pursuant to the other subsections of this section shall be deemed exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
7. A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
8. For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
9. For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employer benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
10. The indemnification and advancement of expenses provided by or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
A list of the exhibits included as part of this registration statement is
contained on the Exhibit Index and is incorporated herein by reference.
(b) Financial Statement Schedules:
II-2
<PAGE>
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted because
they are not required, are inapplicable or the required information has already
been provided elsewhere in the registration statement.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
BONA FIDE offering thereof.
(c) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 193, each such post-effective amendment shall be
II-3
<PAGE>
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant, will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(g) The registrant had not entered into any arrangement or understanding
with any person to distribute the securities to be received in the Exchange
Offer and to the best of the registrant's information and belief, each person
participating in the Exchange Offer is acquiring the securities in its ordinary
course of business and has no arrangement or understanding with any person to
participate in the distribution of the securities to be received in the Exchange
Offer. In this regard, the registrant will make each person participating in the
Exchange Offer aware (through the Exchange Offer Prospectus or otherwise) that
if the Exchange Offer is being registered for the purpose of secondary resales,
any security holder using the exchange offer to participate in a distribution of
the securities to be acquired in the registered exchange offer (1) could not
rely on the staff position enunciated in Exxon Capital Holdings Corporation
(available April 13, 1989) or similar letters and (2) must comply with
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. The registration acknowledges
that such a secondary resale transaction should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 of Regulation S-K.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT, OR ANY AMENDMENT
THERETO, TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF MEMPHIS TENNESSEE, ON JUNE 26, 1998.
<TABLE>
<S> <C> <C>
THE RESTAURANT COMPANY
By: /s/ STEVEN R. MCCLELLAN
-----------------------------------------
Name: Steven R. McClellan
Title: Vice President,
Chief Financial Officer
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT, OR ANY AMENDMENT THERETO, HAS BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON JUNE 26, 1998.
THE RESTAURANT COMPANY
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------------------------------
<C> <S>
*
- ------------------------------ Chief Executive Officer (Principal Executive
Donald N. Smith Officer) and Chairman of the Board
/s/ STEVEN R. MCCLELLAN
- ------------------------------ Vice President, Chief Financial Officer (Principal
Steven R. McClellan Financial Officer)
/s/ MICHAEL P. DONAHOE
- ------------------------------ Vice President, Controller and Treasurer
Michael P. Donahoe (Principal Accounting Officer)
*
- ------------------------------ Director
Steven L. Ezzes
</TABLE>
<TABLE>
<S> <C> <C>
*By: /s/ STEVEN R. MCCLELLAN
-------------------------
Attorney-in-fact
</TABLE>
II-5
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Steven R.
McClellan and Donald F. Wiseman, Esq. his true and lawful attorney-in-fact and
agent, each acting alone, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting alone,
with full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, each acting alone, or his
or her substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------ ---------------------------
<C> <S> <C>
Chief Executive Officer
/s/ DONALD N. SMITH (Principal Executive
- ------------------------------ Officer and Chairman of June 24, 1998
Donald N. Smith the Board
Vice President, Chief
/s/ STEVEN R. MCCLELLAN Financial Officer
- ------------------------------ (Principal Financial June 24, 1998
Steven R. McClellan Officer)
/s/ MICHAEL P. DONAHOE Vice President, Controller
- ------------------------------ and Treasurer (Principal June 24, 1998
Michael P. Donahoe Accounting Officer)
/s/ STEVEN L. EZZES
- ------------------------------ Director June 24, 1998
Steven L. Ezzes
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- ---------- ------------------------------------------------------------------------------------- -------------------
<C> <S> <C>
1 Purchase Agreement dated as of May 13, 1998 among the Issuer and the Initial
Purchasers named therein...........................................................
3.1 Certificate of Incorporation of The Restaurant Company...............................
3.2 By-Laws of The Restaurant Company....................................................
4.1 Indenture dated as of May 18, 1998 among the Issuer and the Trustee named therein....
4.2 Form of 11 1/4% Series B Senior Discount Notes due 2008 (included in Exhibit 4.1)....
5 Opinion of Mayer, Brown & Platt*.....................................................
10.1 Guaranty by Perkins Family Restaurants, L.P. and Perkins Family Restaurants Operating
Company, L.P. in favor of BancBoston Leasing, Inc. dated as of May 1, 1994.*.......
10.2 Guaranty dated July 5, 1995 among Perkins Restaurants Operating Company, L.P. and
BancBoston Leasing, Inc.*..........................................................
10.3 Revolving Credit Agreement, by and among Perkins Family Restaurants, L.P., The
Restaurant Company, Perkins Restaurants, Inc., Perkins Finance Corp., BankBoston,
N.A. and other financial institutions and BankBoston N.A., as Agent and
Administrative Agent with NationsBank, N.A. as Syndication Agent and BancBoston
Securities, Inc. as Arranger dated as of December 22, 1997.*.......................
10.4 Registration Rights Agreement dated as of May 18, 1998 among the Issuer and the
Initial Purchasers named therein...................................................
10.5 10 1/8% Senior Notes Indenture dated as of December 22, 1997 among Perkins Family
Restaurants, L.P., Perkins Finance Corp. and the Trustee named therein.*...........
10.6 Form of 10 1/8% Senior Notes due 2007 (included in Exhibit 10.5).....................
10.7 Lease Agreement between TRC Realty Co. and General Electric Capital Corporation dated
as of April 4, 1994 for an airplane and related guaranty*..........................
10.8 Reimbursement Agreement between TRC Realty Co. and Friendly Ice Cream Corporation for
use of a leased plane*.............................................................
10.9 Note Agreement between Donald N. Smith and The Restaurant Company dated February 16,
1987, with amendments, providing for a revolving loan of up to $1,000,000*.........
21 Subsidiaries of the Registrant*......................................................
23 Consent of Arthur Andersen LLP.......................................................
24 Power of Attorney (Included on Page II-12)...........................................
25 Statement of Eligibility of Trustee*.................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- ---------- ------------------------------------------------------------------------------------- -------------------
<C> <S> <C>
99.1 Stockholders Agreement, dated as of November 21, 1985, among The Restaurant Company,
Holiday Inns, Inc., Bass Investment Limited Partnership Donald N. Smith, et al.....
99.2 Form of Letter of Transmittal*.......................................................
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
$31,100,000 ORIGINAL PRINCIPAL AMOUNT AT MATURITY
THE RESTAURANT COMPANY
11 1/4% SENIOR DISCOUNT NOTES DUE 2008
PURCHASE AGREEMENT
May 13, 1998
SALOMON BROTHERS INC
BANCBOSTON SECURITIES INC.
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
The Restaurant Company, a Delaware corporation (the "Company" or the
"Issuer"), proposes, upon the terms and conditions set forth herein, to issue
and sell to the Initial Purchasers named in Schedule I hereto (the "Initial
Purchasers") $31,100,000 in aggregate Original Principal Amount at Maturity (as
defined in the Indenture) of the Issuer's 11 1/4% Senior Discount Notes due 2008
(the "Series A Notes"). The Series A Notes are to be issued pursuant to the
provisions of an Indenture (the "Indenture"), to be dated as of the Closing
Date (as defined below), between the Issuer and State Street Bank and Trust
Company of Connecticut, N.A., as Trustee (the "Trustee"). The Series A Notes
and the Series B Notes (as defined below) issuable in exchange therefor are
collectively referred to herein as the "Notes."
It is understood by the parties hereto that on or prior to the
Closing Date the Company will consummate a recapitalization (the
"Recapitalization") pursuant to which the Company will purchase 5,820 shares of
Common Stock of the Company owned by Harrah's Operating Company, Inc., a
subsidiary of Harrah's Entertainment, Inc. will be purchased by the Issuer at
an aggregate purchase price of $17 million.
The Issuer wishes to confirm as follows its agreement with the
Initial Purchasers in connection with the purchase and resale of the Series A
Notes.
1. PRELIMINARY OFFERING MEMORANDUM AND OFFERING MEMORANDUM. The
Notes shall be offered and sold to the Initial Purchasers pursuant to one or
more exemptions
<PAGE>
-2-
from the registration requirements of the Securities Act of 1933 (the "Act").
The Issuer has prepared a preliminary offering memorandum, dated May 8, 1998
(the "Preliminary Offering Memorandum") and a final offering memorandum,
dated May 13, 1998 (the "Offering Memorandum"), setting forth information
regarding the Issuer and the Series A Notes. Any references herein to the
Preliminary Offering Memorandum and the Offering Memorandum shall be deemed
to include all amendments and supplements thereto. The Issuer hereby
confirms that it has authorized the use of the Preliminary Offering
Memorandum and the Offering Memorandum, on the terms and in the manner set
forth therein, in connection with the offering and resale of the Series A
Notes by the Initial Purchasers.
The Issuer understands that the Initial Purchasers propose to make
offers and sales (the "Exempt Resales") of the Series A Notes purchased by the
Initial Purchasers hereunder only on the terms and in the manner set forth in
the Offering Memorandum and Section 2 hereof, as soon as the Initial Purchasers
deem advisable after this Agreement has been executed and delivered, (i) to
persons in the United States whom the Initial Purchasers reasonably believe to
be qualified institutional buyers ("QlBs") as defined in Rule 144A under the
Act, as such rule may be amended from time to time ("Rule 144A"), in
transactions under Rule 144A and (ii) outside the United States to persons
other than U.S. persons in reliance upon Regulation S ("Regulation S") under
the Act (such persons specified in clauses (i) and (ii) being referred to
herein as the "Eligible Purchasers"). As used herein the terms "United States"
and "U.S. persons" have the meaning given them in Regulation S.
It is understood and acknowledged that upon original issuance
thereof, and until such time as the same is no longer required under the
applicable requirements of the Act, the Series A Notes shall bear the following
legend:
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
SECTION 5 OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS, AND THE SECURITY EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS
OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF
THE ISSUER THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE
<PAGE>
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SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE
ISSUER OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND
(B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
It is also understood and acknowledged that holders (including
subsequent transferees) of the Series A Notes will have the registration rights
set forth in the registration rights agreement (the "Registration Rights
Agreement"), to be dated the Closing Date, in the form of EXHIBIT A hereto, for
so long as such Series A Notes constitute "Transfer Restricted Securities" (as
defined in the Registration Rights Agreement). Pursuant to the Registration
Rights Agreement, the Issuer will agree to file with the Securities and
Exchange Commission (the "Commission") under the circumstances set forth
therein, (i) a registration statement on the appropriate form under the Act
(the "Exchange Offer Registration Statement") relating to the Issuer's 11 1/4%
Senior Discount Notes due 2008 (the "Series B Notes") to be offered in exchange
for the Series A Notes (the "Exchange Offer") and (ii) a shelf registration
statement pursuant to Rule 415 under the Act relating to the resale by certain
holders of the Series A Notes (the "Shelf Registration Statement"), and to use
all commercially reasonable efforts to cause such Shelf Registration Statement
to be declared effective. This Agreement, the Notes, the Indenture and the
Registration Rights Agreement are hereinafter referred to collectively as the
"Operative Documents."
Capitalized terms used herein without definition have the respective
meanings specified therefor in the Indenture.
2. AGREEMENTS TO SELL, PURCHASE AND RESELL. On the basis of the
representations, warranties and agreements contained in this Agreement and
subject to all the terms and conditions set forth herein, the Issuer agrees to
issue and sell to the Initial Purchasers, and the Initial Purchasers agree to
purchase from the Issuer, at a purchase price equal to 56.75% of the Original
Principal Amount at Maturity thereof, the Original Principal Amount at Maturity
<PAGE>
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of Series A Notes set forth opposite the name of each Initial Purchaser in
Schedule I hereto (the "Purchase Price"). The Initial Purchasers have advised
the Issuer that they shall offer the Series A Notes to Eligible Purchasers at a
price initially equal to 57.907% of the Original Principal Amount at Maturity
thereof. Such price may be changed by the Initial Purchasers at any time
thereafter without notice.
3. INITIAL PURCHASERS' REPRESENTATIONS AND WARRANTIES. Each of the
Initial Purchasers, severally and not jointly, represents and warrants to the
Issuer, and agrees that:
(a) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as is necessary in order to
evaluate the merits and risks of an investment in the Series A Notes.
(b) No form of general solicitation or general advertising (within
the meaning of Regulation D under the Act) has been or shall be used by such
Initial Purchaser or any of its representatives in connection with the offer
and sale of any of the Series A Notes, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine, or
similar medium or broadcast over television or radio, or any seminar or meeting
whose attendees have been invited by any general solicitation or general
advertising.
(c) In connection with the Exempt Resales, such Initial Purchaser
shall solicit offers to buy the Series A Notes only from, and shall offer to
sell the Series A Notes only to, (1) persons that it reasonably believes to be
QIBs who in purchasing such Series A Notes shall be deemed to have represented
and agreed that they are purchasing the Series A Notes for their own accounts
or accounts with respect to which they exercise sole investment discretion and
that they or such accounts, as applicable, are QIBs and (2) Regulation S
Purchasers, in each case, that acknowledge and agree that (A) such Series A
Notes shall not have been registered under the Act and may be resold, pledged
or otherwise transferred only (x)(I) to a person who the seller reasonably
believes is a QIB in a transaction meeting the requirements of Rule 144A, (II)
in a transaction meeting the requirements of Rule 144, (III) outside the United
States in a transaction meeting the requirements of Rule 903 or 904 of
Regulation S under the Securities Act or (IV) in accordance with another
exemption from the registration requirements of the Act (and based upon an
opinion of counsel if the Company so requests), (y) to the Issuer or (z)
pursuant to an effective registration statement under the Act and, in each
case, in accordance with any applicable securities laws of any state of the
United States or any other applicable jurisdiction and (B) that the holder
shall, and each subsequent holder is required to, notify any purchaser of the
security evidenced thereby of the resale restrictions set forth in (A) above.
<PAGE>
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(d) Not to offer, sell or deliver any of the Series A Notes in any
jurisdiction outside the United States except under circumstances that shall
result in compliance with the applicable laws thereof, and to take at its own
expense whatever action is required to permit its purchase and resale of the
Series A Notes in such jurisdictions.
(e) Not to cause any advertisement of the Series A Notes to be
published in any newspaper or periodical or posted in any public place and not
to issue any circular relating to the Series A Notes, except such
advertisements as include the statements required by Regulation S.
(f) The sale of the Series A Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S is not part of a plan or
scheme to evade the registration provisions of the Act.
(g) Such Initial Purchaser has offered the Series A Notes and shall
offer and sell the Series A Notes as part of its distribution at any time and
otherwise until 40 days after the later of the commencement of the offering of
the Series A Notes and the Closing Date, only in accordance with Rule 903 of
Regulation S or another exemption from the registration requirements of the
Act. Accordingly, neither such Initial Purchaser, its affiliates nor any
persons acting on its or their behalf has engaged or shall engage in any
directed selling efforts within the meaning of Rule 901(b) of Regulation S with
respect to the Series A Notes, and such Initial Purchaser, its affiliates and
all persons acting on its or their behalf have complied and shall comply with
the offering restrictions requirements of Regulation S.
(h) Such Initial Purchaser agrees that the Series A Notes offered
and sold in reliance on Regulation S have been and shall be offered and sold
only in offshore transactions and that such securities have been and shall be
represented upon issuance by a temporary global security that may not be
exchanged for definitive securities until the expiration of the restricted
period (as defined in Regulation S) and only upon certification of beneficial
ownership of the securities by a non-U.S. person or a U.S. person who purchased
such securities in a transaction that was exempt from the registration
requirements of the Act, which U.S. person will acquire an interest in a
"Registrable Security" (as defined in the Registration Rights Agreement).
(i) Such Initial Purchaser agrees that, at or prior to confirmation
of a sale of Series A Notes, it shall have sent to each distributor, dealer
or person receiving a selling concession, fee or other remuneration that
purchases Series A Notes from it during the restricted period (as defined in
Regulation S) a confirmation or notice to substantially the following effect:
<PAGE>
-6-
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), and
may not be offered and sold within the United States or to, or for
the account or benefit of, U.S. persons (i) as part of their
distribution at any time or (ii) otherwise until 40 days after the
later of the commencement of the Offering and the Closing Date,
except in either case in accordance with Regulation S (or Rule 144A
or in transactions that are exempt from the registration requirements
of the Securities Act) under the Securities Act. Terms used above
have the meanings assigned to them in Regulation S."
Such Initial Purchaser further agrees that it has not entered and
shall not enter into any contractual arrangement with respect to the
distribution or delivery of the Series A Notes, except with its affiliates or
with the prior consent of the Company.
The Initial Purchasers understand that the Issuer and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to Sections
8, 8(d) and 8(e) hereof, counsel to the Issuer and counsel to the Initial
Purchasers, shall rely upon the accuracy and truth of the foregoing
representations and agreements and the Initial Purchasers hereby consent to
such reliance.
4. DELIVERY OF THE NOTES AND PAYMENT THEREFOR. Delivery to the
Initial Purchasers of and payment for the Series A Notes shall be made at the
office of Cahill Gordon & Reindel, 80 Pine Street, New York New York 10005 or
such other location as may be mutually acceptable, at 9:00 A.M., New York time,
on May 18, 1998 (the "Closing Date").
The Series A Notes shall be delivered to the Initial Purchasers
against payment of the Purchase Price in immediately available funds with any
transfer taxes thereon duly paid by the Company. The Series A Notes shall be
evidenced by one or more global securities (including a temporary global
security that may not be exchanged for definitive securities until the
expiration of the restricted period (as defined in Regulation S)) in definitive
form (the "Global Notes") and/or by additional definitive securities, and shall
be registered, in the case of the Global Notes, in the name of Cede & Co. as
nominee of The Depository Trust Company ("DTC"), and in the other cases, in
such names and in such denominations as the Initial Purchasers shall request
prior to 9:30 A. M., New York City time, on the second business day preceding
the Closing Date. The Series A Notes to be delivered to the Initial Purchasers
shall be made available to the Initial Purchasers in New York City for
inspection and packaging not later than 9:30 A.M., New York City time, on the
business day immediately preceding the Closing Date.
5. AGREEMENTS OF THE ISSUER. The Issuer hereby agrees with the
Initial Purchasers as follows:
<PAGE>
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(a) To advise the Initial Purchasers promptly and, if requested by
them, to confirm such advice in writing, (i) of the issuance by any state
securities commission of any stop order suspending the qualification or
exemption from qualification of any Series A Notes for offering or sale in any
jurisdiction designated by the Initial Purchasers pursuant to Section 5(f)
hereof, or the initiation of any proceeding by any state securities commission
or any other federal or state regulatory authority for such purpose and (ii)
within the period of time referred to in paragraph (e) below, of any material
change in the Issuer's condition (financial or other), business, prospects,
properties, net worth or results of operations, or of the happening of any
event which makes any statement made in the Offering Memorandum untrue or which
requires the making of any additions to or changes in the Offering Memorandum
in order to make the statements therein not misleading, or of the necessity to
amend or supplement the Offering Memorandum to comply with any law. The Issuer
shall use its best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any Series A Notes under any state
securities or Blue Sky laws and, if at any time any state securities commission
or other federal or state regulatory authority shall issue an order suspending
the qualification or exemption of any Series A Notes under any state securities
or Blue Sky laws, the Issuer shall use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(b) To furnish to the Initial Purchasers and those persons
identified by the Initial Purchasers to the Issuer, without charge, as of the
date of the Offering Memorandum, such number of copies of the Offering
Memorandum as they may reasonably request.
(c) Not to make any amendment or supplement to the Preliminary
Offering Memorandum or to the Offering Memorandum of which the Initial
Purchasers shall not previously have been advised or to which they shall
reasonably object after being so advised.
(d) Prior to the execution and delivery of this Agreement, the
Issuer has delivered or shall deliver to the Initial Purchasers, without
charge, in such quantities as the Initial Purchasers shall have requested or
may hereafter reasonably request, copies of the Preliminary Offering
Memorandum. The Issuer consents to the use, on the terms and in the manner set
forth therein and in accordance with the securities or Blue Sky laws of the
jurisdictions in which the Series A Notes are offered by the Initial Purchasers
and by dealers prior to the date of the Offering Memorandum, of each
Preliminary Offering Memorandum so furnished by the Issuer. The Issuer
consents to the use of the Offering Memorandum on the terms and in the manner
set forth therein and in accordance with the securities or Blue Sky laws of the
jurisdictions in which the Series A Notes are offered by the Initial Purchasers
and by all dealers to whom Series A Notes may be sold, in connection with the
offering and sale of the Series A Notes.
<PAGE>
-8-
(e) If, at any time prior to completion of the distribution of the
Series A Notes by the Initial Purchasers to Eligible Purchasers, any event
shall occur that, in the judgment of the Issuer or in the opinion of counsel
for the Initial Purchasers, should be set forth in the Offering Memorandum in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary to supplement or
amend the Offering Memorandum in order to comply with any law, to forthwith
prepare an appropriate supplement or amendment thereto, and to expeditiously
furnish to the Initial Purchasers and dealers a reasonable number of copies
thereof. In the event that the Issuer and the Initial Purchasers agree that
the Offering Memorandum should be amended or supplemented, the Issuer, if
reasonably requested by the Initial Purchasers, shall promptly issue a press
release announcing or disclosing the matters to be covered by the proposed
amendment or supplement or such document.
(f) To cooperate with the Initial Purchasers and their counsel in
connection with the qualification of the Series A Notes for offering and sale
by the Initial Purchasers and by dealers under the securities or Blue Sky laws
of such jurisdictions as the Initial Purchasers may designate and to file such
consents to service of process or other documents necessary or appropriate in
order to effect such qualification; provided that in no event shall the Issuer
be obligated to qualify to do business in any jurisdiction where it is not now
so qualified or to take any action which would subject it to service of process
in suits, other than those arising out of the offering or sale of the Series A
Notes, in any jurisdiction where it is not now so subject.
(g) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof (otherwise than by
notice given by the Initial Purchasers terminating this Agreement pursuant to
Section 11 hereof) or if this Agreement shall be terminated by the Initial
Purchasers because of any failure or refusal on the part of the Issuer to
comply with the terms or fulfill any of the conditions of this Agreement, to
reimburse the Initial Purchasers for all out-of-pocket expenses (including fees
and expenses of its counsel) reasonably incurred by them in connection
herewith, but without any further obligation on the part of the Issuer for loss
of profits or otherwise.
(h) So long as any of the Series A Notes remain outstanding and
during any period in which the Issuer is not subject to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to make
available to any holder of Series A Notes in connection with any sale thereof
and any prospective purchaser of such Series A Notes from such holder, the
information ("Rule 144A Information") required by Rule 144A(d)(4) under the
Act.
<PAGE>
-9-
(i) To apply the net proceeds from the sale of the Series A Notes to
be sold by them hereunder substantially in accordance with the description set
forth in the Offering Memorandum.
(j) Without the prior consent of the Initial Purchasers, prior to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise dispose of any fixed income obligation having a maturity of more than
one year.
(k) Except as stated in this Agreement and in the Preliminary
Offering Memorandum and Offering Memorandum, not to take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Series A
Notes to facilitate the sale or resale of the Series A Notes. Except as
permitted by the Act, not to distribute any offering material in connection
with the Exempt Resales.
(l) To use its best efforts to cause the Series A Notes to be
eligible for trading on the PORTAL Market and to maintain the listing of the
Series A Notes on PORTAL for so long as the Series A Notes are outstanding.
(m) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Series A Notes in a manner that would
require the registration under the Act of the sale to the Initial Purchasers or
the Eligible Purchasers of the Series A Notes.
(n) To comply with all the terms and conditions of the Registration
Rights Agreement and all agreements set forth in the representation letters of
the Issuer to DTC relating to the approval of the Series A Notes by DTC for
"book entry" transfer.
(o) Prior to any registration of the Series B Notes pursuant to the
Registration Rights Agreement, or at such earlier time as may be required, to
cause the Indenture to be qualified under the Trust Indenture Act of 1939 (the
"TIA") and to enter into any necessary supplemental indentures in connection
therewith.
(p) To use all commercially reasonable efforts to do and perform all
things required or necessary to be done and performed under this Agreement by
it prior to the Closing Date and to satisfy all conditions precedent to the
delivery of the Series A Notes.
6. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer
represents and warrants to the Initial Purchasers that:
(a) The Preliminary Offering Memorandum and Offering Memorandum
with respect to the Series A Notes have been prepared by the Issuer for use,
on the terms and
<PAGE>
-10-
in the manner set forth therein, by the Initial Purchasers in connection with
the Exempt Resales. No order or decree preventing the use of the Preliminary
Offering Memorandum or the Offering Memorandum or any amendment or supplement
thereto, or any order asserting that the transactions contemplated by this
Agreement are subject to the registration requirements of the Act has been
issued and no proceeding for that purpose has commenced or is pending or, to
the knowledge of the Issuer, is contemplated.
(b) The Preliminary Offering Memorandum and the Offering Memorandum,
as of their respective dates, and the Offering Memorandum as of the Closing
Date, did not or will not, as of the Closing Date, contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, except that
this representation and warranty does not apply to statements in or omissions
from the Preliminary Offering Memorandum or Offering Memorandum made in
reliance upon and in conformity with information furnished to the Issuer in
writing by or on behalf of the Initial Purchasers expressly for use therein.
(c) The Indenture has been duly and validly authorized by the Issuer
and, upon its execution, delivery and performance by the Issuer and assuming
due authorization, execution, delivery and performance by the Trustee, shall be
a valid and binding agreement of the Issuer, enforceable against it in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally and by
general equitable principles (whether considered in a proceeding in equity or
at law) and conforms in all material respects to the description thereof in the
Offering Memorandum. No qualification of the Indenture under the TIA is
required in connection with the offer and sale of the Series A Notes
contemplated hereby or in connection with the Exempt Resales.
(d) The Series A Notes have been duly authorized by the Issuer and,
when executed by the Issuer and authenticated by the Trustee in accordance with
the Indenture and delivered to the Initial Purchasers against payment therefor
in accordance with the terms hereof, shall have been validly issued and
delivered, and shall constitute valid and binding obligations of the Issuer
entitled to the benefits of the Indenture and enforceable in accordance with
their terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally and by general
equitable principles (whether considered in a proceeding in equity or at law).
The Series A Notes shall conform in all material respects to the description
thereof in the Offering Memorandum.
(e) The Series B Notes have been duly authorized by the Issuer, and,
when duly executed, authenticated, issued and delivered, shall constitute valid
and binding obligations of the Issuer entitled to the benefits of the Indenture
and enforceable in accordance with
<PAGE>
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their terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally and by
general equitable principles (whether considered in a proceeding in equity or
at law).
(f) All the outstanding equity interests of the Issuer have been
duly authorized and validly issued and are fully paid and nonassessable, and
are not subject to any preemptive or similar rights.
(g) Each of the Issuer and the Subsidiaries (as defined) is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization with full power and authority to own, lease and
operate its properties and to conduct its business as described in the Offering
Memorandum, and is duly registered and qualified to conduct its business and is
in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify does not have
a material adverse effect on the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Issuer and the
Subsidiaries, taken as a whole (a "Material Adverse Effect").
(h) The Company does not have any subsidiaries or any ownership
interests in any entities other than TRC Realty Co., Perkins Restaurants, Inc.,
Perkins Management Company, Inc., Perkins Family Restaurants, L.P. and Perkins
Finance Corp. (the "Subsidiaries") and J.A. Joint Venture LLC.
(i) There are no legal or governmental proceedings pending or, to
the knowledge of the Issuer, threatened, against the Issuer or any of the
Subsidiaries or to which the Issuer or any of the Subsidiaries or any of their
respective properties is subject, that are not disclosed in the Offering
Memorandum and which might reasonably be expected to result, singly or in the
aggregate, in a Material Adverse Effect or might materially affect the issuance
of the Series A Notes or the consummation of the transactions contemplated by
this Agreement. There are no agreements, contracts, indentures, leases or other
instruments that are material to the Issuer and the Subsidiaries, taken as a
whole, that are not described in the Offering Memorandum. Neither the Issuer
nor any of the Subsidiaries is involved in any strike, job action or labor
dispute with any group of employees, and, to each Issuer's knowledge, no such
action or dispute is threatened.
(j) Neither the Issuer nor any of the Subsidiaries is (i) in
violation of its certificate or articles of incorporation, certificate of
limited partnership, partnership agreement, by-laws or other organizational
documents, as applicable, or of any law, ordinance, administrative or
governmental rule or regulation applicable to it or of any decree of any court
or governmental agency or body having jurisdiction over it except where any
such violation or
<PAGE>
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violations in the aggregate would not reasonably be expected to have a
Material Adverse Effect or (ii) in default in any material respect in the
performance of any obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in any material
agreement, indenture, lease or other instrument to which it is a party or by
which it or any of its respective properties may be bound, except as may be
disclosed in the Offering Memorandum.
(k) None of the issuance, offer, sale or delivery of the Series A
Notes, the execution, delivery or performance of this Agreement, the
Indenture or the Registration Rights Agreement by the Issuer or the
consummation by the Issuer of the transactions contemplated hereby or thereby
(including the Recapitalization) (i) requires any consent, approval,
authorization or other order of, or registration or filing with, any court,
regulatory body, administrative agency or other governmental body, agency or
official (except as may be required in connection with the registration under
the Act of the Series B Notes in accordance with the Registration Rights
Agreement, qualification of the Indenture under the TIA and compliance with
the securities or Blue Sky laws of various jurisdictions), or conflicts or
shall conflict with or constitutes or shall constitute a breach of, or a
default under, the certificate or articles of incorporation, certificate of
limited partnership, bylaws, partnership agreement or other organizational
documents, as applicable, of the Issuer or any of the Subsidiaries or (ii)
conflicts or will conflict with or constitutes or will constitute a breach
of, or a default under, in any material respect, any material agreement,
indenture, lease or other instrument to which the Issuer or any of the
Subsidiaries is a party or by which any of them or any of their respective
properties may be bound, or (assuming compliance with all applicable state
securities and Blue Sky laws and, in the case of the Registration Rights
Agreement and the transactions contemplated thereby, the Act, the Exchange
Act and the TIA) violates or will violate in any material respect any
statute, law, regulation or filing or judgment, injunction, order or decree
applicable to the Issuer or any of the Subsidiaries or any of their
respective properties, or will result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Issuer or any
of the Subsidiaries pursuant to the terms of any agreement or instrument to
which either of them is a party or by which any of them may be bound or to
which any of the property or assets of any of them is subject.
(l) This Agreement has been duly authorized, executed and
delivered by the Issuer.
(m) The financial statements (historical and pro forma), together
with related schedules and notes forming part of the Offering Memorandum (and
any amendment or supplement thereto), present fairly in all material respects
the consolidated financial position, results of operations and changes in
owners' equity and cash flows of such entities purported to be shown thereby
on the basis stated in the Offering Memorandum at the respective dates or for
the respective periods to which they apply; such statements and related
schedules and
<PAGE>
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notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
except as disclosed therein; the assumptions used in preparing the pro forma
financial information and related notes and schedules included in the
Offering Memorandum are reasonable; and the other financial and statistical
information and data set forth in the Offering Memorandum (and any amendment
or supplement thereto) is accurately presented and, to the extent such
information and data is derived from the financial books and records of the
entities covered thereby, is prepared on a basis consistent with such
financial statements and the books and records of the entities covered
thereby.
(n) The accountants, Arthur Andersen, LLP, who have certified or
shall certify the financial statements included as part of the Offering
Memorandum (or any amendment or supplement thereto), are independent public
accountants under Rule 101 of the AICPA's Code of Professional Conduct, and its
interpretation and rulings. The historical financial statements, together with
related schedules and notes, set forth in the Preliminary Offering Memorandum
and the Offering Memorandum comply as to form in all material respects with the
requirements applicable to registration statements on Form S-1 under the Act.
(o) The Registration Rights Agreement has been duly authorized by
the Issuer and, on the Closing Date, will have been duly executed and delivered
by the Issuer. When the Registration Rights Agreement has been duly executed
and delivered, the Registration Rights Agreement will be a valid and binding
agreement of the Issuer, enforceable against the Issuer in accordance with its
terms subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and to general equitable principles (whether
considered in a proceeding in equity or at law) and except as rights to
indemnity and contribution may be limited by Federal or state securities laws
or principles of public policy. On the Closing Date, the Registration Rights
Agreement will conform as to legal matters in all material respects to the
description thereof in the Offering Memorandum.
(p) [Intentionally Omitted.]
(q) The Recapitalization has been duly authorized by the Company.
(r) Neither the Issuer nor any of its affiliates has taken, directly
or indirectly, any action designed to, or that might reasonably be expected to,
cause or result in stabilization or manipulation of the price of the Series A
Notes.
(s) Except as disclosed in the Offering Memorandum (or any amendment
or supplement thereto) (including, without limitation, in connection with the
Recapitalization and the Registration Rights Agreement), subsequent to the date
as of which such information is given in the Offering Memorandum (or any
amendment or supplement thereto), neither the
<PAGE>
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Issuer nor any Subsidiary has incurred any liability or obligation, direct or
contingent, or entered into any transaction, not in the ordinary course of
business, that is material to the Issuer and the Subsidiaries, taken as a
whole, and there has not been any material change in the general or limited
partners' interests or capital stock, or material increase in the short-term
or long-term debt, of the Issuer or any Subsidiary or any material adverse
change, or any development involving or which could reasonably be expected to
involve a prospective material adverse change, in the condition (financial or
other), business, properties, net worth or results of operations of the
Issuer and the Subsidiaries, taken as a whole.
(t) Each of the Issuer and the Subsidiaries has good and marketable
title to all property (real and personal) described in the Offering Memorandum
as being owned by it, free and clear of all liens, claims, security interests
or other encumbrances except such as are described in the Offering Memorandum
and all the property described in the Offering Memorandum as being held under
lease by each of the Issuer and the Subsidiaries is held by it under valid,
subsisting and enforceable leases, with only such exceptions as in the
aggregate are not materially burdensome and do not interfere in any material
respect with the conduct of the business of the Issuer and the Subsidiaries,
taken as a whole. Each of the Issuer and the Subsidiaries enjoys peaceful and
undisturbed possession under all leases to which it is a party as lessee,
except for such leases that, in the aggregate, are not material to the business
of the Issuer and the Subsidiaries taken as a whole. No consent need be
obtained from any person with respect to any such lease or agreement in
connection with the transactions contemplated hereby and in the Offering
Memorandum, including the Recapitalization, which consent has not already been
obtained. Except for such assets, plants and facilities as are not material in
the aggregate to the business of the Issuer and the Subsidiaries taken as a
whole, all tangible assets, plants and facilities of each of the Issuer and the
Subsidiaries are in good condition and repair (ordinary wear and tear excepted)
and are adequate, in the reasonable opinion of the Issuer, for the uses to
which they are being put or would be put in the ordinary course of business.
(u) Except as permitted by the Act, the Issuer has not distributed
and, prior to the later to occur of the Closing Date and completion of the
distribution of the Series A Notes, shall not distribute any offering material
in connection with the offering and sale of the Series A Notes other than the
Preliminary Offering Memorandum and Offering Memorandum.
(v) Each of the Issuer and the Subsidiaries has such permits,
licenses, franchises, certificates of need and other approvals or
authorizations of governmental or regulatory authorities ("Permits") as are
necessary under applicable law to own its properties and to conduct its
businesses in the manner described in the Offering Memorandum, except to the
extent that the failure to have such Permits would not reasonably be expected
to have a Material Adverse Effect. Each of the Issuer and the Subsidiaries has
fulfilled and performed in all
<PAGE>
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material respects all its material obligations with respect to the Permits,
and no event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination thereof or results in any other
material impairment of the rights of the holder of any such Permit, subject
in each case to such qualification as may be set forth in the Offering
Memorandum and except to the extent that any such revocation or termination
would not have a Material Adverse Effect; and, except as described in the
Offering Memorandum, none of the Permits contains any restriction that is
materially burdensome to the Issuer or any Subsidiary.
(w) Neither the Issuer nor any Subsidiary has violated any foreign,
federal, state or local law or regulation relating to the protection of human
health and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws") or any provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the
rules and regulations promulgated thereunder, except for such violations which,
singly or in the aggregate, would not reasonably be expected to have a Material
Adverse Effect.
(x) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any Permit, any related constraints on operating activities and any
potential liabilities to third parties) which would, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(y) Each of the Issuer and the Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access
to assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(z) Neither the Issuer nor any Subsidiary has, nor, to the Issuer's
knowledge, has any employee or agent of the Issuer or any Subsidiary made any
payment of funds of the Issuer or any Subsidiary or received or retained any
funds in violation of any law, rule or regulation.
(aa) Except as disclosed in the Offering Memorandum, each of the
Issuer and the Subsidiaries has filed all tax returns required to be filed,
which returns are true and correct in all material respects, and neither the
Issuer nor any Subsidiary is in default in the payment of any taxes which were
payable pursuant to said returns or any assessments with
<PAGE>
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respect thereto, except where the failure to file such returns and make such
payments would not reasonably be expected to have a Material Adverse Effect.
(bb) Except as contemplated pursuant to the Registration Rights
Agreement, there are no contracts, agreements or understandings between the
Issuer and any person granting such person the right to require the Issuer to
file a registration statement under the Act with respect to any securities of
the Issuer or to require the Issuer to include such securities with the Series
A Notes registered pursuant to any Shelf Registration Statement. Except as
described in or contemplated by the Offering Memorandum, there are no
outstanding options, warrants or other rights calling for the issuance of, and
there are no commitments, plans or arrangements to issue, any equity interests
of the Issuer or any security convertible into or exchangeable or exercisable
for equity interests of the Issuer.
(cc) Each of the Issuer and the Subsidiaries owns or possesses all
patents, trademarks, trademark registration, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Offering Memorandum as being owned by it or necessary
for the conduct of its businesses, and the Issuer is not aware of any claim to
the contrary or any challenge by any other person to the rights of either the
Issuer or any Subsidiary with respect to the foregoing.
(dd) Each of the Issuer and the Subsidiaries is insured by insurers
of recognized financial responsibility against such losses and risks and in
such amount as are prudent and customary in the businesses in which they are
engaged. Neither Issuer nor any Subsidiary (i) has received notice from any
insurer or agent of such insurer that substantial capital improvements or other
material expenditures shall have to be made in order to continue such insurance
or (ii) has any reason to believe that it shall not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers at a cost that would not have a Material
Adverse Effect.
(ee) Except as disclosed in the Offering Memorandum, no relationship,
direct or indirect, exists between or among the Issuer or any Subsidiary, on
the one hand, and the directors, officers, stockholders, customers or suppliers
of the Issuer or any Subsidiary, on the other hand, which would be required by
the Act to be described in the Offering Memorandum if the Offering Memorandum
were a prospectus included in a registration statement on Form S-1 filed with
the Commission.
(ff) Neither the Issuer nor any Subsidiary is and, upon sale of the
Series A Notes to be issued and sold thereby in accordance herewith and the
application of the net proceeds to the Issuer of such sale as described in the
Offering Memorandum under the caption "Use of Proceeds," shall not be an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
<PAGE>
-17-
(gg) No "nationally recognized statistical rating organization" as
such term is defined for purposes of Rule 436(g)(2) under the Act (i) has
imposed (or has informed the Issuer that it is considering imposing) any
condition (financial or otherwise) on the Issuer's retaining any rating
assigned to the Issuer or any securities of the Issuer or (ii) has indicated to
the Issuer that it is considering (a) the downgrading, suspension or withdrawal
of, or any review for a possible change that does not indicate the direction of
the possible change in, any rating so assigned or (b) any change in the outlook
for any rating of the Issuer or any securities of the Issuer.
(hh) When the Series A Notes are issued and delivered pursuant to
this Agreement, such Series A Notes shall not be of the same class (within the
meaning of Rule 144A(d)(3) under the Act) as any security of the Issuer that is
listed on a national securities exchange registered under Section 6 of the
Exchange Act or that is quoted in a United States automated interdealer
quotation system.
(ii) Neither the Issuer nor any affiliate (as defined in Rule 501(b)
of Regulation D ("Regulation D") under the Act) of the Issuer has directly, or
through any agent (provided that no representation is made as to the Initial
Purchasers or any person acting on their behalf), sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any security (as
defined in the Act) which is or shall be integrated with the offering and sale
of the Series A Notes in a manner that would require the registration of the
Series A Notes under the Act.
(jj) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all of the information specified in, and
meeting the requirements of, Rule 144(d)(4) under the Act.
(kk) Assuming (i) that the representations and warranties in Section
3 hereof are true, (ii) the Initial Purchasers comply with the covenants set
forth in Section 3 hereof and (iii) that each person to whom the Initial
Purchasers offer, sell or deliver the Series A Notes is a QIB or a person other
than a U.S. person outside the United States in reliance on Regulation S under
the Act, the purchase and sale of the Series A Notes pursuant hereto (including
the Initial Purchasers' proposed offering of the Series A Notes on the terms
and in the manner set forth in the Offering Memorandum and Section 3 hereof) is
exempt from the registration requirements of the Act.
(ll) The execution and delivery of this Agreement, the other
Operative Documents and the sale of the Series A Notes to the Initial
Purchasers or by the Initial Purchasers to Eligible Purchasers shall not
involve any prohibited transaction within the meaning of Section 406 of ERISA
or Section 4975 of the Code. The representation made by the Issuer in the
preceding sentence is made in reliance upon and subject to the accuracy of, and
in compliance
<PAGE>
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with, the representations and covenants made or deemed made by the Eligible
Purchasers as set forth in the Offering Memorandum under the section entitled
"Notice to Investors."
(mm) No form of general solicitation or general advertising (as
defined in Regulation D under the Act) was used by the Issuer or any of its
representatives (other than the Initial Purchasers, as to whom the Issuer makes
no representation) in connection with the offer and sale of the Series A Notes
contemplated hereby, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
(nn) Neither the Issuer nor any of its affiliates or any person
acting on its behalf (other than the Initial Purchasers, as to whom the Issuer
makes no representation) has engaged or shall engage in any directed selling
efforts within the meaning of Regulation S under the Act with respect to the
Series A Notes.
(oo) The sale of the Series A Notes pursuant to Regulation S is not
part of a plan or scheme to evade the registration provisions of the Act.
(pp) The Issuer and its affiliates and all persons acting on their
behalf (other than the Initial Purchasers, as to whom the Issuer makes no
representation) have complied with and shall comply with the offering
restrictions requirements of Regulation S in connection with the offering of
the Series A Notes outside the United States and, in connection therewith, the
Offering Memorandum shall contain the disclosure required by Rule 902(h).
(qq) The Series A Notes offered and sold in reliance on Regulation S
have been and shall be offered and sold only in offshore transactions and such
securities have been and shall be represented upon issuance by a temporary
global security that may not be exchanged for definitive securities until the
expiration of the 40-day restricted period referred to in Rule 903(c)(3) of the
Act and only upon certification of beneficial ownership of such Series A Notes
by non-U.S. persons or U.S persons who purchased such Series A Notes in
transactions that were exempt from the registration requirements of the Act.
(rr) Each certificate signed by any officer of the Issuer delivered
to the Initial Purchasers or counsel to the Initial Purchasers shall be deemed
to be a representation and warranty by the Issuer to the Initial Purchasers as
to the matters covered thereby.
The Issuer acknowledges that the Initial Purchasers and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to Sections
8(c), 8(d) and 8(e)
<PAGE>
-19-
hereof, counsel to the Issuer and counsel to the Initial Purchasers, will
rely upon the accuracy and truth of the foregoing representations and hereby
consent to such reliance.
7. INDEMNIFICATION AND CONTRIBUTION. (a) The Issuer agrees to
indemnify, and hold harmless each Initial Purchaser and each person, if any,
who controls such Initial Purchaser within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, from and against any and all losses,
claims, damages, liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary Offering
Memorandum, the Offering Memorandum or the Proxy Statement or in any amendment
or supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses (i) arise out of or are based
upon any untrue statement or omission or alleged untrue statement or omission
which has been made therein or omitted therefrom in reliance upon and in
conformity with the information furnished in writing to the Issuer by or on
behalf of the Initial Purchasers expressly for use in connection therewith or
(ii) with respect to the Preliminary Offering Memorandum, result from the fact
that an Initial Purchaser sold Series A Notes to a person to whom there was not
sent or given, at or prior to the written confirmation of such sale, a copy of
the Offering Memorandum, as amended or supplemented, if the Issuer shall have
previously furnished copies thereof to such Initial Purchaser in accordance
with this Agreement, and the Issuer proves that the Offering Memorandum, as
amended or supplemented, would have corrected such untrue statement or
omission. The foregoing indemnity agreement shall be in addition to any
liability which the Issuer may otherwise have.
(b) If any action, suit or proceeding shall be brought against any
Initial Purchaser or any person controlling such Initial Purchaser in respect
of which indemnity may be sought against the Issuer, such Initial Purchaser or
such controlling person shall promptly notify the parties against whom
indemnification is being sought (the "indemnifying parties"), and such
indemnifying parties shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses. Each Initial Purchaser or any
such controlling person shall have the right to employ separate counsel in any
such action, suit or proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such Initial
Purchaser or such controlling person unless (i) the indemnifying parties have
agreed in writing to pay such fees and expenses, (ii) the indemnifying parties
have failed to assume the defense and employ counsel, or (iii) the named
parties to any such action, suit or proceeding (including any impleaded
parties) include such Initial Purchaser or such controlling person and the
indemnifying parties and such Initial Purchaser or such controlling person
shall have been advised by its counsel that representation of such indemnified
party and any indemnifying party by the same counsel would be inappropriate
under applicable
<PAGE>
-20-
standards of professional conduct (whether or not such representation by the
same counsel has been proposed) due to actual or potential differing
interests between them (in which case the indemnifying party shall not have
the right to assume the defense of such action, suit or proceeding on behalf
of such Initial Purchaser or such controlling person). It is understood,
however, that the indemnifying parties shall, in connection with any one such
action, suit or proceeding or separate but substantially similar or related
actions, suits or proceedings in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the reasonable fees
and expenses of only one separate firm of attorneys (in addition to any local
counsel) at any time for the Initial Purchasers and controlling persons,
which firm shall be designated in writing by Salomon Brothers Inc, and that
all such fees and expenses shall be reimbursed on a monthly basis. Each
indemnified party, as a condition to the indemnity agreement contained in
paragraph (a) above, shall use all commercially reasonable efforts to
cooperate with the indemnifying party in the investigation and defense of any
such action, suit, proceeding or claim. The indemnifying parties shall not
be liable for any settlement of any such action, suit or proceeding effected
without their written consent (which consent shall not unreasonably be
withheld), but if settled with such written consent, or if there be a final
judgment for the plaintiff in any such action, suit or proceeding, the
indemnifying parties agree to indemnify and hold harmless the Initial
Purchasers and any such controlling person, to the extent provided in
paragraph (a), from and against any loss, claim, damage, liability or expense
by reason of such settlement or judgment.
(c) Each of the Initial Purchasers, severally and not jointly,
agrees to indemnify and hold harmless the Issuer, its directors and officers
and any person who controls the Issuer within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act to the same extent as the indemnity from
the Issuer to the Initial Purchasers set forth in paragraph (a) hereof, but
only with respect to information furnished in writing by or on behalf of such
Initial Purchaser expressly for use in the Preliminary Offering Memorandum or
the Offering Memorandum or any amendment or supplement thereto. If any action,
suit or proceeding shall be brought against the Issuer, its directors or
officers or any such controlling person based on the Preliminary Offering
Memorandum or the Offering Memorandum, or any amendment or supplement thereto,
and in respect of which indemnity may be sought against such Initial Purchaser
pursuant to this paragraph (c), such Initial Purchaser shall have the rights
and duties given to the Issuer by paragraph (b) above (except that if the
Issuer shall have assumed the defense thereof such Initial Purchaser shall not
be required to do so, but may employ separate counsel therein and participate
in the defense thereof, but the fees and expenses of such counsel shall be at
such Initial Purchaser's expense), and the Issuer, its directors and officers,
and any such controlling person shall have the rights and duties given to such
Initial Purchaser by paragraph (b) above. The foregoing indemnity agreement
shall be in addition to any liability which such Initial Purchaser may
otherwise have.
<PAGE>
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(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Issuer on the one hand and the Initial Purchasers on the other hand from
the offering of the Series A Notes, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Issuer on the one hand and the Initial
Purchasers on the other in connection with the statements or omissions that
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Issuer on the one hand and the Initial Purchasers on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Issuer to the total underwriting
discounts and commissions received by the Initial Purchasers, in each case as
set forth in the table on the cover page of the Offering Memorandum. The
relative fault of the Issuer on the one hand and the Initial Purchasers on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Issuer on the one hand or by the Initial Purchasers on the other hand and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
(e) The Issuer and the Initial Purchasers agree that it would not be
just and equitable if contribution pursuant to this Section 7 were determined
by a pro rata allocation (even if the Initial Purchasers were treated as one
entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in paragraph (d)
above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities and expenses referred to in paragraph (d)
above shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 7, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price of the Series A Notes purchased by it and distributed to
Eligible Purchasers exceeds the amount of any damages which such Initial
Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to
contribute pursuant to this
<PAGE>
-22-
Section 7(e) are several in proportion to the respective amount of Series A
Notes purchased by each of the Initial Purchasers hereunder and not joint.
(f) Any losses, claims, damages, liabilities or expenses for which
an indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Issuer set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Initial Purchaser or any person
controlling such Initial Purchaser, the Issuer, its directors or officers or
any person controlling the Company, (ii) acceptance of any Series A Notes and
payment therefor hereunder, and (iii) any termination of this Agreement. A
successor to any Initial Purchaser or any person controlling any Initial
Purchaser, or to the Issuer, its directors or officers or any person
controlling the Issuer, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 7.
(g) No indemnifying party shall, without the prior written consent
of the indemnified party (which consent shall not be unreasonably withheld),
effect any settlement of any pending or threatened action, suit or proceeding
in respect of which any indemnified party is a party and indemnity could have
been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such action, suit or proceeding.
8. CONDITIONS OF THE INITIAL PURCHASERS' OBLIGATIONS. The
obligations of the Initial Purchasers to purchase the Series A Notes hereunder
are subject to the following conditions:
(a) At the time of execution of this Agreement and on the Closing
Date, no order or decree preventing the use of the Offering Memorandum or any
amendment or supplement thereto, or any order asserting that the transactions
contemplated by this Agreement are subject to the registration requirements of
the Act shall have been issued and no proceedings for that purpose shall have
been commenced or shall be pending or, to the knowledge of the Issuer, be
contemplated. No stop order suspending the sale of the Series A Notes in any
jurisdiction designated by the Initial Purchasers shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending or,
to the knowledge of the Issuer, shall be contemplated.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any material change, or any development involving a
prospective material change, in or affecting the condition (financial or
other), business, properties, net worth, or
<PAGE>
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results of operations of the Issuer and the Subsidiaries, taken as a whole,
not contemplated by the Offering Memorandum, which in the opinion of the
Initial Purchasers, would materially adversely affect the market for the
Series A Notes, or (ii) any event or development relating to or involving any
officer or director of the Issuer or any Subsidiary which makes any statement
made in the Offering Memorandum untrue or which, in the opinion of the Issuer
and its counsel or the Initial Purchasers and their counsel, requires the
making of any addition to or change in the Offering Memorandum in order to
state a material fact required by any law to be stated therein or necessary
in order to make the statements therein not misleading, if amending or
supplementing the Offering Memorandum to reflect such event or development
would, in the opinion of the Initial Purchasers, materially adversely affect
the market for the Series A Notes.
(c) The Initial Purchasers shall have received on the Closing Date
an opinion of Mayer, Brown & Platt, counsel for the Company, dated the Closing
Date and addressed to the Initial Purchasers, to the effect that:
(i) Each of the Issuer and the Subsidiaries is validly existing and
in good standing under the laws of its jurisdiction or organization
with full power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering
Memorandum (and any amendment or supplement thereto);
(ii) The Issuer has the requisite power and authority to enter into
this Agreement and the Registration Rights Agreement and to issue,
sell and deliver the Series A Notes to be sold by it to the Initial
Purchasers as provided herein. This Agreement and the Registration
Rights Agreement have been duly authorized, executed and delivered by
the Issuer and are the valid, legal and binding agreements of the
Issuer, enforceable against the Issuer in accordance with their
terms, except (A) as enforcement of rights to indemnity and
contribution hereunder and thereunder may be limited by Federal or
state securities laws or principles of public policy and (B) subject
to the qualification that the enforceability of each Issuer's
obligations hereunder and thereunder may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights generally and
by general equitable principles;
(iii) The Indenture has been duly and validly authorized,
executed and delivered by the Issuer and, assuming due authorization,
execution and delivery by the Trustee, is a valid and binding
agreement of the Issuer, enforceable in accordance with its terms,
subject to the qualification that the enforceability of the Issuer's
obligations thereunder may be limited by bankruptcy, fraudulent
<PAGE>
-24-
conveyance, insolvency, reorganization, moratorium, and other laws
relating to or affecting creditors' rights generally and by general
equitable principles. No qualification of the Indenture under the
TIA is required in connection with the offer and sale of the Series A
Notes contemplated hereby or in connection with the Exempt Resales;
(iv) The Series A Notes have been duly and validly authorized by the
Issuer and when executed by the Issuer in accordance with the
Indenture and, assuming due authentication of the Series A Notes by
the Trustee, upon delivery to the Initial Purchasers against payment
therefor in accordance with the terms hereof, will have been validly
issued and delivered, and will constitute valid and binding
obligations of the Issuer entitled to the benefits of the Indenture,
subject to the qualification that the enforceability of the Issuer's
obligations thereunder may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other laws
relating to or affecting creditors' rights generally and by general
equitable principles;
(v) Neither the offer, sale or delivery of the Series A Notes, the
execution, delivery or performance by the Issuer of this Agreement,
the Registration Rights Agreement or the Indenture, compliance by the
Issuer with the provisions hereof or thereof or consummation by the
Issuer of the transactions contemplated hereby or thereby (including
the Recapitalization) conflicts or will conflict with or constitutes
or will constitute a breach of, or a default under, in any material
respect, the certificate or articles of incorporation, the
certificate of limited partnership, the bylaws, the partnership
agreement or other organizational documents of the Issuer or any
Subsidiary, as applicable, or any material agreement, indenture,
lease or other instrument listed on Exhibit B hereto (collectively,
the "Material Agreements"), or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Issuer or any Subsidiary pursuant to the terms of any
Material Agreement nor will any such action (assuming compliance with
all applicable state securities and Blue Sky laws and, in the case of
the Registration Rights Agreement and the transactions contemplated
thereby, the Act, the Exchange Act and the TIA) result in any
violation in any material respect of any existing New York, Illinois,
Delaware corporate or federal law, regulation, ruling, judgment,
injunction, order or decree known to such counsel, applicable to the
Issuer or any Subsidiary or any of their respective properties;
(vi) Other than any state securities and Blue Sky laws, no consent,
approval, authorization or other order of, or registration or filing
with, any court, regulatory body, administrative agency or other
<PAGE>
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governmental body, agency, or official is required on the part of the
Issuer for the valid issuance and sale of the Series A Notes to the
Initial Purchasers as contemplated by this Agreement;
(vii) The Issuer and the Subsidiaries have full corporate power
and authority to own their respective properties and to conduct their
respective businesses as now being conducted as described in the
Offering Memorandum;
(viii) The statements in the Offering Memorandum, insofar as they
are descriptions of contracts, agreements or other legal documents,
or refer to statements of law or legal conclusions, are accurate in
all material respects and present fairly the information required to
be shown;
(ix) When the Series A Notes are issued and delivered pursuant to
this Agreement, such Series A Notes will not be of the same class
(within the meaning of Rule 144A(d)(3) under the Act) as any equity
interests of the Issuer that are listed on a national securities
exchange registered under Section 6 of the Exchange Act or that are
quoted in a United States automated interdealer quotation system;
(x) No registration of the Series A Notes under the Act is required
for the sale of the Series A Notes to the Initial Purchasers as
contemplated in this Agreement or for the Exempt Resales (assuming
(A) that any Eligible Purchaser who buys the Series A Notes in the
Exempt Resales is a QIB or a person other than a U.S. person outside
the United States in reliance on Regulation S and (B) the accuracy of
the Initial Purchasers' representations and those of the Issuer in
this Agreement regarding the absence of general solicitation in
connection with the Exempt Resales);
(xi) The Recapitalization has been duly authorized by the Company;
and
(xii) Although such counsel have not undertaken, except as
otherwise indicated in their opinion, to determine independently, and
do not assume any responsibility for, the accuracy, completeness or
fairness of the statements in the Offering Memorandum, such counsel
have participated in the preparation of the Offering Memorandum,
including review and discussion of the contents thereof, and nothing
has come to the attention of such counsel that has caused them to
believe that the Offering Memorandum, as of its date and as of the
Closing Date, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
<PAGE>
-26-
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or that any
amendment or supplement to the Offering Memorandum, as of its
respective date, and as of the Closing Date, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading (it being understood that such counsel need
express no opinion with respect to the financial statements and the
notes thereto and the schedules and other financial and statistical
data included or incorporated by reference in the Offering Memorandum
and information furnished in writing by or on behalf of the Initial
Purchasers).
(d) The Initial Purchasers shall have received on the Closing Date
an opinion of Donald F. Wiseman, Esq., General Counsel of the Company, dated
the Closing Date and addressed to the Initial Purchasers to the effect that:
(i) Each of the Issuer and the Subsidiaries is duly organized under
the laws of its jurisdiction of organization.
(ii) Each of the Issuer and the Subsidiaries is duly registered and
qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the
conduct of its business requires such registration or qualification,
except where the failure so to register or qualify or to be in good
standing does not have a Material Adverse Effect;
(iii) Upon consummation of the Recapitalization, all outstanding
equity interests of the Issuer will have been duly authorized and
validly issued, are fully paid and nonassessable, and not subject to
any preemptive or similar rights;
(iv) Neither Issuer nor any Subsidiary is in violation in any
material respect of its certificate or articles of incorporation,
certificate of limited partnership, bylaws, partnership or other
organizational documents, as applicable, or to the knowledge of such
counsel after reasonable inquiry, is in default in any material
respect in the performance of any material obligation, agreement or
condition contained in any bond, debenture, note or other evidence of
indebtedness or in any material agreement, indenture, lease or other
instrument to which such Issuer or Subsidiary is a party or by which
the Issuer or a Subsidiary or any of their respective properties may
be bound, except as disclosed in the Offering Memorandum and except
<PAGE>
-27-
to the extent that any such violation or default would not reasonably
be expected to have a Material Adverse Effect; and
(v) To the knowledge of such counsel, the Issuer and the
Subsidiaries have all Permits that are required under applicable law
to own their respective properties and to conduct their respective
businesses as now being conducted as described in the Offering
Memorandum except where the failure to have any such Permits would
not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect
(vi) To the knowledge of such counsel, (A) other than as described or
contemplated in the Offering Memorandum (or any amendment or
supplement thereto), there are no legal or governmental proceedings
pending or threatened against the Issuer or a Subsidiary, or to which
the Issuer or a Subsidiary or any of their properties are subject,
which are not disclosed in the Offering Memorandum and which, if
adversely decided, are reasonably likely to cause a Material Adverse
Effect or materially affect the issuance of the Series A Notes or the
consummation of the transactions contemplated by this Agreement and
(B) there are no agreements, contracts, indentures, leases or other
instruments material to the Issuer and the Subsidiaries, taken as a
whole, that are not described in the Offering Memorandum (or any
amendment or supplement thereto);
(vii) To the knowledge of such counsel, neither the Issuer nor
any Subsidiary is in violation of any law, ordinance, administrative
or governmental rule or regulation applicable to the Issuer or a
Subsidiary or of any decree of any court or governmental agency or
body having jurisdiction over the Issuer or a Subsidiary, except to
the extent that any such violation would not reasonably be expected
to have a Material Adverse Effect.
(viii) Except as described in the Offering Memorandum, such
counsel does not know of any person who has the right, contractual or
otherwise, to cause the Issuer to sell or otherwise issue to them, or
to permit them to underwrite the sale of, any of the Series A Notes
or the right, as a result of the consummation of the transactions
contemplated by this Agreement, to require registration under the Act
of any equity interests of the Issuer;
(ix) To the knowledge of such counsel and except as has previously
been obtained, the Issuer is not required to obtain stockholder
consent for the issuance or offering of the Series A Notes;
<PAGE>
-28-
(x) Nothing has come to the attention of such counsel that has
caused him to believe that, as of the date of the Offering Memorandum
or as of the Closing Date, the Offering Memorandum (except for the
financial statements and the notes thereto and other financial and
statistical data included therein and information furnished in
writing by or on behalf of the Initial Purchasers, as to which such
counsel need not express any belief) contains any untrue statement of
a material fact or omits to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(e) The Initial Purchasers shall have received on the Closing Date
an opinion of Cahill Gordon & Reindel, counsel for the Initial Purchasers,
dated the Closing Date, and addressed to the Initial Purchasers, in form and
substance reasonably satisfactory to the Initial Purchasers.
(f) The Initial Purchasers shall have received letters addressed to
the Initial Purchasers, and dated the date hereof and the Closing Date from
Arthur Andersen, LLP, independent certified public accountants, substantially
in the forms heretofore approved by the Initial Purchasers.
(g) (i) There shall not have been any change in the capital stock of
the Issuer or any Subsidiary nor any material increase in the short-term or
long-term debt of the Issuer or any Subsidiary (other than in the ordinary
course of business) from that set forth or contemplated in the Offering
Memorandum (or any amendment or supplement thereto); (ii) there shall not have
been, since the respective dates as of which information is given in the
Offering Memorandum (or any amendment or supplement thereto), except as may
otherwise be stated in the Offering Memorandum (or any amendment or supplement
thereto), any material adverse change in the condition (financial or other),
business, prospects, properties, net worth or results of operations of the
Issuer and the Subsidiaries taken as a whole; (iii) the Issuer and the
Subsidiaries shall not have any liabilities or obligations, direct or
contingent (whether or not in the ordinary course of business), that are
material to the Issuer, taken as a whole, other than those reflected in the
Offering Memorandum (or any amendment or supplement thereto) (including,
without limitation, in connection with the Recapitalization and the
Registration Rights Agreement); and (iv) all the representations and warranties
of the Issuer contained in this Agreement shall be true and correct in all
material respects on and as of the date hereof and on and as of the Closing
Date as if made on and as of the Closing Date, and the Initial Purchasers shall
have received a certificate, dated the Closing Date and signed by the chief
executive officer and the chief accounting officer of the Issuer (or such other
officers as are acceptable to the Initial Purchasers), to the effect set forth
in this Section 8(g) and in Section 8(h) hereof.
<PAGE>
-29-
(h) The Issuer shall not have failed at or prior to the Closing Date
to have performed or complied with any of its agreements herein contained and
required to be performed or complied with by it hereunder at or prior to the
Closing Date.
(i) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of Rule
436(g) under the Act, that (i) it is downgrading its rating assigned to any
class of securities of the Issuer or any Subsidiary, or (ii) it is reviewing
its ratings assigned to any class of securities of the Issuer with a view to
possible downgrading, or with negative implications, or direction not
determined.
(j) The Series A Notes shall have been approved for trading on
PORTAL.
(k) The Recapitalization shall be consummated concurrently with the
Closing.
(l) [Intentionally Omitted.]
(m) The Issuer shall have furnished or caused to be furnished to the
Initial Purchasers such further certificates and documents as the Initial
Purchasers shall have reasonably requested.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Initial Purchasers and counsel for
the Initial Purchasers.
9. EXPENSES. The Issuer agrees to pay the following costs and
expenses and all other costs and expenses incident to the performance by it of
its obligations hereunder: (i) the preparation, printing or reproduction of
the Offering Memorandum (including financial statements thereto), and each
amendment or supplement to any of them, this Agreement and the Indenture; (ii)
the printing (or reproduction) and delivery (including postage, air freight
charges and charges for counting and packaging) of such copies of the Offering
Memorandum, the Preliminary Offering Memorandum, and all amendments or
supplements to any of them as may be reasonably requested for use in connection
with the offering and sale of the Series A Notes; (iii) the preparation,
printing, authentication, issuance and delivery of certificates for the Series
A Notes, including any stamp taxes in connection with the original issuance and
sale of the Series A Notes; (iv) the printing (or reproduction) and delivery of
this Agreement, the preliminary and supplemental Blue Sky Memoranda and all
other agreements or documents printed (or reproduced) and delivered in
connection with the offering of the Series A Notes; (v) the application for
quotation of the Notes on the PORTAL market; (vi) the qualification of the
Series A Notes for offer and sale under the securities or Blue Sky laws of the
several states as provided in Section 4(f) hereof (including the reasonable
fees, expenses
<PAGE>
-30-
and disbursements of counsel for the Initial Purchasers relating to the
preparation, printing or reproduction, and delivery of the preliminary and
supplemental Blue Sky Memoranda and such qualification); (vii) the
performance by the Issuer of its obligations under the Registration Rights
Agreement; and (viii) the fees and expenses of the Issuer's accountants and
the fees and expenses of counsel (including local and special counsel) for
the Issuer. The Issuer hereby agrees to pay in full on the Closing Date the
fees and expenses referred to in clause (vi) of this Section 9 by delivering
to counsel for the Initial Purchasers on such date a check payable to such
counsel in the requisite amount.
10. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective upon the execution and delivery hereof by all the parties hereto.
11. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchasers, without
liability on the part of the Initial Purchasers to the Issuer, by notice to the
Issuer, if prior to the Closing Date, (i) trading in securities generally on
the New York Stock Exchange shall have been suspended or materially limited,
(ii) a general moratorium on commercial banking activities in New York shall
have been declared, or (iii) there shall have occurred any outbreak or
escalation of hostilities, or other U.S. or international calamity, crisis or
change in political, financial or economic conditions, the effect of which on
the financial markets of the United States is such as to make it, in the
judgment of the Initial Purchasers, impracticable or inadvisable to commence or
continue the offering of the Series A Notes on the terms set forth on the cover
page of the Offering Memorandum or to enforce contracts for the resale of the
Series A Notes by the Initial Purchasers. Notice of such termination may be
given to the Issuer by telecopy or telephone and shall be subsequently
confirmed by letter.
12. INFORMATION FURNISHED by the Initial Purchasers. The statements
set forth in the stabilization legend on the inside front cover, the last
paragraph on the cover page and the statements in the first, second and third
paragraphs and the fifth sentence of the fourth paragraph under the caption
"Plan of Distribution" in the Preliminary Offering Memorandum and Offering
Memorandum, constitute the only information furnished by or on behalf of the
Initial Purchasers as such information is referred to in Sections 6(b), 7(a),
7(c), 8(c)(xii) and 8(d)(x) hereof.
13. MISCELLANEOUS. Except as otherwise provided in Sections 4, 10
and 11 hereof, notice given pursuant to any provision of this Agreement shall
be in writing and shall be delivered (i) if to the Issuer, at the office of the
Issuer at 6075 Poplar Avenue, Suite 800, Memphis, TN 38119-4709, Attention:
General Counsel, or (ii) if to the Initial Purchasers, to Salomon Brothers Inc,
Seven World Trade Center, New York, New York 10048, Attention: Manager,
Investment Banking Division.
<PAGE>
-31-
This Agreement has been and is made solely for the benefit of the
Initial Purchasers, the Issuer, its directors, its officers and the controlling
persons referred to in Section 7 hereof and their respective successors and
assigns, to the extent provided herein, and no other person shall acquire or
have any right under or by virtue of this Agreement. Neither the term
"successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from the Initial Purchasers of any of the Series A
Notes in its status as such purchaser.
14. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed within the State of New York
and without regard to the conflicts of law principles thereof.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
Please confirm that the foregoing correctly sets forth the agreement
between the Issuer and the Initial Purchasers.
Very truly yours,
THE RESTAURANT COMPANY
By:
--------------------------------
Name:
Title:
Confirmed as of the date first
above mentioned.
SALOMON BROTHERS INC
By:
-----------------------------
Name:
Title:
<PAGE>
-32-
BANCBOSTON SECURITIES INC.
By:
------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
A-1
<PAGE>
SCHEDULE I
NAME OF ISSUER
<TABLE>
<CAPTION>
Original Principal Amount
At Maturity
Initial Purchasers of Series A Notes
- ------------------ ---------------------------
<S> <C>
Salomon Brothers Inc $15,550,000
BancBoston Securities Inc. $15,550,000
Total $31,100,000
</TABLE>
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 06/02/1994
944099702 - 2074711
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TENNESSEE RESTAURANT COMPANY
Tennessee Restaurant Company, a corporation organized and existing under
and by virtue of the General Corporation Law of Delaware (the "Corporation")
DOES HEREBY CERTIFY:
FIRST, That the Board of Directors of said Corporation adopted
resolutions by Unanimous Written Consent setting forth a proposed amendment
of the Corporation's Certificate of Incorporation, declaring said amendment
to be advisable and calling a meeting of the stockholders of said corporation
for consideration of such amendment. The resolution setting forth the
proposed amendment declared it advisable to make the following amendment to
Article 1 of the Certificate of Incorporation of said Corporation:
1. The name of the Corporation is THE RESTAURANT COMPANY.
SECOND, That thereafter pursuant to resolution of its Board of
Directors, a special meeting of the stockholders of said Corporation was
called and in lieu of such meeting, the written consent of the stockholders
was obtained in accordance with Section 228(d) of Delaware Corporation Law in
which consent the necessary number of shares as required by statute and the
Corporation's By-Laws were voted in favor of the amendment.
THIRD, That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 of the General Corporation Law of
the State of Delaware.
FOURTH, That notice of the consent of the stockholders in lieu of a
meeting adopting the amendment to the Certificate of Incorporation was sent
to all stockholders of the Corporation who did not consent in writing to such
amendment.
IN WITNESS HEREOF, said Corporation has caused this Certificate to be
signed by Donald N. Smith, Chairman of the Board of Directors, and attested
by Larry W. Browne, its Secretary this 25th day of May, 1994.
By: /s/ Michael P. Donahoe
----------------------------------------
Michael P. Donahoe
Its: Vice President, Controller and Treasurer
ATTEST:
BY: /s/ Larry W. Browne
--------------------------
Larry W. Browne, Secretary
<PAGE>
BOOK 839 PAGE 507
FILED
JUL 26 1989
/s/ Unreadable
SECRETARY OF STATE
Unreadable
729207076
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TENNESSEE RESTAURANT COMPANY
Tennessee Restaurant Company, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation")
DOES HEREBY CERTIFY:
FIRST, That the Board of Directors of said Corporation, at a meeting
duly held, adopted a resolution proposing and declaring advisable the
following amendment to Article 4 of the Certificate of Incorporation of said
Corporation:
"4. The total number of shares of stock which the corporation
shall have authority to issue is one hundred thousand (100,000),
said shares to be common stock with par value of $.01 per
share."
SECOND, That thereafter pursuant to resolution of its Board of
Directors, a special meeting of the Stockholders of said Corporation was
called and held at which meeting the necessary number of shares as required
by statute were voted in favor of the amendment.
THIRD, That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
signed by Donald N. Smith, Chairman of the Board of Directors, and attested
by Larry W. Browne, its Secretary this third day of May, 1989.
BY: /s/ Donald N. Smith
---------------------------------------
Donald N. Smith
ITS: Chairman of the Board of Directors
ATTEST: RECEIVED FOR RECORD
BY: /s/ Larry W. Browne JUL 28 1989
------------------------------------
Larry W. Browne, Secretary William M. Honey, Recorder
289IL
<PAGE>
F I L E D
MAR 18 1986
/s/ Unreadable
SECRETARY OF STATE
CERTIFICATE OF CHANGE OF REGISTERED AGENT
AND
REGISTERED OFFICE
* * * * *
TENNESSEE RESTAURANT COMPANY, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
The present registered agent of the corporation is United States
Corporation Company and the present registered office of the corporation is
in the county of Kent
The Board of Directors of Tennessee Restaurant Company adopted the
following resolution on the 5th day of February, 1986.
Resolved, that the registered office of United States Corporation
Company, 306 South State Street in the City of Dover, in the state of
Delaware be and it hereby is changed to Corporation Trust Center, 1209
Orange Street, in the City of Wilmington, County of New Castle, and the
authorization of the present registered agent of this corporation be and
the same is hereby withdrawn, and THE CORPORATION TRUST COMPANY, shall be
and is hereby constituted and appointed the registered agent of this
corporation at the address of its registered office.
IN WITNESS WHEREOF, Tennessee Restaurant Company has caused this
statement to be signed by John Lambert, its Executive Vice President and
attested by Larry W. Browne, its Secretary this 5th day of February, 1986.
By /s/ John Lambert
------------------------
Executive Vice President
ATTEST:
By /s/ Larry W. Browne
-------------------
Secretary
<PAGE>
Unreadable
CERTIFICATE OF CHANGE OF ADDRESS OF
REGISTERED OFFICE AND OF REGISTERED AGENT
PURSUANT TO SECTION 134 OF TITLE 8 OF THE DELAWARE CODE
To: DEPARTMENT OF STATE F I L E D
Division of Corporations
Townsend Building FEB 14 1986 4:30
Federal Street
Dover, Delaware 19903 Unreadable
SECRETARY OF STATE
Pursuant to the provisions of Section 134 of Title 8 of the Delaware
Code, the undersigned Agent for service of process, in order to change the
address of the registered office of the corporations for which it is
registered agent, hereby certifies that:
1. The name of the agent is United States Corporation Company.
2. The address of the old registered office was 306 South State Street,
Dover, Delaware 19901.
3. The address to which the registered office is to be changed is 229
South State Street, Dover, Delaware 19901. The new address will be effective
on February 18th, 1986.
4. The names of the corporations represented by said agent are set
forth on the list annexed to this certificate and made a part hereof by
reference.
<PAGE>
IN WITNESS WHEREOF, said agent has caused this certificate to be signed
on its behalf by its Vice President and Secretary this 13th day of February,
1986.
UNITED STATES CORPORATION COMPANY
/s/ Dennis E. Howarth
----------------------------------
Dennis E. Howarth
Vice President
ATTEST:
/s/ Grant Dawson
- ----------------
Grant Dawson
Secretary
<PAGE>
F I L E
OCT 31 1985
9 AM
/s/ Unreadable
SECRETARY OF STATE
BOOK S 94 PAGE 181
CERTIFICATE OF INCORPORATION
OF
TENNESSEE RESTAURANT COMPANY
1. The name of the corporation is TENNESSEE RESTAURANT COMPANY.
2. The address of its registered office in the State of Delaware is 306
South State Street in the City of Dover, County of Kent. The name of its
registered agent at such address is United States Corporation Company.
3. The nature of the business or purpose to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is one million (1,000,000), said shares to be common stock
with par value of $.01 per share.
5. The name and mailing address of the incorporator is as follows:
Susan M. Prevost
United States Corporation Company
33 North LaSalle Street
Chicago, Illinois 60602
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to make, alter or
repeal the by-laws of the corporation.
8. Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the corporation may be
kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the board of directors or in the by-laws of the corporation. Elections of
directors need not be by written ballot unless the by-laws of the corporation
shall so provide.
10/30/85/000E0870/MT-6
<PAGE>
BOOK S 94 PAGE 182
9. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation, in the manner
now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, do make this certificate, hereby declaring and
certifying that this is my act and deed and the facts herein stated are true,
and accordingly have hereunto set my hand this 31st day of October, 1985.
/s/ Susan M. Prevost
--------------------
Susan M. Prevost
10/30/85/000E0870/MT-6 -2-
<PAGE>
EXHIBIT 3.2
BYLAWS OF
THE RESTAURANT COMPANY
AMENDED AS OF FEBRUARY 3, 1998
SECTION 1
OFFICES
SECTION 1.1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
SECTION 1.2. The corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors
("Board") may from time to time determine or the business of the corporation
may require.
SECTION 2
STOCKHOLDERS
SECTION 2.1. All meetings of stockholders shall be held at such place
either within or without the State of Delaware as shall be designated from
time to time by the Board, including without limitation, the corporation's
principal office in Memphis, Tennessee.
SECTION 2.2. Annual meetings of stockholders shall be held at such date
and time as shall be designated from time to time by the Board and stated in
the notice of the meeting, at which time the stockholders shall elect a Board
and transact such other business as may properly be brought before the
meeting.
SECTION 2.3. Written notice of the annual meeting of the stockholders
stating the place, date and hour of such meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting.
SECTION 2.4. Special meetings of the stockholders for any purpose or
purposes may be called by the Board and shall be called by the chief
executive officer or secretary at the request in writing of any holder of
five (5) percent or more of the issued and outstanding shares of common stock
of the corporation, par value $.01 (the "Common Stock"). Such request shall
state the purpose or purposes of the proposed meeting.
<PAGE>
SECTION 2.5. Written notice of a special meeting of stockholders stating
the place, date and hour of the meeting and the purpose or purposes for which
the meeting is called shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting to each stockholder entitled
to vote at such meeting.
SECTION 2.6. The holders of a majority of the issued and outstanding stock
of the corporation, present in person and/or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction
of business, except as otherwise provided by statute. If, however, such
quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person
and/or represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting of the
time and place to which such meeting is adjourned, until a quorum shall be
present and/or represented. At such adjourned meeting at which a quorum shall
be present and/or represented any business may be transacted which might have
been transacted at the meeting as originally notified. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the meeting.
SECTION 2.7. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person
and/or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of
statute, of the Certificate of Incorporation, or of these Bylaws, a different
vote is required in which case the express provision shall govern.
SECTION 2.8. Until the date, if any, on which Stage Three (as defined in
Section 3.1 hereof) commences, the affirmative vote of seventy-five (75)
percent of the issued and outstanding Common Stock shall be required for any
of the following "Significant Stockholder Actions"; provided, however, that
if any of the following actions is required to be taken in order to enable
the corporation to exercise the Primary Option (as defined in Section 3.1
hereof) in accordance with and subject to the Stockholders Agreement (as
defined in Section 3.1 hereof), including without limitation Section 3.8
thereof, or to purchase shares of Common Stock pursuant to any option or
obligation set forth in the
2
<PAGE>
Stockholders Agreement, then such action shall not require the affirmative
vote of the stockholder whose shares of Common Stock are being purchased, and
the required affirmative vote, as set forth above, will be reduced by the
percentage of shares issued and outstanding Common Stock that such selling
stockholder is entitled to vote:
(a) the amendment or repeal of the corporation's Certificate of
Incorporation or Bylaws or the adoption of a new or restated
Certificate of Incorporation or new Bylaws;
(b) any merger or consolidation to which the corporation or any
subsidiary of the corporation is a constituent corporation;
(c) any sale, lease, or exchange of all or substantially all of the
property and assets of the corporation; and
(d) dissolution or liquidation of the corporation.
SECTION 2.9. Each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the stock having
voting power held by such stockholder, but no proxy shall be voted after
three years from its date unless the proxy provides for a longer period.
SECTION 3
DIRECTORS
SECTION 3.1. At all times the Board shall be composed of three directors.
The three stages referred to in these Bylaws are defined as follows:
(a) Stage One - the period of time beginning the date of the original
adoption hereof and continuing until the earlier to commence of
Stage Two or Stage Three;
(b) Stage Two - in the event the Primary Option (as herein after
defined) is exercised, the period of time beginning with the
closing under the Primary Option and continuing until the
termination of the Stockholders Agreement (as hereinafter defined);
and
3
<PAGE>
(c) Stage Three - the period of time beginning on the date the Primary
Option expires without being exercised and continuing until the
termination of the Stockholders Agreement.
"Primary Option" shall have the same meaning given it in the Stockholders
Agreement dated the 21st day of November, 1985 by and among the corporation,
Holiday Inns, Inc., Bass Investment Limited Partnership, Donald N. Smith, Leon
Irons, and John P. Lambert (the "Stockholders Agreement").
Each director elected shall hold office until such director's successor is
elected and qualified or such director's earlier resignation, removal or
death. Directors need not be stockholders. Unless otherwise agreed by the
stockholders, any vacancy in the Board shall be filled by the directors
remaining in office.
SECTION 3.2. Any director may resign at any time and such resignation may be
made contingent upon the occurrence of a future event. Such resignation shall
be made in writing and shall take effect at the later of the date designated
in the written resignation and the time of its receipt by the chief executive
officer or the secretary of the corporation. The acceptance of a resignation
shall not be necessary to make it effective.
SECTION 3.3. The business of the corporation shall be managed by or under
the direction of the Board, which may exercise all powers of the corporation
and do all lawful acts and things as are not by statute, by the Certificate
of Incorporation, by these Bylaws, or by written agreement among the
stockholders of the corporation directed or required to be exercised or done
by the stockholders.
SECTION 3.4. The Board may hold meetings, both regular and special, either
within or without the State of Delaware, including without limitation at the
corporation's principal office in Memphis, Tennessee.
SECTION 3.5. The first meeting of each newly elected Board shall be held at
such time and place as shall be fixed by the stockholders at the annual
meeting, and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event of the failure of the stockholders to
fix the time and place of such first meeting of the newly elected Board, or
in the
4
<PAGE>
event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of
the Board.
SECTION 3.6. Regular meetings of the Board may be held without notice at
such time and at such place as shall from time to time be determined by the
Board.
SECTION 3.7. Special meetings of the Board may be called by the chief
executive officer on three (3) business days' notice to each director.
Special meetings shall be called on the written request of any director on
three (3) business days' notice to each other director.
SECTION 3.8. At the meetings of the Board, a majority of the directors shall
constitute a quorum for the transaction of business and, except as may be
otherwise provided by statute, by the Certificate of Incorporation, by these
Bylaws, or by the Stockholders Agreement, the vote of two directors present
at any meeting at which there is a quorum shall constitute the act of the
Board. If a quorum shall not be present at any meeting of the Board, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be
present.
SECTION 3.9. (a) Until the date, if any, on which Stage Three commences, the
following; "Significant Director Actions" shall require the unanimous
approval of all three members of the Board (unless the Board has unanimously
delegated authority with respect to any such actions to a committee of the
Board in accordance with Section 3.12 hereof) in order to constitute binding
and effective acts of the Board and the corporation; provided, however, that
if any of the following actions is required to be taken in order to enable
the corporation to exercise the Primary Option in accordance with and subject
to the Stockholders Agreement, including without limitation Section 3.8
thereof, or to purchase shares of Common Stock pursuant to any option or
obligation set forth in the Stockholders Agreement, then such action shall
not require the approval of the director designated by the stockholder whose
shares of Common Stock are being purchased:
(i) the adoption of any plan or agreement for the dissolution of
liquidation of the corporation;
5
<PAGE>
(ii) the adoption of any plan or agreement for any merger or
consolidation to which the corporation or any subsidiary of the
corporation is a constituent corporation;
(iii) any sale, lease, or exchange of all or substantially all of the
property and assets of the corporation;
(iv) the amendment or repeal of the corporation's Certificate of
Incorporation or Bylaws or the adoption of a new or restated
Certificate of Incorporation or new Bylaws;
(v) the issuance of any shares of the corporation's capital stock, or
any options, warrants, or rights to acquire shares of the
corporation's capital stock, or any instrument convertible into
shares of the corporation's capital stock;
(vi) the declaration or payment by the corporation of any dividend,
whether payable in cash, in shares of capital stock, or otherwise;
(vii) the purchase or redemption by the corporation of any of its shares
of capital stock except in accordance with the provisions of the
Primary Option or otherwise in accordance with the Stockholders
Agreement;
(viii) the establishment of any committee of the Board or the repeal or
amendment of any resolution establishing a committee of the Board;
(ix) the filing with the Securities and Exchange Commission of any
registration statement of the corporation for a public offering of
any shares of the corporation's capital stock;
(x) the entering into of any transaction in which any stockholder has a
direct or indirect interest other than as a stockholder of the
corporation, except such transactions as are contemplated in the
Stockholders Agreement, the Master Agreement, dated November 21,
1985, by and among the
6
<PAGE>
corporation, certain of the corporation's stockholders and
Perkins Restaurants, Inc. ("Perkins"), the Term Loan
Agreement by and among the corporation, Perkins and Bass
Investment Limited Partnership ("Bass"), dated November 21,
1985 ("Term Loan Agreement"), or the Registration Rights
Agreement, dated November 21, 1985, by and between the
corporation and Bass;
(xi) the undertaking of any Capital Transaction, as defined in
subsection (b) below, not included in a Capital Transaction
Budget; provided, however, that (A) in the event Donald N.
Smith for any reason ceases to be the chief executive
officer of the corporation, then, during Stage One, Capital
Transactions aggregating up to $3,000,000 per year (from
sources other than the Term Loan Agreement) shall require
only the approval of the Director(s) of the Corporation
designated by the holder(s) of the Class H Stock, as defined
in the Stockholders Agreement, (B) the incurrence of any
liability for borrowed money under the Term Loan Agreement
shall require the affirmative vote of only two directors
provided (except in connection with the exercise of the
Primary Option) one of such directors approving the
transaction is a director designated by the holder(s) of the
Class H Stock, as defined in the Stockholders Agreement, and
(C) the incurrence of any subordinated liability for
borrowed money up to $50,000,000 on terms at least as
favorable to the obliger as the terms under the Term Loan
Agreement with respect to interest rate and repayment shall
require the affirmative vote of only two directors provided
one of such directors approving the transaction is a
director designated by the holder(s) of the Class B Stock as
defined in the Stockholders Agreement; and
(xii) the adoption of a Capital Transaction Budget, as provided
below in subsection (b).
(b) For the purposes of these Bylaws, the term "Capital Transaction"
shall mean the incurring of or commitment to incur any capital expense or
capital obligation or the undertaking of or commitment to undertake any
transaction involving the acquisition
7
<PAGE>
or disposition of a capital asset, including, without limitation, (i) the
acquisition or disposition of the capital assets or common stock of any
business or company, (ii) the incurrence of any liability for borrowed money
(other than as provided in Section 3.9(a)(ix) above), (iii) the making of any
guaranty, whether direct or indirect (other than the endorsement in the
ordinary course of business of negotiable instruments for deposit or
collection), (iv) the entering into as lessee of any capitalized lease, (v)
the purchase or development of new restaurants, and (vi) the remodeling of
existing restaurants or installation of bakery facilities. Notwithstanding
the above, the incurrence of an expense or obligation relating solely to (x)
the maintenance, repair or replacement of a capital asset or (y) the exercise
of the Primary Option or any other option or obligation of the corporation to
purchase shares of Common Stock pursuant to the Stockholders Agreement, or
the undertaking or commitment to undertake of any transaction necessary to
enable the corporation to close the purchase of Common Stock thereunder,
shall not constitute a "Capital Transaction".
Until the date, if any, on which Stage Three commences, at the beginning
of each fiscal year of the corporation there shall be submitted to the Board
by the chief executive officer a proposed budget for Capital Transactions
during such year (the "Capital Transaction Budget"). The adoption of a
Capital Transaction Budget shall require unanimous approval of all three
members of the Board. Any expenditure during a fiscal year properly the
subject of a Capital Transaction Budget for that fiscal year but not included
in any Capital Transaction Budget for that year shall be made only with the
unanimous approval of all three members of the Board. The Board may adopt
such other budget(s) as it deems advisable.
SECTION 3.10. Any action required or permitted to be taken at any meeting of
the Board or any committee thereof may be taken without a meeting, if all
members of the Board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings
of the Board or committee.
SECTION 3.11. Members of the Board may participate in a meeting of the Board
by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at
the meeting.
8
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SECTION 3.12. The Board may, by resolution adopted by the unanimous
affirmative vote of all three members, appoint one or more of its members to
constitute one or more committees and such committees shall have such powers
and duties (including without limitation the power to take Significant
Director Actions without further approval of the Board) as the full Board
shall unanimously prescribe, as such powers and duties may be limited by the
Delaware General Corporation Law.
SECTION 4
NOTICES
SECTION 4.1. Whenever, under the provisions of the applicable statutes or
of the Certificate of Incorporation or of these Bylaws, notice is required to
be given to any director or stockholder, personal notice is not required; any
notice shall be given in writing either in person, by air courier service, or
by mail addressed to such director or stockholder at his address as it
appears on the records of the corporation, with postage thereon prepaid if
sent by air courier service or mailed, and such notice shall be deemed to be
given when handed to such director or stockholder, one (1) business day after
being delivered to an air courier service, or two (2) business days after
being deposited in the United States mail.
SECTION 4.2. Whenever any notice is required to be given under the
provisions of applicable statutes or of the Certificate of Incorporation or
of these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein,
shall be deemed equivalent thereto. Attendance of a person at a meeting shall
constitute waiver of notice of such meeting, except when the person attends
the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders or directors
needs to be specified in any written waiver of notice.
SECTION 5
OFFICERS
SECTION 5.1. The officers of the corporation shall be a chairman, a chief
executive officer, one or more vice presidents, a
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secretary and a treasurer. The chairman and chief executive officer shall be
elected by the stockholders. The vice president or vice presidents,
secretary, and treasurer, shall be elected by the Board. The Board may also
elect one or more assistant secretaries and assistant treasurers. Any number
of offices may be held by the same person.
SECTION 5.2. The stockholders at the annual meeting shall elect the
chairman and chief executive officer. The Board at its first meeting after
each annual meeting of stockholders shall elect one or more vice presidents,
a secretary and a treasurer.
SECTION 5.3. The Board may elect such other officers and agents as it shall
deem necessary, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time
to time by the Board.
SECTION 5.4. The salaries of all officers of the corporation shall be fixed
by the Board, except that the stockholders shall fix the salaries of the
chairman and the chief executive officer.
SECTION 5.5. Each officer of the corporation shall hold office until his
successor is chosen and qualifies, or until his earlier resignation, removal
or death. Any officer elected by the Board may be removed at any time by the
Board. Any officer elected by the stockholders may be removed at any time by
the stockholders. Any vacancy occurring in any office of the corporation
shall be filled by the Board, except that the stockholders shall fill any
vacancy in the office of the chairman or of the chief executive officer.
SECTION 5.6. The chairman shall preside, when present, at each meeting of
the Board and shall perform such other duties and have such other powers as
the Board may from time to time prescribe.
SECTION 5.7. The chief executive officer of the corporation shall preside
at all meetings of the stockholders and, in the absence of the chairman, at
all meetings of the Board, and shall have general and active management of
the business of the corporation consistent with the Certificate of
Incorporation and these Bylaws, including the hiring and firing of employees
other than officers, determination of menus, franchise operations, marketing
and day-to-day management of the corporation's business. The chief executive
officer shall see that all orders and resolutions of the Board are carried
into effect. He shall execute bonds, mortgages and other contracts requiring
a seal, under the
10
<PAGE>
seal of the corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board to some other officer or
agent of the corporation.
SECTION 5.8. In the absence of the chief executive officer or in the event
of his inability or refusal to act, the vice president (or, in the event that
there is more than one vice president, the vice presidents in the order
designated by the Board or in the absence of any designation then in the
order of their election) shall perform the duties of the chief executive
officer and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the chief executive officer. The vice presidents
shall perform such other duties and have such other powers as the Board may
from time to time prescribe.
SECTION 5.9. The secretary shall attend to the recording of all the
proceedings of the meetings of the stockholders and of the Board in a book to
be kept for that purpose. He shall give, or cause to be given, notice of all
meetings of the stockholders and shall perform such other duties as may be
prescribed by the Board or chief executive officer, under whose supervision
he shall be. He shall have custody of the corporate seal of the corporation
and he, or an assistant secretary, shall have authority to affix the same to
any instrument requiring it and when so affixed, it may be attested by his
signature or by the signature of such assistant secretary. The Board may give
general authority to any other officer to affix the seal of the corporation
and to attest the affixing by his signature.
SECTION 5.10. The asssistant secretary or, if there be more than one, the
assistant secretaries in the order determined by the Board (or, if there be
no such determination, then in the order of their election) shall, in the
absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary.
SECTION 5.11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
monies and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board. He shall
disburse such funds of the corporation as may be ordered by the Board, taking
proper vouchers for such disbursements, and shall render to the chief
executive officer and the Board, at its regular meetings
11
<PAGE>
or when the Board so requires, an account of all his transactions as
treasurer and of the financial condition of the corporation.
SECTION 5.12. The assistant treasurer or, if there shall be more than one,
the assistant treasurers in the order determined by the Board (or, if there be
no such determination, then in the order of their election) shall, in the
absence of the treasurer or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the treasurer.
SECTION 5.13. In addition to the foregoing enumerated duties and powers, the
several officers of the corporation shall perform such other duties and
exercise such further powers as may be provided in these Bylaws or as the
Board may, from time to time, determine or as may be delegated to them by any
superior officer.
SECTION 6
CERTIFICATES OF STOCK AND OTHER STOCKHOLDER MATTERS
SECTION 6.1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by the
chief executive officer or a vice president and by the treasurer or the
secretary of the corporation, certifying the number and the particular class
of shares owned by him or it in the corporation.
SECTION 6.2. The Board may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock
to be lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the Board may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or certificates, or his legal representative,
to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to
the certificate alleged to have been lost, stolen or destroyed.
SECTION 6.3. Upon surrender to the corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succesion, assignment
or authority to transfer, including evidence satisfactory to the corporation
that all of the terms of the Stockholders Agreement have been satisfied, it
shall be the duty of
12
<PAGE>
the corporation to issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
SECTION 6.4. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board may fix, in advance, a record date, which shall not
be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided however, that the Board may fix a new record date for the adjourned
meeting.
SECTION 6.5. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends and other distributions, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to, or interest in, such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware or by the Stockholders Agreement.
SECTION 7
GENERAL PROVISIONS
SECTION 7.1. Dividends may be declared by the Board at any regular or
special meeting, pursuant to law and in accordance with the voting
requirements stated in these Bylaws. Dividends may be paid in cash, in
property, or in shares of the corporation's capital stock.
Section 7.2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
Board from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for repairing or maintaining any
property of the corporation, or for such other purpose as the Board may
determine promotes the interests of the corporation, and the Board may modify
or abolish any such reserve in the manner in which it was created.
13
<PAGE>
SECTION 7.3. All checks or other orders for the payment of money and notes
of the corporation shall be signed by such officer or officers or such other
person or persons as the Board may from time to time designate.
SECTION 7.4. The fiscal year of the corporation shall be fixed by
resolution of the Board.
SECTION 7.5. The corporate seal shall be circular in form and shall have
inscribed thereon the name of the corporation, the year of its organization
and the words "Corporate Seal, Delaware". The seal may be used by causing it
or a facsimile thereof to be impressed or affixed or reproduced.
SECTION 7.6. In the event of any conflict between these Bylaws and the
provisions of the Stockholders Agreement, the provisions of the Stockholders
Agreement shall prevail.
SECTION 7.7. As provided in Section 220 of the General Corporation Law of
Delaware, or any successor provision, the corporation shall make available to
the stockholders the books and records of the corporation, including without
limitation, periodic financial statements of the corporation.
SECTION 8
INDEMNIFICATION
SECTION 8.1. The corporation shall indemnify its directors, officers and
employees serving at the request of the corporation (including subsidiaries
of the corporation), partnership, joint venture, trust or other enterprise,
to the fullest extent permitted by the General Corporation Law, as the same
exists or may be hereafter amended (but, in the case of any such amendment,
only to the extent that such amendment permits the corporation to provide
broader indemnification rights than said law permitted the corporation prior
to such amendment).
SECTION 9
SECTION 9.1. Subject to the provisions of Sections 2.8 and 3.9(a) hereof,
these Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the stockholders or by the Board.
14
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THE RESTAURANT COMPANY
Issuer
__________________
SERIES A AND SERIES B
11 1/4% SENIOR DISCOUNT NOTES DUE 2008
__________________
INDENTURE
Dated as of May 18
__________________
STATE STREET BANK AND TRUST COMPANY
Trustee
__________________
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C>
310(a)(1).................................. 7.10
(a)(2).................................. 7.10
(a)(3).................................. N.A.
(a)(4).................................. N.A.
(a)(5).................................. 7.10
(i)(b).................................. 7.10
(ii)(c)................................. N.A.
311(a)..................................... 7.11
(b)..................................... 7.11
(iii)(c)................................ N.A.
312(a)..................................... 2.05
(b)..................................... 10.03
(iv)(c)................................. 10.03
313(a)..................................... 7.06
(b)(2).................................. 7.07
(v)(c).................................. 7.06; 10.02
(vi)(d)................................. 7.06
314(a)..................................... 4.03; 10.02
(c)(1).................................. 10.04
(c)(2).................................. 10.04
(c)(3).................................. N.A.
(vii)(e)................................ 10.05
(f)..................................... NA
315(a)..................................... 7.01
(b)..................................... 7.05, 10.02
(A)(c).................................. 7.01
(d)..................................... 7.01
(e)..................................... 6.11
316(a)(last sentence)...................... 2.09
(a)(1)(A)............................... 6.05
(a)(1)(B)............................... 6.04
(a)(2).................................. N.A.
(b)..................................... 6.07
(B)(c).................................. 2.12
317(a)(1).................................. 6.08
(a)(2).................................. 6.09
(b)..................................... 2.04
318(a)..................................... 10.01
(b)..................................... N.A.
(c)..................................... 10.01
</TABLE>
_____________________________
N.A. means Not Applicable
* This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C>
SECTION 1.01. DEFINITIONS........................................... 1
SECTION 1.02. OTHER DEFINITIONS..................................... 15
SECTION 1.03. .................................................... 16
SECTION 1.04. RULES OF CONSTRUCTION................................. 16
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING....................................... 17
SECTION 2.02. EXECUTION AND AUTHENTICATION.......................... 18
SECTION 2.03. REGISTRAR AND PAYING AGENT............................ 18
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST................... 18
SECTION 2.05. HOLDER LISTS.......................................... 19
SECTION 2.06. TRANSFER AND EXCHANGE................................. 19
SECTION 2.07. REPLACEMENT NOTES..................................... 30
SECTION 2.08. OUTSTANDING NOTES..................................... 30
SECTION 2.09. TREASURY NOTES........................................ 30
SECTION 2.10. TEMPORARY NOTES....................................... 31
SECTION 2.11. CANCELLATION.......................................... 31
SECTION 2.12. DEFAULTED INTEREST.................................... 31
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.................................... 31
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED..................... 31
SECTION 3.03. NOTICE OF REDEMPTION.................................. 32
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION........................ 33
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE........................... 33
SECTION 3.06. NOTES REDEEMED IN PART................................ 33
SECTION 3.07. OPTIONAL REDEMPTION................................... 33
SECTION 3.08. MANDATORY REDEMPTION.................................. 34
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS... 34
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES...................................... 36
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Page
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SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY....................... 36
SECTION 4.03. REPORTS............................................... 36
SECTION 4.04. COMPLIANCE CERTIFICATE................................ 37
SECTION 4.05. TAXES................................................. 37
SECTION 4.06. STAY, EXTENSION AND USURY LAWS........................ 38
SECTION 4.07. RESTRICTED PAYMENTS................................... 38
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTION AFFECTING
SUBSIDIARIES.......................................... 40
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
PREFERRED STOCK....................................... 40
SECTION 4.10. ASSET SALES........................................... 42
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.......................... 44
SECTION 4.12. LIENS................................................. 44
SECTION 4.13. CORPORATE EXISTENCE................................... 44
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL............ 44
SECTION 4.15. [INTENTIONALLY OMITTED]............................... 45
SECTION 4.16. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS......... 45
SECTION 4.17. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF
WHOLLY-OWNED RESTRICTED SUBSIDIARIES.................. 46
SECTION 4.18. LINE OF BUSINESS...................................... 46
SECTION 4.19. PAYMENTS FOR CONSENT.................................. 46
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.............. 46
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED..................... 47
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT..................................... 47
SECTION 6.02. ACCELERATION.......................................... 49
SECTION 6.03. OTHER REMEDIES........................................ 49
SECTION 6.04. WAIVER OF PAST DEFAULTS............................... 49
SECTION 6.05. CONTROL BY MAJORITY................................... 50
SECTION 6.06. LIMITATION ON SUITS................................... 50
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT......... 50
SECTION 6.08. COLLECTION SUIT BY TRUSTEE............................ 50
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM...................... 51
SECTION 6.10. PRIORITIES............................................ 51
SECTION 6.11. UNDERTAKING FOR COSTS................................. 51
ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE..................................... 52
-ii-
<PAGE>
Page
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SECTION 7.02. RIGHTS OF TRUSTEE..................................... 53
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.......................... 53
SECTION 7.04. TRUSTEE'S DISCLAIMER.................................. 53
SECTION 7.05. NOTICE OF DEFAULTS.................................... 53
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES............ 54
SECTION 7.07. COMPENSATION AND INDEMNITY............................ 54
SECTION 7.08. REPLACEMENT OF TRUSTEE................................ 55
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC...................... 55
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION......................... 56
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER...... 56
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT
DEFEASANCE............................................ 56
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE........................ 56
SECTION 8.03. COVENANT DEFEASANCE................................... 57
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE............ 57
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD
IN TRUST; OTHER MISCELLANEOUS PROVISIONS.............. 58
SECTION 8.06. REPAYMENT TO ISSUER................................... 59
SECTION 8.07. REINSTATEMENT......................................... 59
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES................... 59
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES...................... 60
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT................... 61
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS..................... 61
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES...................... 61
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC....................... 62
ARTICLE 10.
MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT CONTROLS.......................... 62
SECTION 10.02. NOTICES............................................... 62
SECTION 10.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS
OF NOTES.............................................. 63
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.... 63
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION......... 63
SECTION 10.06. RULES BY TRUSTEE AND AGENTS........................... 64
SECTION 10.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS,
EMPLOYEES AND STOCKHOLDERS............................ 64
SECTION 10.08. GOVERNING LAW......................................... 64
-iii-
<PAGE>
Page
-----
SECTION 10.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS......... 64
SECTION 10.10. SUCCESSORS............................................ 64
SECTION 10.11. SEVERABILITY.......................................... 64
SECTION 10.12. COUNTERPART ORIGINALS................................. 65
SECTION 10.13. TABLE OF CONTENTS, HEADINGS, ETC...................... 66
EXHIBITS
Exhibit A-1 FORM OF GLOBAL NOTE
Exhibit A-2 FORM OF REGULATIONS S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL
ACCREDITED INVESTOR
</TABLE>
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<PAGE>
INDENTURE dated as of May 18, 1998 between The Restaurant Company, a
Delaware corporation (the "Company" or the "Issuer"), and State Street Bank and
Trust Company, as trustee (the "Trustee").
The Issuer and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 11 1/4%
Series A Senior Discount Notes due 2008 (the "Series A Notes") and the
11 1/4% Series B Senior Discount Notes due 2008 (the "Series B Notes" and,
together with the Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A GLOBAL NOTE" means a global note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary
or its nominee that will be issued in a denomination equal to the outstanding
Principal Amount at Maturity of the Notes sold in reliance on Rule 144A.
"1997 NOTES" means the Notes issued pursuant to the 1997 Notes
Indenture.
"1997 NOTES INDENTURE" means the Indenture dated as of December 22,
1997 by and between Perkins Family Restaurants, L.P. and Perkins Finance Corp.
and State Street Bank and Trust Company, as trustee.
"ACCRETED VALUE" as of any date (the "Specified Date") means, with
respect to each $1,000 Original Principal Amount at Maturity of Notes:
(i) if the Specified Date is one of the following dates (each a
"Semi-Annual Accrual Date"), the amount set forth opposite such date
below:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRETED
ACCRUAL DATE VALUE
------------- ---------
<S> <C>
Issue Date $579.07
November 15, 1998 611.10
May 15, 1999 645.47
November 15, 1999 681.78
May 15, 2000 720.13
November 15, 2000 760.64
May 15, 2001 803.43
November 15, 2001 848.62
May 15, 2002 896.35
November 15, 2002 946.77
May 15, 2003 $1,000.00
</TABLE>
(ii) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the sum of (a) the Accreted Value for the Semi-Annual Accrual Date
immediately preceding the Specified Date and (b) an amount equal to the
<PAGE>
product of (x) the Accreted Value for the immediately following Semi-
Annual Accrual Date less the Accreted Value for the immediately preceding
Semi-Annual Accrual Date and (y) a fraction, the numerator of which is the
number of days actually elapsed from the immediately preceding Semi-Annual
Accrual Date to the Specified Date and the denominator of which is 180;
and
(iii) if the Specified Date is after May 15, 2003 and all accrued but
unpaid interest has been paid pursuant to the provisions of Section 3.08,
$579.07;
PROVIDED, HOWEVER, that if the Company makes the Cash Interest Election, the
Accreted Value shall be, and remain through the Stated Maturity of the Notes,
the Accreted Value as of the Semi-Annual Accrual Date on which the Cash
Interest Election is made; PROVIDED, FURTHER, HOWEVER, that if the redemption
payment required by Section 3.08 is made, the Accreted Value shall be as set
forth in clause (iii) above.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any assets acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly
or indirectly controlling, or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED, that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"APPLICABLE PROCEDURES" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer
or exchange.
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP)
of the obligation of the lessee for net rental payments during the remaining
term of the lease included in such sale and leaseback transaction (including
any period for which such lease has been extended or may, at the option of the
lessor, be extended).
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"BOARD OF DIRECTORS" means (i) with respect to any Person that is a
corporation, the board of directors of such Person or any authorized committee
of such board of directors, and (ii) with respect to any Person that is a
partnership or a limited liability company, the board of directors of the
general partner (or similar Person) of such Person or any authorized committee
of such board of directors.
"BUSINESS DAY" means any day other than a Legal Holiday.
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<PAGE>
"CAPITAL INTERESTS" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital
lease that would at such time be required to be capitalized on a balance sheet
in accordance with GAAP.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any lender party to the Existing Credit Facility or with any domestic
commercial bank having capital and surplus in excess of $500,000,000 and a
Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper having the highest rating obtainable from either Moody's
Investors Service, Inc. or Standard & Poor's Corporation and, in each case,
maturing within six months after the date of acquisition and (vi) money market
funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i)-(v) of this definition.
"CASH INTEREST ELECTION" means the election by the Company to begin
accruing cash interest on the Notes on any Semi-Annual Accrual Date prior to
May 15, 2003, which election shall be given by means of an Officers'
Certificate delivered to the Trustee (with notice to the Holders) on or prior
to such Semi-Annual Accrual Date.
"CEDEL" means Cedel Bank, S.A.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company and its Restricted
Subsidiaries, taken as a whole, to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act) other than a Permitted Holder, (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company,
(iii) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as defined
above), other than a Permitted Holder, becomes the "beneficial owner" (as such
term is defined in Rule l3d-3 and Rule 13d-5 under the Exchange Act), directly
or indirectly, of Capital Interests of the Company entitling the owners thereof
to 45% or more of the income or profits of the Company or (iv) the first day on
which a majority of the members of the Board of Directors of the Company are
not Continuing Directors.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" or "ISSUER" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
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<PAGE>
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an asset sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for federal, state, local and
foreign income taxes payable by such Person and its Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP plus (iii)
consolidated interest expense, net of interest income, of such Person and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred
in respect of letter of credit or bankers' acceptance financings, and net
payments (if any) pursuant to Hedging Obligations), to the extent that any such
expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period), minority interests in the earnings of PFR prior to December
22, 1997 and other non-cash expenses (excluding any such non-cash expense to
the extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a
prior period) of such Person and its Subsidiaries for such period to the extent
that such depreciation, amortization and other non-cash expenses were deducted
in computing such Consolidated Net Income, minus (v) noncash items increasing
such Consolidated Net Income for such period, in each case, on a consolidated
basis and determined in accordance with GAAP. Notwithstanding the foregoing,
the provision for taxes based on the income or profits of, and the depreciation
and amortization of, a Subsidiary of a Person shall be added to Consolidated
Net Income to compute Consolidated Cash Flow only to the extent (and in the
same proportion) that the Net Income of such Subsidiary was included in
calculating the Consolidated Net Income of such Person. In addition, if
Consolidated Cash Flow is being calculated for purposes of calculating the
Issuer Coverage Ratio for all purposes of this Indenture, the provision, for
taxes based on income or profits of, and the depreciation and amortization of,
a Subsidiary of a Person shall be added to Consolidation Net Income to compute
Consolidated Cash Flow only if a corresponding amount would be permitted at the
date of determination to be dividended or distributed to the Company by such
Subsidiary without prior approval, pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
government regulations applicable to that Subsidiary or its equityholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; PROVIDED that (i) the Net Income (but not loss) of any Person that
is not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly-Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded, (iii) the cumulative effect of a change in accounting
principles shall be excluded and (iv) the Net Income (but not loss) of any
Unrestricted Subsidiary shall be excluded to the extent not distributed to the
Company or one of its Restricted Subsidiaries. In calculating Consolidated Net
Income for purposes of calculating Consolidated Cash Flow for purposes of
calculating the Issuer Coverage Ratio for all purposes of this Indenture, the
net income of a Restricted Subsidiary shall be excluded to the extent that the
declaration of dividends or similar distributions by such Restricted Subsidiary
of that net income is not at the time permitted, directly or indirectly, by
reason of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Restricted
Subsidiary or its equityholders.
"CONSOLIDATED NET WORTH" means, (a) with respect to a partnership as
of any date, the capital accounts attributable to all common and preferred
partnership interests (other than Disqualified Interests) of such partnership
as of such date, determined on a consolidated basis in accordance with GAAP,
and (b) with respect to any other Person as of any date, the sum of (i) the
consolidated equity of the common stockholders
-4-
<PAGE>
of such Person and its consolidated Subsidiaries as of such date plus (ii)
the respective amounts reported on such Person's balance sheet as of such
date with respect to any series of preferred equity (other than Disqualified
Interests) that by its terms is not entitled to the payment of dividends
unless such dividends may be declared and paid only out of net earnings in
respect of the year of such declaration and payment, but only to the extent
of any cash received by such Person upon issuance of such preferred equity,
less (x) all write-ups (other than write-ups resulting from foreign currency
transactions and write-ups of tangible assets of a going concern business
made within 12 months after the acquisition of such business) subsequent to
the date of this Indenture in the book value of any asset owned by such
Person or a consolidated Subsidiary of such Person, (y) all investments as of
such date in unconsolidated Subsidiaries and in Persons that are not
Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determination in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture, (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election, or (iii) was nominated or ratified for election to such
Board of Directors by a Permitted Holder.
"CONTROL" has the meaning set forth in the definition of "Affiliate."
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of
the Trustee specified in Section 10.02 hereof or such other address as to which
the Trustee may give notice to the Issuer.
"CREDIT FACILITIES" means, with respect to the Company and the
Restricted Subsidiaries, one or more debt facilities (including, without
limitation, the Existing Credit Facility) or commercial paper facilities with
banks or other institutional lenders providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"CUSTODIAN" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"DEFAULT" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"DEFINITIVE NOTE" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A-1 hereto except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"DEPOSITARY" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"DISQUALIFIED INTEREST" means any Capital Interest that, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable, at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the
holder thereof, in whole or in part, on or prior to the date that is 91 days
after the date on which the Notes mature; PROVIDED, HOWEVER, that any Capital
Interests that would
-5-
<PAGE>
constitute Disqualified Interests solely because the holders thereof have the
right to require the Company to repurchase such Capital Interests upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Interests if the terms of such Capital Interests provide that
the Company may not repurchase or redeem any such Capital Interests pursuant
to such provisions unless such repurchase or redemption complies with the
provisions of Section 4.07 of this Indenture.
"EQUITY INTERESTS" means Capital Interests and all warrants, options
or other rights to acquire Capital Interests (but excluding any debt security
that is convertible into, or exchangeable for, Capital Interests).
"EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE NOTES" means the Notes issued in the Exchange Offer
pursuant to Section 2.06(f) hereof.
"EXCHANGE OFFER" has the meaning set forth in the Registration Rights
Agreement.
"EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in
the Registration Rights Agreement.
"EXISTING CREDIT FACILITY" means the Credit Agreement dated as of
December 22, 1997 among PFR, BankBoston, N.A., as agent, and the lenders party
thereto and any related notes, collateral documents, letters of credit and
guarantees, including any appendices, exhibits or schedules to any of the
foregoing (as the same may be in effect from time to time), in each case, as
such agreements may be amended, modified, supplemented or restated from time to
time (whether with the original agents and lenders or other agents or lenders
or otherwise, and whether provided under the original credit agreement or other
credit agreements or otherwise).
"EXISTING INDEBTEDNESS" means (i) Indebtedness under the 1997 Notes
in aggregate principal amount not to exceed $150.0 million (and any guarantees
thereof) and (ii) up to $15.0 million in aggregate principal amount of
Indebtedness of the Company (other than Indebtedness under the Existing Credit
Facility) in existence on the date of this Indenture.
"FIXED CHARGES" means, with respect to any person for any period, (a)
the sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred
in respect of letters of credit or bankers' acceptance financings, and net
payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest of such Person and its Restricted Subsidiaries that was capitalized
during such period, and (iii) any interest expense on Indebtedness of another
Person that is Guaranteed by such Person or one of its Restricted Subsidiaries
or secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv)
the product of (x) all dividend payments, whether or not in cash, on any series
of preferred equity of such Person or any of its Restricted Subsidiaries, times
(y) a fraction, the numerator of which is one and the denominator of which is
one minus the then current combined federal, state and local statutory tax rate
of such Person, expressed as a decimal, LESS (b) the
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<PAGE>
consolidated interest income of such Person and its Restricted Subsidiaries,
in each case, on a consolidated basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the referent Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees or redeems any Indebtedness (other than revolving credit borrowings)
or issues or redeems preferred equity subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated but prior
to the date on which the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred equity, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Company or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (ii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii)
the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall
be excluded, but only to the extent that the obligations giving rise to such
Fixed Charges will not be obligations of the referent Person or any of its
Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, as in effect from time to time.
"GLOBAL NOTES" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii), 2.06(d)(iii) or 2.06(f) hereof.
"GLOBAL NOTE LEGEND" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"GOVERNMENT SECURITIES" MEANS direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"GUARANTEE" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, by way of
pledge of assets or through letters of credit and reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"HOLDER" means a Person in whose name a Note is registered.
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<PAGE>
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable,
if and to the extent any of the foregoing (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all Indebtedness of others
secured by a Lien on any asset of such Person (whether or not such Indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any Indebtedness of any other Person. The amount
of any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness issued with original issue discount,
and (ii) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.
"INDENTURE" means this Indenture, as amended or supplemented from
time to time.
"INDIRECT PARTICIPANT" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act who are not also QIBs.
"INTEREST PAYMENT DATE" means each May 15 and November 15, commencing
on the earlier of November 15, 2003 or the next succeeding Semi-Annual Accrual
Date with respect to which the Cash Interest Election is made.
"INVESTMENTS" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of Section 4.07 of this
Indenture.
"ISSUER COVERAGE RATIO" means, with respect to the Issuer for any
period, the ratio of Consolidated Cash Flow of the Issuer for such period to
Issuer Fixed Charges for such period. In the event the Issuer incurs,
assumes, Guarantees or redeems any of its Indebtedness (other than revolving
credit borrowings) or issues or redeems preferred equity subsequent to the
commencement of the period for which the Issuer Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation
of the Issuer Coverage Ratio is made (the "ICR Calculation Date"), then the
Issuer Coverage Ratio shall be calculated giving pro forma effect to such
incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred equity, as if the same had occurred at
the beginning of the applicable four quarter period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that
have been made by the Issuer or any of its Restricted Subsidiaries, including
mergers and consolidations and including any related financing transactions,
during the four-quarter reference period or subsequent to such reference
period and on or prior to the ICR Calculation Date shall be deemed to have
occurred on the first day of the four quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated
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<PAGE>
without giving effect to clause (ii) of the proviso set forth in the
definition of Consolidated Net Income, (ii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with
GAAP, and operations or businesses disposed of prior to the ICR Calculation
Date, shall be excluded and (iii) the Issuer Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the ICR Calculation Date, shall
be excluded, but only to the extent that the obligations giving rise to such
Issuer Fixed Charges will not be obligations of the Issuer following the ICR
Calculation Date.
"ISSUER FIXED CHARGES" means, with respect to the Issuer for any
period, (a) the sum, without duplication, of (i) the unconsolidated interest
expense of the Issuer for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), (ii) the interest of the Issuer (on an unconsolidated
basis) that was capitalized during such period, (iii) any interest expense on
Indebtedness (other than Indebtedness under a Credit Facility) of another
Person that is Guaranteed by the Issuer or secured by a Lien on assets of the
Issuer (whether or not such Guarantee is called upon) and (iv) the product of
(a) all dividend payments, whether or not in cash, on any series of preferred
equity of the Issuer times (b) a fraction, the numerator of which is one and
the denominator of which is one minus the combined federal, state and local
statutory tax rate of the Issuer, expressed as a decimal LESS (b) the
unconsolidated interest income of the Issuer, in each case calculated in
accordance with GAAP.
"JACK ASTOR VEHICLE" means J.A. Joint Venture, LLC, a Delaware
limited liability company engaged solely in the business of creating, owning,
developing and operating Jack Astor's Bar and Grill restaurants.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, Hartford, Connecticut or at a place of
payment are authorized by law, regulation or executive order to remain closed.
If a payment date is a Legal Holiday at a place of payment, payment may be made
at that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue on such payment for the intervening period.
"LETTER OF TRANSMITTAL" means the letter of transmittal to be
prepared by the Issuer and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"LIQUIDATED DAMAGES" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"NET INCOME" means, with respect to any Person, for any period, the
net income (loss) of such Person, determined in accordance with GAAP and
before any reduction in respect of dividends on preferred equity interests,
excluding, however, to the extent included in calculating such Net Income:
(i) any gain (but not loss), together with any related provision for taxes on
such gain (but not loss), realized in connection with (a) any Asset Sale
(including, without limitation, dispositions pursuant to sale and leaseback
transactions), or (b) the disposition of any securities by such Person or any
of its Restricted Subsidiaries or the
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<PAGE>
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries, and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance
with GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender, and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company of any of its Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its Stated Maturity; and (iii) as to which the lenders have been
notified in writing that they will not have any recourse to the stock or assets
of the Company or any of its Restricted Subsidiaries.
"NON-U.S. PERSON" means a Person who is not a U.S. Person.
"NOTES" has the meaning assigned to it in the preamble to this
Indenture.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFERING" means the offering of the Notes by the Issuer.
"OFFICER" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary, any Assistant Secretary or any Vice-President of
such Person.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the
Issuer by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Sections 10.04 and 10.05 hereof.
"OPINION OF COUNSEL" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Sections
10.04 and 10.05 hereof. The counsel may be an employee of or counsel to the
Issuer, any Subsidiary of the Company or the Trustee.
"ORIGINAL PRINCIPAL AMOUNT AT MATURITY" means $31,100,000 in the
aggregate with respect to all of the Notes and, with respect to any Note, means
the Original Principal Amount at Maturity set forth on such Note.
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<PAGE>
"PARTICIPANT" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"PERMITTED BUSINESS" means the business of owning, operating and
franchising restaurants and other businesses that are ancillary or related
thereto.
"PERMITTED HOLDER" means (i) each of Donald N. Smith and The
Equitable Life Assurance Society of the United States and (ii) any Affiliate of
either Donald N. Smith and/or The Equitable Life Assurance Society of the
United States.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in
a Wholly-Owned Restricted Subsidiary of the Company (other than an Investment
in the Jack Astor Vehicle if it is subsequently to be declared an Unrestricted
Subsidiary); (b) any Investment in Cash Equivalents; (c) any Investment by the
Company or any Restricted Subsidiary of the Company in a Person, if as a result
of such Investment (i) such Person becomes a Wholly-Owned Restricted Subsidiary
of the Company that is engaged in a Permitted Business or (ii) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Wholly-Owned Restricted Subsidiary of the Company and that is engaged in a
Permitted Business; (d) any Investment made as a result of the receipt of non-
cash consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.10 of this Indenture; (e) any acquisition of assets
solely in exchange for the issuance of Equity Interests (other than
Disqualified Interests) of the Company; (f) additional Investments in the Jack
Astor Vehicle, either by way of capital contribution or loan to, or Guarantee
of Indebtedness of, the Jack Astor Vehicle; PROVIDED that the aggregate amount
of such capital contributions and loans, together with the aggregate principal
amount of any such Indebtedness that is so Guaranteed, does not exceed $10.0
million at any time outstanding (with each such Investment being measured as of
the date it was made and without giving effect to subsequent changes in value);
(g) any Investments in promissory notes acquired in a Permitted Non-Cash
Transaction, provided that not more than $5.0 million in aggregate principal
amount of such promissory notes remains outstanding after giving effect to such
Investment (excluding any such promissory notes outstanding on the date of this
Indenture); and (h) other Investments in any Person having an aggregate fair
market value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (h) since the date of the
Indenture, not to exceed $2.0 million.
"PERMITTED LIENS" means (i) Liens securing Indebtedness under Credit
Facilities that were permitted by the terms of the Indenture to be incurred;
(ii) Liens in favor of the Company; (iii) Liens on property of a Person
existing at the time such Person is merged into or consolidated with the
Company; provided that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other than
those of the Person merged into or consolidated with the Company; (iv) Liens on
property existing at the time of acquisition thereof by the Company, PROVIDED
that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (iv) of Section 4.09 of this Indenture
covering only the assets acquired with the proceeds of such Indebtedness; (vi)
Liens to secure additional Capital Lease Obligations that were permitted to be
incurred pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 of this Indenture covering only assets acquired
with the proceeds of such Indebtedness, up to an aggregate of $15.0 million in
principal amount at any one time outstanding; and (vii) Liens existing on the
date of the Indenture.
"PERMITTED NON-CASH TRANSACTION" means (i) any sale, lease or other
disposition of restaurants and related equipment for consideration consisting
of cash and/or promissory notes of the acquiror of such assets, provided that
not more than $5.0 million in aggregate principal amount of such promissory
notes
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<PAGE>
remains outstanding after giving effect to such transaction (excluding any
such promissory notes outstanding on the date of the Indenture) and (ii) any
sale, lease or other disposition of assets that are no longer used by the
Company or any of its Restricted Subsidiaries in a Permitted Business.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); PROVIDED that: (i) the principal
amount (or accreted value, if applicable) of such Permitted Refinancing
Indebtedness does not exceed the principal amount of (or accreted value, if
applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Notes, then the Permitted
Refinancing Indebtedness must have a final maturity date later than the final
maturity date of, and be subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either
by the Company or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization
or government or agency or political subdivision thereof (including any
subdivision or ongoing business of any such entity or substantially all of the
assets of any such entity, subdivision or business).
"PFR" means Perkins Family Restaurants, L.P.
"PRINCIPAL AMOUNT AT MATURITY" means, with respect to each $1,000
Original Principal Amount at Maturity of the Notes, (i) if no Cash Interest
Election has been made, $1,000, (ii) if the Cash Interest Election has been
made, the Accreted Value of such Notes on the Semi-Annual Accrual Date with
respect to which the Cash Interest Election was made or (iii) after giving
effect to the redemption contemplated by the Section 3.08, $579.07.
"PRIVATE PLACEMENT LEGEND" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"PRO RATA SHARE" means, with respect to any Indebtedness of the
Company not subordinated in right of payment to the Notes, on any date of
determination, a fraction, the numerator of which is the principal amount or
accreted value, as the case may be, of such Indebtedness and the denominator of
which is the aggregate accreted value and principal amount, as applicable, of
all Indebtedness of the Company not subordinated in right of payment to the
Notes (including the Accreted Value of the Notes on such date of
determination).
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of May 18, 1998, by and among the Issuer and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
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<PAGE>
"REGULATION S" means Regulation S promulgated under the Securities
Act.
"REGULATION S GLOBAL NOTE" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
"REGULATION S PERMANENT GLOBAL NOTE" means a permanent global Note in
the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding Principal Amount at Maturity of the Regulation S Temporary Global
Note upon expiration of the Restricted Period.
"REGULATION S TEMPORARY GLOBAL NOTE" means a temporary global Note in
the form of Exhibit A-2 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding Principal Amount at Maturity of the Notes initially sold in
reliance on Rule 903 of Regulation S.
"RESPONSIBLE OFFICER," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"RESTRICTED BROKER-DEALER" has the meaning set forth in the
Registration Rights Agreement.
"RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the
Private Placement Legend.
"RESTRICTED GLOBAL NOTE" means a Global Note bearing the Private
Placement Legend.
"RESTRICTED INVESTMENT" means any Investment other than a Permitted
Investment.
"RESTRICTED PERIOD" means the 40-day restricted period as defined in
Regulation S.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"RULE 144" means Rule 144 promulgated under the Securities Act.
"RULE 144A" means Rule 144A promulgated under the Securities Act.
"RULE 903" means Rule 903 promulgated under the Securities Act.
"RULE 904" means Rule 904 promulgated under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
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"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture.
"STATED MATURITY" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Interests entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes
that do not bear and are not required to bear the Private Placement Legend.
"UNRESTRICTED GLOBAL NOTE" means a permanent global Note in the form
of Exhibit A-1 attached hereto that bears the Global Note Legend and that has
the "Schedule of Exchanges of Interests in the Global Note" attached thereto,
and that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that is designated
by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; (c) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation (x) to subscribe for additional Equity Interests or (y)
to maintain or preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results; (d) has not
guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) has
at least one director on its board of directors that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries and has
at least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries, except that clauses (a)-(d)
shall not be applicable to the Jack Astor Vehicle. Any such designation by the
Board of Directors shall be evidenced to the Trustee by filing with the Trustee
a certified copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the provisions of Section 4.07
hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of
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such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
the Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the provisions of Section 4.09 hereof, the
Company shall be in default of Section 4.09 hereof). The Board of Directors
of the Company may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; PROVIDED that such designation shall be deemed to be
an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted
under the provisions of Section 4.09 of this Indenture, calculated on a pro
forma basis as if such designation had occurred at the beginning of the
four-quarter reference period, and (ii) no Default or Event of Default would
be in existence following such designation.
"U.S. PERSON" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"VOTING STOCK" of any Person as of any date means the Capital
Interests of such Person that is at the time entitled to vote in the election
of the Board of Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
principal amount of such Indebtedness.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Interests or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly-Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly-Owned
Restricted Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
DEFINED IN
TERM SECTION
----- -----------
<S> <C>
"Affiliate Transaction"................................... 4.11
"Asset Sale".............................................. 4.10
"Asset Sale Offer"........................................ 3.09
"Authentication Order".................................... 2.02
"Change of Control Offer"................................. 4.14
"Change of Control Payment"............................... 4.14
"Change of Control Payment Date".......................... 4.14
"Covenant Defeasance"..................................... 8.03
"Event of Default"........................................ 6.01
"Excess Proceeds"......................................... 4.10
"Incur"................................................... 4.09
"Legal Defeasance"........................................ 8.02
"Offer Amount"............................................ 3.09
"Offer Period"............................................ 3.09
"Paying Agent"............................................ 2.03
"Permitted Debt".......................................... 4.09
"Purchase Date"........................................... 3.09
</TABLE>
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DEFINED IN
TERM SECTION
----- -----------
"Registrar"............................................. 2.03
"Restricted Payments"................................... 4.07
SECTION 1.03.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes means the Issuer and any successor obligor
upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the
TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections
or rules adopted by the SEC from time to time.
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ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) GENERAL. The Notes shall be substantially in the form of
Exhibit A-1 or A-2 hereto. The Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Note shall be
dated the date of its authentication. The Notes shall be originally issued in
denominations of $1,000 Original Principal Amount at Maturity and integral
multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Issuer and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby. However, to the extent any
provision of any Note conflicts with the express provisions of this Indenture,
the provisions of this Indenture shall govern and be controlling.
(b) GLOBAL NOTES. Notes issued in global form shall be
substantially in the form of Exhibits A-1 or A-2 attached hereto (including the
Global Note Legend thereon and the "Schedule of Exchanges of Interests in the
Global Note" attached thereto). Notes issued in definitive form shall be
substantially in the form of Exhibit A-1 attached hereto (but without the
Global Note Legend thereon and without the "Schedule of Exchanges of Interests
in the Global Note" attached thereto). Each Global Note shall represent such
of the outstanding Notes as shall be specified therein and each shall provide
that it shall represent the aggregate Principal Amount at Maturity of
outstanding Notes from time to time endorsed thereon and that the aggregate
Principal Amount at Maturity of outstanding Notes represented thereby may from
time to time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the aggregate Principal Amount at Maturity of
outstanding Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) TEMPORARY GLOBAL NOTES. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of the Regulation S
Temporary Global Note, which shall be deposited on behalf of the purchasers of
the Notes represented thereby with the Trustee, at its New York office, as
custodian for the Depositary, and registered in the name of the Depositary or
the nominee of the Depositary for the accounts of designated agents holding on
behalf of Euroclear or Cedel, duly executed by the Issuer and authenticated by
the Trustee as hereinafter provided. The Restricted Period shall be terminated
upon the receipt by the Trustee of (i) a written certificate from the
Depositary, together with copies of certificates from Euroclear and Cedel
certifying that they have received certification of non-United States
beneficial ownership of 100% of the aggregate Principal Amount at Maturity of
the Regulation S Temporary Global Note (except to the extent of any beneficial
owners thereof who acquired an interest therein during the Restricted Period
pursuant to another exemption from registration under the Securities Act and
who will take delivery of a beneficial ownership interest in a 144A Global Note
bearing a Private Placement Legend, all as contemplated by Section 2.06(a)(ii)
hereof), and (ii) an Officers' Certificate from the Issuer. Following the
termination of the Restricted Period, beneficial interests in the Regulation S
Temporary Global Note shall be exchanged for beneficial interests in Regulation
S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously
with the authentication of Regulation S Permanent Global Notes, the Trustee
shall cancel the Regulation S Temporary Global Note. The aggregate Principal
Amount at Maturity of the Regulation S Temporary Global Note and the Regulation
S Permanent Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
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(d) EUROCLEAR AND CEDEL PROCEDURES APPLICABLE. The provisions of
the "Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Condition of Cedel Bank"
and "Customer Handbook" of Cedel shall be applicable to transfers of beneficial
interests in the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes that are held by Participants through Euroclear or
Cedel.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Issuer by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Issuer signed by an
Officer of the Issuer (an "Authentication Order"), authenticate Notes for
original issue up to the aggregate Original Principal Amount at Maturity stated
in paragraph 4 of the Notes. The aggregate Original Principal Amount at
Maturity of Notes outstanding at any time may not exceed such amount except as
provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Issuer to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Issuer.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Issuer shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent").
The Registrar shall keep a register of the Notes and of their transfer and
exchange. The Issuer may appoint one or more co-registrars and one or more
additional paying agents. The term "Registrar" includes any co-registrar and
the term "Paying Agent" includes any additional paying agent. The Issuer may
change any Paying Agent or Registrar without notice to any Holder. The Issuer
shall notify the Trustee in writing of the name and address of any Agent not a
party to this Indenture. If the Issuer fails to appoint or maintain another
entity as Registrar or Paying Agent, the Trustee shall act as such. The
Company or any of its Subsidiaries may act as Paying Agent or Registrar.
The Issuer initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Issuer initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Issuer shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
Accreted Value, principal, premium or Liquidated Damages, if any, or interest
on the Notes, and will notify the Trustee of any default by the Issuer in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The
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Issuer at any time may require a Paying Agent to pay all money held by it to
the Trustee. Upon payment over to the Trustee, the Paying Agent (if other
than the Company or a Subsidiary) shall have no further liability for the
money. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Issuer, the Trustee shall serve as Paying Agent
for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Issuer shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Issuer shall otherwise comply with TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged
by the Issuer for Definitive Notes if (i) the Issuer delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by
the Issuer within 120 days after the date of such notice from the Depositary or
(ii) the Issuer in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and deliver a
written notice to such effect to the Trustee; PROVIDED that in no event shall
the Regulation S Temporary Global Note be exchanged by the Issuer for
Definitive Notes prior to (x) the expiration of the Restricted Period and (y)
the receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of
the preceding events in (i) or (ii) above, Definitive Notes shall be issued in
such names as the Depositary shall instruct the Trustee. Global Notes also may
be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in
lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for
another Note other than as provided in this Section 2.06(a), however,
beneficial interests in a Global Note may be transferred and exchanged as
provided in Section 2.06(b), (c) or (f) hereof.
(b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL
NOTES. The transfer and exchange of beneficial interests in the Global Notes
shall be effected through the Depositary, in accordance with the provisions of
this Indenture and the Applicable Procedures. Beneficial interests in the
Restricted Global Notes shall be subject to restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.
Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well
as one or more of the other following subparagraphs, as applicable:
(i) TRANSFER OF BENEFICIAL INTERESTS IN THE SAME GLOBAL NOTE.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; PROVIDED, HOWEVER,
that prior to the expiration of the Restricted Period, transfers of
beneficial interests in the Temporary Regulation S Global Note may not be
made to a U.S. Person (ii) or for the account or benefit of a U.S. Person
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(other than an Initial Purchaser). Beneficial interests in any
Unrestricted Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note. No written orders or instructions shall be required to be delivered
to the Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) ALL OTHER TRANSFERS AND EXCHANGES OF BENEFICIAL INTERESTS IN
GLOBAL NOTES. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i) above, the
transferor of such beneficial interest must deliver to the Registrar
either (A) (1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to credit or cause to be credited a
beneficial interest in another Global Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2) instructions
given in accordance with the Applicable Procedures containing information
regarding the Participant account to be credited with such increase or (B)
(1) a written order from a Participant or an Indirect Participant given to
the Depositary in accordance with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Note in an amount equal to
the beneficial interest to be transferred or exchanged and (2)
instructions given by the Depositary to the Registrar containing
information regarding the Person in whose name such Definitive Note shall
be registered to effect the transfer or exchange referred to in (1) above;
PROVIDED that in no event shall Definitive Notes be issued upon the
transfer or exchange of beneficial interests in the Regulation S Temporary
Global Note prior to (x) the expiration of the Restricted Period and (y)
the receipt by the Registrar of any certificates required Pursuant to Rule
903 under the Securities Act. Upon consummation of an Exchange Offer by
the Issuer in accordance with Section 2.06(f) hereof, the requirements of
this Section 2.06(b)(ii) shall be deemed to have been satisfied upon
receipt by the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests in the
Restricted Global Notes. Upon satisfaction of all of the requirements for
transfer or exchange of beneficial interests in Global Notes contained in
this Indenture and the Notes or otherwise applicable under the Securities
Act, the Trustee shall adjust the Principal Amount at Maturity of the
relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) TRANSFER OF BENEFICIAL INTERESTS TO ANOTHER RESTRICTED GLOBAL
NOTE. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof, and
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or the
Regulation S Permanent Global Note, then the transferor must deliver
a certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof.
(iv) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN A RESTRICTED
GLOBAL NOTE FOR BENEFICIAL INTERESTS IN THE UNRESTRICTED GLOBAL NOTE. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
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(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1)
a broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Issuer;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Restricted Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Issuer shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate Principal Amount at Maturity equal to
the aggregate Principal Amount at Maturity of beneficial interests transferred
pursuant to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) TRANSFER OR EXCHANGE OF BENEFICIAL INTERESTS FOR DEFINITIVE
NOTES.
(i) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO RESTRICTED
DEFINITIVE NOTES. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Restricted Definitive Note, then,
upon receipt by the Registrar of the following documentation;
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(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the
form of Exhibit C hereto, including the certifications in item (2)(a)
thereof.
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-
U.S. Person in an offshore transaction in accordance with Rule 903 or
Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such beneficial interest is being transferred pursuant
to an exemption from the registration requirements of the Securities
Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate Principal Amount at Maturity of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Issuer shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate Principal Amount at Maturity. Any
Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes to
the Persons in whose names such Notes are so registered. Any Definitive
Note issued in exchange for a beneficial interest in a Restricted Global
Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement
Legend and shall be subject to all restrictions on transfer contained
therein.
Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial
interest in the Regulation S Temporary Global Note may not be exchanged
for a Definitive Note or transferred to a Person who takes delivery
thereof in the form of a Definitive Note prior to (x) the expiration of
the Restricted Period and (y) the receipt by the Registrar of any
certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act, except in the case of a transfer pursuant to an exemption
from the registration requirements of the Securities Act other than Rule
903 or Rule 904.
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(ii) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO UNRESTRICTED
DEFINITIVE NOTES. A holder of a beneficial interest in a Restricted
Global Note may exchange such beneficial interest for an Unrestricted
Definitive Note or may transfer such beneficial interest to a Person who
takes delivery thereof in the form of an Unrestricted Definitive Note only
if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a broker-
dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Issuer;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Restricted Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item (1)(b)
thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a Definitive Note that does not bear the Private Placement
Legend, a certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
(iii) BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES TO
UNRESTRICTED DEFINITIVE NOTES. If any holder of a beneficial interest in
an Unrestricted Global Note proposes to exchange such beneficial interest
for a Definitive Note or to transfer such beneficial interest to a Person
who takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof,
the Trustee shall cause the aggregate Principal Amount at Maturity of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Issuer shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate Principal Amount at Maturity. Any
Definitive Note issued in exchange for a beneficial interest pursuant to
this Section 2.06(c)(iii) shall be registered in such name or names and in
such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions from
the Depositary and the Participant or Indirect Participant. The Trustee
shall deliver such Definitive Notes to the Persons in whose names such
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Notes are so registered. Any Definitive Note issued in exchange for a
beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear
the Private Placement Legend.
(d) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR BENEFICIAL
INTERESTS.
(i) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a Restricted
Global Note or to transfer such Restricted Definitive Notes to a Person
who takes delivery thereof in the form of a beneficial interest in a
Restricted Global Note, then, upon receipt by the Registrar of the
following documentation:
(A) it the Holder of such Restricted Definitive Note proposes
to exchange such Note for a beneficial interest in a Restricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to
a Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(2) thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to
an Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (13) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such Restricted Definitive Note is being transferred to
the Issuer or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate Principal Amount at Maturity of, in the case
of clause (A) above, the appropriate Restricted Global Note, in the case
of clause (B) above, the 144A Global Note, and in the case of clause (c)
above, the Regulation S Global Note.
(ii) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
UNRESTRICTED GLOBAL NOTES. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
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Note or transfer such Restricted Definitive Note to a Person who takes
delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Issuer;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Restricted Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item
(1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof
in the form of a beneficial interest in the Unrestricted Global
Note, a certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate Principal Amount at
Maturity of the Unrestricted Global Note.
(iii) UNRESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
UNRESTRICTED GLOBAL NOTES. A Holder of an Unrestricted Definitive Note
may exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note at any time Upon receipt of a request for such an exchange or
transfer, the Trustee shall cancel the applicable. Unrestricted
Definitive Note and increase or cause to be increased the aggregate
Principal Amount at Maturity of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Issuer shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate Principal Amount at Maturity equal to
the Principal Amount at Maturity of Definitive Notes so transferred.
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(e) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR DEFINITIVE NOTES.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of
transfer or exchange, the requesting Holder shall present or surrender to the
Registrar the Definitive Notes duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing. In addition, the
requesting Holder shall provide any additional certifications, documents and
information, as applicable, required pursuant to the following provisions of
this Section 2.06(e).
(i) RESTRICTED DEFINITIVE NOTES TO RESTRICTED DEFINITIVE NOTES. Any
Restricted Definitive Note may be transferred to and registered in the
name of Persons who take delivery thereof in the form of a Restricted
Definitive Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under
the Securities Act, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in item
(1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act,
then the transferor must deliver a certificate in the form of Exhibit
B hereto, including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable.
(ii) RESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE NOTES.
Any Restricted Definitive Note may be exchanged by the Holder thereof for
an Unrestricted Definitive Note or transferred to a Person or Persons who
take delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Issuer;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Restricted Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(d) thereof; or
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(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive Note,
a certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably acceptable
to the Issuer to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.
(iii) UNRESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE NOTES.
A Holder of Unrestricted Definitive Notes may transfer such Notes to a
Person who takes delivery there of in the form of an Unrestricted
Definitive Note. Upon receipt of a request to register such a transfer,
the Registrar shall register the Unrestricted Definitive Notes pursuant to
the instructions from the Holder thereof.
(f) EXCHANGE OFFER. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Issuer shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate Principal Amount at Maturity equal to the Principal Amount at
Maturity of the beneficial interests in the Restricted Global Notes tendered
for acceptance by Persons that certify in the applicable Letters of Transmittal
that (x) they are not broker-dealers, (y) they are not participating in a
distribution of the Exchange Notes and (z) they are not affiliates (as defined
in Rule 144) of the Issuer, and accepted for exchange in the Exchange Offer and
(ii) Definitive Notes in an aggregate Principal Amount at Maturity equal to the
Principal Amount at Maturity of the Restricted Definitive Notes accepted for
exchange in the Exchange Offer. Concurrently with the issuance of such Notes,
the Trustee shall cause the aggregate Principal Amount at Maturity of the
applicable Restricted Global Notes to be reduced accordingly, and the Issuer
shall execute and the Trustee shall authenticate and deliver to the Persons
designated by the Holders of Definitive Notes so accepted Definitive Notes in
the appropriate Principal Amount at Maturity.
(g) LEGENDS. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) PRIVATE PLACEMENT LEGEND.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED IN RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
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EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE ONLY (1)(a) TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (b)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE ISSUER SO REQUESTS), (2) TO THE ISSUER OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraph (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) of this Section
2.06 (and all Notes issued in exchange therefor or substitution
thereof) shall not bear the Private Placement Legend.
(ii) GLOBAL NOTE LEGEND. Each Global Note shall bear a legend in
substantially the following form:
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE
BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF
THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY
OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OR TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
(iii) REGULATION S TEMPORARY GLOBAL NOTE LEGEND. The Regulation S
Temporary Global Note shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S
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TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF
INTEREST HEREON."
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as
all beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to
or retained and canceled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note or for Definitive
Notes, the Principal Amount at Maturity of Notes represented by such Global
Note shall be reduced accordingly and an endorsement shall be made on such
Global Note by the Trustee or by the Depositary at the direction of the Trustee
to reflect such reduction; and if the beneficial interest is being exchanged
for or transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Note, such other Global Note shall be
increased accordingly and an endorsement shall be made on such Global Note by
the Trustee or by the Depositary at the direction of the Trustee to reflect
such increase.
(i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES.
(i) To permit registrations of transfers and exchanges, the Issuer
shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon the Issuer's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Issuer may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 3.09, 4.10, 4.14 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global
Notes or Definitive Notes surrendered upon such registration of transfer
or exchange.
(v) The Issuer shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business
on the day of selection, (B) to register the transfer of or to exchange
any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part or (c) to register
the transfer of or to exchange a Note between a record date and the next
succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Issuer may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of Accreted Value or principal
of and interest on such Notes and for all other purposes, and none of the
Trustee, any Agent or the Issuer shall be affected by notice to the
contrary.
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(vii) The Trustee shall authenticate Global Notes and Definitive Notes
in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or the Issuer and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Issuer shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Issuer, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Issuer to protect the Issuer, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Issuer may charge for their expenses in replacing a Note.
Every replacement Note is an additional obligation of the Issuer and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Issuer or an Affiliate of the
Issuer holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the Principal Amount at Maturity of any Note is considered paid
under Section 4.01 hereof, it ceases to be outstanding and interest on it
ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required Principal Amount
at Maturity of Notes have concurred in any direction, waiver or consent, Notes
owned by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company,
shall be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee knows are so owned
shall be so disregarded.
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SECTION 2.10. TEMPORARY NOTES.
Until certificates representing Notes are ready for delivery, the
Issuer may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Issuer
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Issuer shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits
of this Indenture.
SECTION 2.11. CANCELLATION.
The Issuer at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be
delivered to the Issuer. The Issuer may not issue new Notes to replace Notes
that they have paid or that have been delivered to the Trustee for
cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Issuer defaults in a payment of interest on the Notes, they
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Issuer shall notify the Trustee
in writing of the amount of defaulted interest proposed to be paid on each Note
and the date of the proposed payment. The Issuer shall fix or cause to be
fixed each such special record date and payment date; PROVIDED that no such
special record date shall be less than 10 days prior to the related payment
date for such defaulted interest. At least 15 days before the special record
date, the Issuer (or, upon the written request of the Issuer, the Trustee in
the name and at the expense of the Issuer) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Issuer elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant
to which the redemption shall occur, (ii) the redemption date, (iii) the
Principal Amount at Maturity of Notes to be redeemed and (iv) the redemption
price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed pursuant to an
optional redemption or purchased in an offer to purchase at any time, the
Trustee shall select the Notes to be redeemed or purchased
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among the Holders of the Notes in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed
or, if the Notes are not so listed, on a PRO RATA basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate.
In the event of partial redemption by lot, the particular Notes to be
redeemed shall be selected, unless otherwise provided herein, not less than
30 nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Issuer in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the Principal Amount at Maturity thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 Principal Amount at
Maturity or whole multiples of $1,000 Principal Amount at Maturity; except that
if all of the Notes of a Holder are to be redeemed, the entire outstanding
amount of Notes held by such Holder, even if not a multiple of $1,000 Principal
Amount at Maturity, shall be redeemed. Except as provided in the preceding
sentence, provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days
but not more than 60 days before a redemption date, the Issuer shall mail or
cause to be mailed, by first class mail, a notice of redemption to each Holder
whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
Principal Amount at Maturity of such Note to be redeemed and that, after
the redemption date upon surrender of such Note, a new Note or Notes in
Principal Amount at Maturity equal to the unredeemed portion shall be
issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Issuer defaults in making such redemption
payment, Accreted Value on the Notes called for redemption ceases to
accrete, and interest on Notes called for redemption ceases to accrue, on
and after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At the Issuer's request, the Trustee shall give the notice of
redemption in the Issuer's name and at its expense; PROVIDED, HOWEVER, that the
Issuer shall have delivered to the Trustee, at least 45 days prior
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to the redemption date, an Officers' Certificate requesting that the Trustee
give such notice and setting forth the information to be stated in such
notice as provided in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Issuer shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Issuer any
money deposited with the Trustee or the Paying Agent by the Issuer in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Issuer complies with the provisions of the preceding
paragraph, on and after the redemption date, Accreted Value on the Notes called
for redemption ceases to accrete, and interest shall cease to accrue, on the
Notes or the portions of Notes called for redemption. If a Note is redeemed on
or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender
for redemption because of the failure of the Issuer to comply with the
preceding paragraph, Accreted Value shall continue to accrete as provided in
this Indenture or interest shall be paid on the unpaid principal, as the case
may be, from the redemption date until such Accreted Value or principal, as the
case may be, is paid, and to the extent lawful on any interest not paid on such
unpaid principal, in each case at the rate provided in the Notes and in Section
4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part the Issuer shall
issue and, upon the Issuer's written request, the Trustee shall authenticate
for the Holder at the expense of the Issuer, a new Note equal in Principal
Amount at Maturity to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) The Issuer shall not have the option to redeem the Notes
pursuant to this Section 3.07 prior to May 15, 2003. Thereafter, the Issuer
shall have the option to redeem the Notes, in whole or in part, upon not less
than 30 nor more or 60 days' notice, at the redemption prices (expressed as
percentages of Principal Amount at Maturity) set forth below plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the applicable
redemption date, if redeemed during the twelve-month period beginning on May 15
of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003 105.625%
2004 103.750%
2005 101.875%
2006 and thereafter 100.000%
</TABLE>
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(b) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
(a) On May 15, 2003, the Company will be required to pay all accrued
and unpaid interest on the Notes by redeeming an amount per Note equal to the
Accreted Value of such Note on May 15, 2003, LESS the original issue price with
respect to such Note ($597.07 per $1,000 Original Principal Amount at Maturity)
at a redemption price equal to 105.625% of the amount so redeemed; and the
Principal Amount at Maturity of such Note shall thereafter be reduced by the
amount of such payment.
(b) The redemption pursuant to this Section 3.08 shall be made
pursuant to the provisions of Sections 3.01 through 3.06 hereof.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Issuer shall
be required to commence an offer to all Holders to purchase Notes (an "Asset
Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later
than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Issuer shall purchase the amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same
manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Issuer shall send,
by first class mail, a notice to the Trustee and each of the Holders. The
notice shall contain all instructions and materials necessary to enable such
Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer
shall be made to all Holders. The notice, which shall govern the terms of the
Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrete Accreted Value and accrue interest;
(d) that, unless the Issuer defaults in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrete Accreted Value and accrue interest after the Purchase Date;
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(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may
not elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Issuer, the
Depositary, if appointed by the Issuer, or a Paying Agent at the address
specified in the notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Issuer, the Depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
Principal Amount at Maturity of the Note the Holder delivered for purchase
and a statement that such Holder is withdrawing his election to have such
Note purchased;
(h) that, if the aggregate Accreted Value on the Purchase Date of
Notes surrendered by Holders exceeds the Offer Amount, the Issuer shall
select the Notes to be purchased on a PRO RATA basis (with such
adjustments as may be deemed appropriate by the Issuer so that only Notes
in denominations of $1,000 Principal Amount at Maturity, or integral
multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in Principal Amount at Maturity to the unpurchased
portion of the Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Issuer shall, to the extent
lawful, accept for payment, on a PRO RATA basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Issuer in accordance
with the terms of this Section 3.09. The Issuer, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
Business Days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Issuer for purchase, and the Issuer shall promptly issue a new
Note, and the Trustee, upon written request from the Issuer shall authenticate
and mail or deliver such new Note to such Holder, in a Principal Amount at
Maturity equal to any unpurchased portion of the Note surrendered. Any Note
not so accepted shall be promptly mailed or delivered by the Issuer to the
Holder thereof. The Issuer shall publicly announce the results of the Asset
Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof
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ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Issuer shall pay or cause to be paid the Accreted Value,
principal of, premium, if any, and interest on the Notes on the dates and in
the manner provided in the Notes. Accreted Value, principal, premium, if any,
and interest shall be considered paid on the date due if the Paying Agent, if
other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern
Time on the due date money deposited by the Issuer in immediately available
funds and designated for and sufficient to pay all Accreted Value, principal,
premium, if any, and interest then due. The Issuer shall pay all Liquidated
Damages, if any, in the same manner on the dates and in the amounts set forth
in the Registration Rights Agreement.
The Issuer shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue Accreted Value, principal
at the rate equal to 1% per annum in excess of the then applicable interest
rate on the Notes to the extent lawful; it shall pay interest (including post-
petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace period) at the same rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Issuer shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Issuer in respect of the Notes and this Indenture may be
served. The Issuer shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Issuer shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Issuer may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations;
PROVIDED, HOWEVER, that no such designation or rescission shall in any manner
relieve the Issuer of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Issuer shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Issuer hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Issuer in accordance with Section
2.03.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the SEC,
so long as any Notes are outstanding, the Issuer shall furnish to the Trustee
and the Holders of Notes (i) all quarterly and annual financial information
that would be required to be contained in a filing with the SEC on Forms 10-Q
and 10-K if the Company were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all current reports
that would be re-
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quired to be filed with the SEC on Form 8-K if the Company were required to
file such reports, in each case, within the time periods specified in the
SEC's rules and regulations. In addition, following consummation of the
Exchange Offer, whether or not required by the rules and regulations of the
SEC, the Company shall file a copy of all such information and reports with
the SEC for public availability within the time periods specified in the
SEC's rules and regulations (unless the SEC will not accept such a filing)
and make such information available to securities analysts and prospective
investors upon request. The Issuer shall at all times comply with TIA
Section 314(a).
(b) For so long as any Notes remain outstanding, the Issuer shall
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Issuer shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Issuer has kept, observed, performed and fulfilled its
obligations under this Indenture and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Issuer
has kept, observed, performed and fulfilled each and every covenant contained
in this Indenture and is not in default in the performance or observance of any
of the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Issuer is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Issuer is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by
a written statement of the Company's independent public accountants (who shall
be a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Issuer has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Issuer shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any
Default or Event of Default, an Officers' Certificate specifying such Default
or Event of Default and what action the Issuer is taking or proposes to take
with respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate
proceedings or where the failure to effect such payment is not adverse in any
material respect to the Holders of the Notes.
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SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Issuer covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants
or the performance of this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or
make any other payment or distribution on account of the Company's or any of
its Restricted Subsidiaries' Equity Interests (including, without limitation,
any payment in connection with any merger or consolidation involving the
Company or any of its Restricted Subsidiaries) or to the direct or indirect
holders of the Company's or any of its Restricted Subsidiaries' Equity
Interests in their capacity as such (other than dividends or distributions
payable in Equity Interests (other than Disqualified Interests) of the Company
or to the Company or a Restricted Subsidiary of the Company); (ii) purchase,
redeem or otherwise acquire or retire for value (including without limitation,
in connection with any merger or consolidation involving the Company) any
Equity Interests of the Company or any direct or indirect parent of the Company
(other than any such Equity Interests owned by the Company or any Wholly-Owned
Restricted Subsidiary of the Company); (iii) make any payment on or with
respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is subordinated to the Notes, except a payment of
interest or principal at Stated Maturity; or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i)
through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) at the time of such Restricted Payment and after giving pro form
effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, (x) in the case of a
Restricted Payment identified in clauses (i), (ii) or (iii) above, the
Issuer would have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test and the
Issuer Coverage Ratio test set forth in the first paragraph of Section
4.09 of this Indenture and (y) in the case of a Restricted Payment
identified in clause (iv) above, a Restricted Subsidiary would have been
able to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.09 of this Indenture; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of this Indenture (excluding Restricted
Payments permitted by clauses (ii), (iii), (iv), (vi), (vii) and (ix) of
the second succeeding paragraph), is less than the sum, without
duplication, of (i) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) from the beginning of the
first fiscal quarter commencing after the date of this Indenture (the
"Measurement Date") to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the time
of such Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus (ii) 100% of the
aggregate net cash proceeds received by the Company since the Measurement
Date as a contribution to its common equity capital or from the issue or
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sale of Equity Interests of the Company (other than Disqualified
Interests) or from the issue or sale of Disqualified Interests or debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests or convertible debt securities sold
to a Subsidiary of the Company), plus (iii) to the extent that any
Restricted Investment that was made after the date of this Indenture is
sold for cash or otherwise liquidated or repaid for cash, the lesser of
(A) the cash return of capital with respect to such Restricted Investment
(less the cost of disposition, if any) and (B) the aggregate amount of
such Restricted Investment that was treated as a Restricted Payment when
made.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries in the Subsidiary so designated will be
deemed to be Restricted Payments at the time of such designation and will
reduce the amount available for Restricted Payments under the first paragraph
of this Section 4.07. All such outstanding Investments will be deemed to
constitute Investments in an amount equal to the fair market value of such
Investments at the time of such designation. Such designation will only be
permitted if such Restricted Payment would be permitted at such time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture, (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
or of Equity Interests of a Restricted Subsidiary in exchange for, or out of
the net cash proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of, other Equity Interests of the Company (other
than any Disqualified Interests); PROVIDED that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (c)(ii) of the
preceding paragraph; (iii) the defeasance, redemption, repurchase or other
acquisition of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend or distribution by a Subsidiary of the Company to the holders of its
common Equity Interests on a PRO RATA basis; (v) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of the
Company or any Subsidiary of the Company held by any member of the Company's
(or any of its Subsidiaries') management; PROVIDED that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Equity Interests
shall not exceed $1,000,000 in any twelve-month period and no Default or Event
of Default shall have occurred and be continuing immediately after such
transaction; (vi) the declaration of the Jack Astor Vehicle as an Unrestricted
Subsidiary on the date that it becomes a Subsidiary of the Company; PROVIDED
that it otherwise meets the qualifications of an Unrestricted Subsidiary;
(vii) transfers of cash proceeds from the sale of the Notes not to exceed, in
the aggregate, $17.0 million, to finance the purchase of the Company's Equity
Interests, as set forth in the Offering Memorandum under the caption "Use of
Proceeds"; (viii) so long as no Default or Event of Default shall have occurred
or be continuing immediately after such transaction, the repurchase of equity
Interests of the Issuer from its equityholders as of the Issue Date (or their
respective Affiliates) in an aggregate amount not to exceed $20.0 million if,
after giving effect to such transaction, the Issuer would be able to incur
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test and the Issuer Coverage Ratio test set forth in the first paragraph of
Section 4.09 of this Indenture; (ix) any payment to the Company or any
Restricted Subsidiary; and (x) additional Restricted Payments not to exceed
$5.0 million after the date of the Indenture.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the
Board of Directors whose resolution with respect thereto shall be delivered to
the Trustee, such determination to be based upon an opinion or appraisal issued
by an accounting, appraisal or investment banking firm of national standing if
such fair market value exceeds $1.0
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million. Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment is permitted and setting forth the basis upon which
the calculations required by this Section 4.07 were computed, together with a
copy of any fairness opinion or appraisal required by this Indenture.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTION AFFECTING
SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a)(i) pay dividends or make any other distributions
to the Company or any of its Restricted Subsidiaries (A) on its Capital
Interests or (B) with respect to any other interest or participation in, or
measured by, its profits or (ii) pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries, (b) make loans or advances to the Company
or any of its Restricted Subsidiaries or (c) transfer any of its properties or
assets to the Company or any of its Subsidiaries. However, the foregoing
restrictions will not apply to encumbrances or restrictions existing under or
by reasons of (i) this Indenture and the Notes, (ii) applicable law, (iii) any
instrument governing Indebtedness or Capital Interests of a Person acquired by
the Company or any of its Restricted Subsidiaries as in effect at the time of
such acquisition (except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, PROVIDED that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of this Indenture to be incurred, (iv) customary non-
assignment provisions in leases entered into in the ordinary course of business
and consistent with past practices, (v) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (c) above on the property so acquired, (vi) any
agreement for the sale of a Restricted Subsidiary that restricts distributions
by that Restricted Subsidiary pending its sale, (vii) Permitted Refinancing
Indebtedness, PROVIDED that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive than
those contained in the agreements governing the Indebtedness being refinanced,
(viii) secured Indebtedness otherwise permitted to be incurred pursuant to the
provisions of Section 4.12 hereof that limit the right of the debtor to dispose
of the assets securing such Indebtedness, (ix) restrictions on cash or other
deposits or net worth imposed by customers under contracts entered into in the
ordinary course of business; (x) the 1997 Notes Indenture and the 1997 Notes as
in effect on the date of this Indenture, and (xi) the Existing Credit Facility
or one or more other Credit Facilities; PROVIDED that such encumbrances and
restrictions are not materially more restrictive than those contained in the
Existing Credit Facility as in effect on the date of this Indenture.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED
STOCK.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and the Company shall not issue any Disqualified Interests and
shall not permit any of its Restricted Subsidiaries to issue preferred Equity
Interests (including Disqualified Interests); PROVIDED, HOWEVER, that (a) the
Company may incur Indebtedness (including Acquired Debt) or issue Disqualified
Interests if each of the Fixed Charge Coverage Ratio and the Issuer Coverage
Ratio for the Company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Equity Interests are
issued would have been at least 2 to 1, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred, or the Equity Interests had been
issued, as the case may be, at the beginning of such
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four-quarter period; and (b) any of the Issuer's Restricted Subsidiaries may
incur Indebtedness (including any Acquired Debt) or issue preferred Equity
Interests (including Disqualified Equity Interests) if the Fixed Charge
Coverage Ratio for the Issuer's most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding
the date on which such additional Indebtedness is incurred or such Equity
Interests are issued would have been at least 2 to 1, determined on a pro
forma basis (including pro forma application of the net proceeds therefrom),
as if the additional Indebtedness had been incurred, or the Equity Interests
had been issued, as the case may be, at the beginning of such four quarter
period.
The Company shall not incur any Indebtedness that is contractually
subordinated to any other Indebtedness of the Company unless such Indebtedness
is also contractually subordinated in right of payment to the Notes on
substantially identical terms; PROVIDED, HOWEVER, that no Indebtedness of the
Company shall be deemed to be contractually subordinated to any other
Indebtedness of the Company solely by virtue of being unsecured.
The foregoing provisions shall not prohibit the incurrence of any of
the following items of Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Company and its Subsidiaries of revolving
credit Indebtedness and letters of credit (with letters of credit being
deemed to have a principal amount equal to the maximum potential liability
of the Company and its Subsidiaries thereunder) under Credit Facilities;
PROVIDED that the aggregate principal amount of all revolving credit
Indebtedness and letters of credit outstanding under Credit Facilities
after giving effect to such incurrence does not exceed an amount equal to
$50.0 million;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount (together with any Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (iv)) not to exceed $5.0 million at any time
outstanding;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of assets
or a new Restricted Subsidiary; PROVIDED that such Indebtedness was
incurred by the prior owner of such assets or such Restricted Subsidiary
prior to such acquisition by the Company or one of its Restricted
Subsidiaries and was not incurred in connection with, or in contemplation
of, such acquisition by the Company or one of its Restricted Subsidiaries;
and PROVIDED FURTHER that the principal amount (or accreted value, as
applicable) of such Indebtedness, together with any other outstanding
Indebtedness incurred pursuant to this clause (v) and any Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (v), does not exceed $10
million;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace
Indebtedness incurred pursuant to clauses (ii) or (iii) above or this
clause (vi) or any In-
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debtedness that was permitted by the Indenture to be incurred pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
this Section 4.09;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Wholly-Owned Restricted Subsidiaries; PROVIDED, HOWEVER, that
(i) if the Company is the obligor on such Indebtedness, such Indebtedness
is expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the Notes and (ii)(A) any subsequent issuance
or transfer of Equity Interests that results in any such Indebtedness
being held by a Person other than the Company or a Subsidiary thereof and
(B) any sale or other transfer of any such Indebtedness to a Person that
is not either the Company or a Wholly-Owned Restricted Subsidiary thereof
shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Restricted Subsidiary, as the case may
be, that was not permitted by this clause (vii);
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding;
(ix) the guarantee by the Company or any Restricted Subsidiary of
Indebtedness of a Restricted Subsidiary of the Company that was permitted
to be incurred by another provision of this Section 4.09;
(x) the incurrence by the Company's Unrestricted Subsidiaries of Non-
Recourse Debt; PROVIDED, HOWEVER, that if any such Indebtedness ceases to
be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (x);
(xi) Indebtedness consisting of Permitted Investments of the kind
described in clause (f) of the definition of "Permitted Investments"; and
(xii) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any Indebtedness incurred pursuant to this clause (xii), not to
exceed $5.0 million.
For purposes of determining compliance with this Section 4.09, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xii) above or is
entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness
in any manner that complies with this Section 4.09. Accrual of interest,
accretion or amortization of original issue discount, the payment of interest
on any Indebtedness in the form of additional Indebtedness with the same terms,
and the payment of dividends on Disqualified Interests in the form of
additional shares of the same class of Disqualified Interests shall not be
deemed to be an incurrence of Indebtedness for purposes of this Section 4.09;
PROVIDED, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued.
SECTION 4.10. ASSET SALES
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to: (i) sell, lease, convey or otherwise dispose of any assets
(including, without limitation, by way of a sale and leaseback) other than
sales of inventory and leases (or subleases) of restaurant facilities and
related equipment to franchisees, in each case, in the ordinary course of
business consistent with past practices (PROVIDED that the sale,
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lease, conveyance or other disposition of all or substantially all of the
assets of the Company and its Subsidiaries shall be governed by the
provisions of Sections 4.14 and 5.01 hereof), or (ii) issue or sell Equity
Interests of any of its Subsidiaries, in the case of either clause (i) or
(ii), whether in a single transaction or a series of related transactions,
(a) that have a fair market value in excess of $1 million or (b) for net
proceeds in excess of $1 million (each of the foregoing, an "Asset Sale"),
unless (x) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Trustee) of the assets or
Equity Interests issued or sold or otherwise disposed of and (y) except in
the case of a Permitted Non-Cash Transaction, at least 75% of the
consideration received therefor by the Company or such Restricted Subsidiary
is in the form of cash; PROVIDED that the amount of (A) any liabilities (as
shown on the Company's or such Restricted Subsidiary's most recent balance
sheet), of the Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes
or any guarantee thereof) that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases the Company
or such Restricted Subsidiary from further liability and (B) any securities,
notes or other obligations received by the Company or any such Restricted
Subsidiary from such transferee that are contemporaneously (subject to
ordinary settlement periods) converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received), shall be deemed to
be cash for purposes of this provision and PROVIDED, FURTHER, that if cash
consideration from any such Asset Sale is received by a Restricted Subsidiary
which is unable to transfer such cash consideration to the Company (by means
of a dividend, distribution or otherwise) by reason of any legal or
contractual restriction affecting such Restricted Subsidiary, such cash
consideration shall be deemed to constitute Net Proceeds only to the extent
such Restricted Subsidiary is permitted from time to time to transfer such
cash consideration to the Company. A transfer of assets by the Company to a
Wholly-Owned Restricted Subsidiary or by a Wholly-Owned Restricted Subsidiary
to the Company or to another Wholly-Owned Restricted Subsidiary, and an
issuance of Equity Interests by a Wholly-Owned Restricted Subsidiary to the
Company or to another Wholly-Owned Restricted Subsidiary, shall not be deemed
to be an Asset Sale. Any Restricted Payment that is permitted by Section
4.07 hereof, will not be deemed to be an Asset Sale.
Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or the applicable Restricted Subsidiary may apply such Net
Proceeds (a) to permanently repay Indebtedness (and to correspondingly reduce
commitments with respect thereto) of (x) any Restricted Subsidiary or (y) the
Company (if such Indebtedness of the Company is not subordinated in right of
payment to the Notes); PROVIDED that the amount of Net Proceeds utilized to
repay any such Indebtedness of the Company shall not exceed such Indebtedness's
Pro Rata Share of such Net Proceeds, or (b) to the acquisition of a majority of
the assets of, or a majority of the voting Capital Interests of, another
Permitted Business, the making of a capital expenditure or the acquisition of
other tangible long-term assets, in each case, that are used or useful in a
Permitted Business of the Company or a Restricted Subsidiary. Pending the
final application of any such Net Proceeds, the Company may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any manner
that is not prohibited by this Indenture. Any Net Proceeds from such Asset
Sale that are not finally applied or invested as provided in the first sentence
of this paragraph will be deemed to constitute "Excess Proceeds." Within ten
days of each date on which the aggregate amount of Excess Proceeds exceeds $5
million, the Issuer shall commence a PRO RATA Asset Sale Offer pursuant to
Section 3.09 hereof to purchase the maximum Accreted Value of Notes that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the Accreted Value thereof on the date fixed for the closing
of such offer plus accrued and unpaid interest and Liquidated Damages thereon,
if any. To the extent that the aggregate Accreted Value of Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company
may use such deficiency for any purpose not otherwise prohibited by the
Indenture. Upon completion of such offer to purchase, the amount of Excess
Proceeds will be deemed to be reset at zero.
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SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(a) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (b) the Company delivers to the Trustee
(i) with respect to any Affiliate Transaction involving aggregate consideration
in excess of $1 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (a) above and that such Affiliate Transaction has either been approved
by a majority of the disinterested members of the Board of Directors or has
been approved in an opinion issued by an accounting, appraisal or investment
banking firm of national standing as being fair to the Holders from a financial
point of view and (ii) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$5 million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal
or investment banking firm of national standing; PROVIDED, HOWEVER, that (i)
any employment agreement entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Company or such Restricted Subsidiary, (ii) transactions
between or among the Company and/or its Restricted Subsidiaries, (iii) payment
of reasonable directors fees to Persons who are not otherwise Affiliates of the
Company, (iv) any agreement in effect on the date of this Indenture or any
amendment thereto or transaction contemplated thereby (and any replacement or
amendment of any such agreement so long as any such amendment or replacement
thereof is not materially less favorable to the Holders than the original
agreement in effect on the date of this Indenture), and (v) transactions
permitted under Section 4.07 hereof shall not be deemed Affiliate Transactions.
SECTION 4.12. LIENS.
The Company shall not, directly or indirectly, create, incur, assume
or suffer to exist any Lien securing Indebtedness or trade payables on any
asset now owned or hereafter acquired by it, or any income or profits therefrom
or assign or convey any right to receive income therefrom, except Permitted
Liens.
SECTION 4.13. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; PROVIDED, HOWEVER, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Issuer or a
third party shall make an offer (a "Change of Control Offer") to each Holder to
repurchase all or any part (such that any Note not tendered for purchase shall
be in a denomination equal to $1,000 Principal Amount at Maturity or an
integral multiple thereof) of each Holder's Notes at a purchase price each
equal to 101% of the Accreted Value thereof
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plus accrued and unpaid interest thereon, if any, and Liquidated Damages
thereon, if any, to the date of purchase (the "Change of Control Payment").
Within 10 days following any Change of Control, the Issuer shall mail a
notice to each Holder stating: (1) that the Change of Control Offer is being
made pursuant to this Section 4.14 and that all Notes tendered will be
accepted for payment; (2) the purchase price and the purchase date, which
shall be no earlier than 30, nor later than 60 business days from the date
such notice is mailed (the "Change of Control Payment Date"); (3) that any
Note not tendered will continue to accrete Accreted Value and to accrue
interest; (4) that, unless the Issuer defaults in the payment of the Change
of Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrete Accreted Value and to accrue interest
after the Change of Control Payment Date; (5) that Holders electing to have
any Notes Purchased pursuant to a Change of Control Offer will be required to
surrender the Notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date; (6) that Holders
will be entitled to withdraw their election if the Paying Agent receives, not
later than the close of business on the second Business Day preceding the
Change of Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the Principal Amount at Maturity
of Notes delivered for purchase, and a statement that such Holder is
withdrawing his election to have the Notes purchased; and (7) that Holders
whose Notes are being purchased only in part will be issued new Notes equal
in Principal Amount at Maturity to the unpurchased portion of the Notes
surrendered, which unpurchased portion must be equal to $1,000 in Principal
Amount at Maturity or an integral multiple thereof. The Issuer shall comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of Notes in
connection with a Change of Control.
(b) On the Change of Control Payment Date, the Issuer shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate Principal Amount at Maturity of Notes or portions thereof being
purchased by the Issuer. The Paying Agent shall promptly mail to each Holder
of Notes so tendered payment in an amount equal to the purchase price for the
Notes, and the Trustee shall promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Note equal in Principal Amount
at Maturity to any unpurchased portion of the Notes surrendered by such Holder,
if any; PROVIDED, that each such new Note shall be in a Principal Amount at
Maturity of $1,000 or an integral multiple thereof. The Issuer shall publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
SECTION 4.15. [INTENTIONALLY OMITTED]
SECTION 4.16. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; PROVIDED that
the Company and any Restricted Subsidiary may enter into a sale and leaseback
transaction if (i) the Company or such Restricted Subsidiary could have (a)
incurred Indebtedness in an amount equal to the Attributable Debt relating to
such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of Section 4.09 hereof and (b) in the
case of a sale and leaseback transaction by the Company, incurred a Lien to
secure such Indebtedness pursuant to the provisions of Section 4.12 hereof,
(ii) the gross cash proceeds of such sale and leaseback transaction are at
least equal to the fair market value (as determined in good faith by the Board
of Directors and set forth in an Officers' Certificate delivered to the
Trustee) of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and leaseback
transaction is permitted by, and the Com-
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pany or such Restricted Subsidiary applies the proceeds of such transaction
in compliance with, Section 4.10 hereof.
SECTION 4.17. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF
WHOLLY-OWNED RESTRICTED SUBSIDIARIES.
The Company (i) shall not, and shall not permit any Wholly-Owned
Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Interests of any Wholly-Owned Restricted
Subsidiary of the Company to any Person (other than the Company or a Wholly-
Owned Restricted Subsidiary of the Company), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Capital Interests of
such Wholly-Owned Restricted Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in
accordance with Section 4.10 hereof and (ii) will not permit any Wholly-Owned
Restricted Subsidiary of the Company to issue any of its Equity Interests
(other than, if necessary, shares of its Capital Interests constituting
directors' qualifying shares) to any Person other than to the Company or a
Wholly-Owned Restricted Subsidiary of the Company.
SECTION 4.18. LINE OF BUSINESS.
The Company shall not, and shall not permit any Restricted Subsidiary
to, engage in any business other than Permitted Businesses, except to such
extent as would not be material to the Company and its Restricted Subsidiaries,
taken as a whole.
SECTION 4.19. PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into (whether or
not the Company is the surviving corporation) or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to, another corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia, (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company pursuant to a
supplemental indenture under the Notes and this Indenture in a form reasonably
satisfactory to the Trustee, (iii) immediately after such transaction, no
Default or Event of Default exists and (iv) the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
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Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) shall have Consolidated Net Worth
(immediately after the transaction) equal to or greater than the Consolidated
Net Worth of the Company immediately preceding the transaction and (B) shall,
at the time of such transaction and after giving pro forma effect thereto as
if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test and the Issuer
Coverage Ratio Test set forth in the first paragraph of Section 4.09 hereof.
The foregoing will not prohibit the Company or any Restricted Subsidiary from
consolidating or merging with or into the Company or any other Restricted
Subsidiary.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the
assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein;
PROVIDED, HOWEVER, that the predecessor Company shall not be relieved from the
obligation to pay the Accreted Value or principal of and interest on the Notes
except in the case of a sale of all of the Company's assets that meets the
requirements of Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Issuer defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes and such default continues
for a period of 30 days;
(b) the Issuer defaults in the payment when due of Accreted Value or
principal of or premium, if any, on the Notes when the same becomes due
and payable at maturity, upon redemption (including in connection with an
offer to purchase) or otherwise;
(c) the Company or any of its Subsidiaries fails to comply with any
of the provisions of Section 4.07, 4.09, 4.10, 4.14 or 5.01 hereof;
(d) the Company fails to observe or perform any other covenant,
representation, warranty or other agreement in this Indenture or the Notes
for 60 days after notice to the Issuer by the Trustee or the Holders of at
least 25% in aggregate Principal Amount at Maturity of the Notes then
outstanding voting as a single class;
(e) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or
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any of its Subsidiaries), whether such Indebtedness or guarantee now
exists, or is created after the date of this Indenture, which default (a)
is caused by a failure to pay accreted value or principal of or premium, if
any, or interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there had been a Payment Default or the maturity
of which has been so accelerated, aggregates $5 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company
or any of its Significant Subsidiaries or a group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary and such
judgment or judgments remain undischarged for a period (during which
execution shall not be effectively stayed) of 60 days, PROVIDED that the
aggregate of all such undischarged judgments exceeds $5 million;
(g) the Company or any of its Significant Subsidiaries or any group
of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary in an involuntary case;
(ii) appoints a Custodian of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary or for all or
substantially all of the property of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days.
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SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Significant Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary) occurs and is continuing,
the Trustee or the Holders of at least 25% in Principal Amount at Maturity of
the then outstanding Notes may declare the Accreted Value of all the Notes,
together with accrued and unpaid interest, if any, thereon and Liquidated
Damages, if any, thereof to be due and payable immediately. Upon any such
declaration, such amounts shall become due and payable immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause (g)
or (h) of Section 6.01 hereof occurs with respect to the Company, any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary, the Accreted Value of all the Notes,
together with accrued and unpaid interest, if any, thereon and Liquidated
Damages, if any, thereon shall be due and payable immediately without further
action or notice. The Holders of a majority in aggregate Principal Amount at
Maturity of the then outstanding Notes by written notice to the Trustee may on
behalf of all of the Holders rescind an acceleration and its consequences if
the rescission would not conflict with any judgment or decree and if all
existing Events of Default (except nonpayment of Accreted Value, principal,
interest or premium that has become due solely because of the acceleration)
have been cured or waived.
If an Event of Default occurs by reason of any willful action (or
inaction) taken ( or not taken) by or on behalf of the Issuer with the
intention of avoiding payment of the premium that the Issuer would have had to
pay if the Issuer then had elected to redeem the Notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the Notes. If an Event of Default occurs on or before May 15,
2003 by reason of any willful action (or inaction) taken (or not taken) by or
on behalf of the Issuer with the intention of avoiding the prohibition on
redemption of the Notes prior to May 15, 2003, then the premium payable for
purposes of this paragraph for the period beginning on the date hereof and
ending on May 15, 2003 shall be 105.625% of the Accreted Value of Notes that
would otherwise by due but for the provisions of this paragraph, plus accrued
interest and Liquidated Damages, if any, to the date of payment.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of Accreted Value,
principal, premium, if any, and interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate Principal Amount at
Maturity of the then outstanding Notes by notice to the Trustee may on behalf
of the Holders of all of the Notes waive an existing Default or Event of
Default and its consequences hereunder, except a continuing Default or Event of
Default in the payment of the Accreted Value, principal of, premium and
Liquidated Damages, if any, or interest on, the Notes (including in connection
with an offer to purchase) (PROVIDED, HOWEVER, that the Holders of a majority
in aggregate Principal Amount at Maturity of the then outstanding Notes may
rescind an acceleration and its consequences, including any related payment
default that resulted from such acceleration). Upon any such waiver, such
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have
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been cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in Principal Amount at Maturity of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in Principal Amount at Maturity of
the then outstanding Notes make a written request to the Trustee to pursue
the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in Principal
Amount at Maturity of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of Accreted Value, principal, premium
and Liquidated Damages, if any, and interest on the Note, on or after the
respective due dates expressed in the Note (including in connection with an
offer to purchase), or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01 (a) or (b) occurs
and is continuing, the Trustee is authorized to recover judgment in its own
name and as trustee of an express trust against the Issuer for the whole amount
of Accreted Value, principal of, premium and Liquidated Damages, if any, and
interest remaining unpaid on the Notes and interest on overdue Accreted Value,
principal and, to the extent lawful, interest and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
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SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Holders of the Notes allowed in any judicial proceedings relative to
the Issuer (or any other obligor upon the Notes), its creditors or its property
and shall be entitled and empowered to collect, receive and distribute any
money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder
to make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 7.07 hereof. To the extent that
the payment of any such compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 7.07 hereof out of the estate in any such proceeding, shall be
denied for any reason, payment of the same shall be secured by a Lien on, and
shall be paid out of, any and all distributions, dividends, money, securities
and other properties that the Holders may be entitled to receive in such
proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be denied to
authorize the Trustee to authorize or consent to or accept or adopt on behalf
of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
FIRST: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the
costs and expenses of collection;
SECOND: to Holders of Notes for amounts due and unpaid on the Notes
for Accreted Value, principal, premium and Liquidated Damages, if any, and
interest, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Notes for Accreted Value, principal,
premium and Liquidated Damages, if any and interest, respectively; and
THIRD: to the Issuer or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
Principal Amount at Maturity of the then outstanding Notes.
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ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), (c), (e) and (f) and Section 7.02 of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders, unless such Holder shall have offered
to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuer.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
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SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Issuer shall be sufficient if
signed by an Officer of the Issuer.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Issuer or any
Affiliate of the Issuer with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Issuer's use of the proceeds from the Notes or any money
paid to the Issuer or upon the Issuer's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes
or any other document in connection with the sale of the Notes or pursuant to
this Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of
the Default or Event of Default within 90 days after it occurs. Except in the
case of a Default or Event of Default in payment of Accreted Value, principal
of, premium, if any, or interest on any Note, the Trustee may withhold the
notice if and so long as a committee of its
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Responsible Officers in good faith determines that withholding the notice is
in the interests of the Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA Section 313(a) (but if no event described
in TIA Section 313(a) has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with TIA Section 313(b)(2). Trustee shall also transmit by mail all reports as
required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Issuer and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA Section 313(d).
The Issuer shall promptly notify the Trustee when the Notes are listed on any
stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Issuer shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred
or made by it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Issuer shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Issuer (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Issuer or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Issuer promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Issuer shall not relieve the Issuer of its obligations hereunder. The Issuer
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Issuer shall pay the reasonable fees
and expenses of such counsel. The Issuer need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Issuer under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Issuer's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section 313(b)(2)
to the extent applicable.
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SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Issuer. The Holders of Notes of a
majority in Principal Amount at Maturity of the then outstanding Notes may
remove the Trustee by so notifying the Trustee and the Issuer in writing. The
Issuer may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuer shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in Principal Amount at Maturity of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Issuer.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer, or
the Holders of Notes of at least 10% in Principal Amount at Maturity of the
then outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10, such Holder of a Note may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, PROVIDED
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Issuer's obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
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SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or
state authorities and that has a combined capital and surplus of at least $100
million as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310 (a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Issuer may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Issuer's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Issuer shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Issuer shall
be deemed to have paid and discharged the entire Indebtedness represented by
the outstanding Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Issuer, shall execute proper instruments
acknowledging the same), except for the following provisions which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Notes to receive solely from the trust fund described in
Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest on such Notes when
such payments are due, (b) the Issuer's obligations with respect to such Notes
under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties
and immunities of the Trustee hereunder and the Issuer's obligations in
correction therewith and (d) this Article Eight. Subject to compliance with
this Article Eight, the Issuer may exercise its option under this Section 8.02
notwithstanding the prior exercise of its option under Section 8.03 hereof
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SECTION 8.03. COVENANT DEFEASANCE.
Upon the Issuer's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Issuer shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.04, 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20 and 5.01
hereof with respect to the outstanding Notes on and after the date the
conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for
the purposes of any direction, waiver, consent or declaration or act of Holders
(and the consequences of any thereof) in connection with such covenants, but
shall continue to be deemed "outstanding" for all other purposes hereunder (it
being understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to
the outstanding Notes, the Issuer may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and
such Notes shall be unaffected thereby. In addition, upon the Issuer's
exercise under Section 8.01 hereof of the option applicable to this Section
8.03 hereof, subject to the satisfaction of the conditions set forth in Section
8.04 hereof, Sections 6.01(d) through 6.01(f) hereof shall not constitute
Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Issuer must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-
callable Government Securities, or a combination thereof, in such amounts
as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants or investment bankers, to pay the principal
of, premium and Liquidated Damages, if any, and interest on the
outstanding Notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be;
(b) in the case of an election under Section 8.02 hereof, the Issuer
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Issuer
has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date of this Indenture, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Issuer
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of
the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance
had not occurred;
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(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness all or a portion of
the proceeds of which will be used to defease the Notes pursuant to this
Article Eight concurrently with such incurrence) or insofar as Sections
6.01(g) or 6.01(h) hereof is concerned, at any time in the period ending
on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Issuer or
any of its Subsidiaries is a party or by which the Issuer or any of its
Subsidiaries is bound;
(f) the Issuer shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that
on the 91st day following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally;
(g) the Issuer shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuer with the
intent of preferring the Holders over any other creditors of the Issuer or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Issuer; and
(h) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Issuer acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent
required by law.
The Issuer shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuer from time to time upon the request
of the Issuer any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
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SECTION 8.06. REPAYMENT TO ISSUER.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Issuer, in trust for the payment of the principal of, premium, if
any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Issuer on its request or (if then held by the Issuer) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Issuer for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Issuer as trustee thereof, shall thereupon cease;
PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Issuer cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Issuer.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02
or 8.03 hereof, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Issuer's obligations under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance with Section
8.02 or 8.03 hereof, as the case may be; PROVIDED, HOWEVER, that, if the Issuer
makes any payment of principal of, premium, if any, or interest on any Note
following the reinstatement of its obligations, the Issuer shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Issuer and the
Trustee may amend or supplement this Indenture or the Notes without the consent
of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place
of certificated Notes or to alter the provisions of Article 2 hereof
(including the related definitions) in a manner that does not materially
adversely affect any Holder;
(c) to provide for the assumption of the Issuer's obligations to the
Holders of the Notes by a successor to the Issuer pursuant to Article 5
hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of the Note; or
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(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Issuer accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Issuer in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Issuer and the
Trustee may amend or supplement this Indenture (including Sections 3.09, 4.10
and 4.14 hereof), and the Notes may be amended or supplemented with the consent
of the Holders of at least a majority in Principal Amount at Maturity of the
Notes then outstanding voting as a single class (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of, the
Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or
Event of Default (other than a Default or Event of Default in the payment of
the Accreted Value, principal of, premium, if any, or interest on the Notes,
except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture or the Notes may
be waived with the consent of the Holders of a majority in Principal Amount at
Maturity of the then outstanding Notes voting as a single class (including
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Notes). Section 2.08 hereof shall determine which Notes are
considered to be "outstanding" for purposes of this Section 9.02.
Upon the request of the Issuer accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee shall join with the Issuer in the execution of
such amended or supplemental Indenture unless such amended or supplemental
Indenture directly affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise, in which case the Trustee may in its discretion,
but shall not be obligated to, enter into such amended or supplemental
Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Issuer shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Issuer to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of
a majority in aggregate Principal Amount at Maturity of the Notes then
outstanding voting as a single class may waive compliance in a particular
instance by the Issuer with any provision of this Indenture or the Notes.
However, without the consent of each Holder affected, an amendment or waiver
under this Section 9.02 may not (with respect to any Notes held by a non-
consenting Holder):
(a) reduce the Principal Amount at Maturity of Notes whose Holders
must consent to an amendment, supplement or waiver;
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(b) reduce the principal of or change the fixed maturity of any Note
or alter or waive any of the provisions with respect to the redemption of
the Notes;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of Accreted
Value, principal of or premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate Principal Amount at Maturity of the then outstanding
Notes and a waiver of the payment default that resulted from such
acceleration;
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or interest on the Notes;
(g) waive a redemption payment with respect to any Note (other than
a payment required by Section 4.10 or 4.14 hereof);
(h) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions; or
(i) modify the definition of Accreted Value, Original Principal
Amount at Maturity or Principal Amount at Maturity in any manner adverse
to the Holders.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment
becomes effective. An amendment, supplement or waiver becomes effective in
accordance with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Issuer in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment, supplement or waiver.
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SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. The Issuer may not sign an amendment or supplemental Indenture until
the Board of Directors approves it. In executing any amended or supplemental
indenture, the Trustee shall be entitled to receive and (subject to Section
7.01 hereof) shall be fully protected in relying upon, in addition to the
documents required by Section 10.04 hereof, an Officer's Certificate and an
Opinion of Counsel stating that the execution of such amended or supplemental
indenture is authorized or permitted by this Indenture.
ARTICLE 10.
MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA Section 318(c), the imposed duties shall
control.
SECTION 10.02. NOTICES.
Any notice or communication by the Issuer or the Trustee to the
others is du]y given if in writing and delivered in Person or mailed by first
class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address.
If to the Issuer:
c/o The Restaurant Company
6075 Poplar Ave. Suite 800
Memphis, Tennessee 38119-4709
Telecopier No.: (901) 766-6482
Attention: Steven R. McClellan, Donald F. Wiseman
With a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, IL 60603
Telecopier No.: (312) 706-7711
Attention: James T. Lidbury
If to the Trustee:
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, CT 06103
Telecopier No.: (860) 244-1897
Attention: Steven Cimalore
-62-
<PAGE>
The Issuer or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on
the register kept by the Registrar. Any notice or communication shall also
be so mailed to any Person described in TIA Section 313(c), to the extent
required by the TIA. Failure to mail a notice or communication to a Holder or
any defect in it shall not affect its sufficiency with respect to other
Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Issuer mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 10.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF
NOTES.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Issuer, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Issuer to the Trustee to take
any action under this Indenture, the Issuer shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
-63-
<PAGE>
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 10.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 10.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES
AND STOCKHOLDERS.
No past, present or future director, officer, partner, employee,
incorporator or stockholder of the Issuer, as such, shall have any liability
for any obligations of the Issuer under the Notes, this Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance
of the Notes.
SECTION 10.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE NOTES WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 10.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Issuer or its Subsidiaries or of any other Person.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 10.10. SUCCESSORS.
All agreements of the Issuer in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 10.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
-64-
<PAGE>
SECTION 10.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
-65-
<PAGE>
SECTION 10.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
-66-
<PAGE>
SIGNATURES
Dated as of May 18, 1998
THE RESTAURANT COMPANY
By:
---------------------------------------
Name:
Title:
Attest:
- ---------------------------
STATE STREET BANK AND TRUST COMPANY
By:
---------------------------------------
Name:
Title:
Attest:
- ----------------------------
<PAGE>
EXHIBIT A-1
(Face of Note)
THE RESTAURANT COMPANY
THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF SECTION 1271
ET SEQ. OF THE INTERNAL REVENUE CODE. FOR EACH $1,000 OF ORIGINAL PRINCIPAL
AMOUNT AT MATURITY OF THIS NOTE, THE ISSUE PRICE IS $579.07 AND THE AMOUNT OF
ORIGINAL ISSUE DISCOUNT IS $420.93. THE ISSUE DATE OF THIS NOTE IS MAY 18,
1998 AND THE YIELD TO MATURITY IS 11 1/4%.
11 1/4% Series A Senior Discount Notes due 2008
No. ______
CUSIP NO. ______ $[ ] Original Principal Amount at Maturity
THE RESTAURANT COMPANY, a Delaware corporation (the "Company" or the
"Issuer"), promises to pay to [ ] or registered assigns upon
surrender hereof the principal sum of [ ] Dollars or, if less,
the Accreted Value of this Note, on May 15, 2008.
Interest Payment Dates: May 15 and November 15, commencing on the
earlier of November 15, 2003 or the Interest Payment Date next succeeding the
Semi-Annual Accrual Date with respect to which the Cash Interest Election is
made, and at stated maturity.
THE RESTAURANT COMPANY
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
This is one of the Global Notes
referred to in the within-mentioned
Indenture:
STATE STREET BANK AND TRUST COMPANY,
AS TRUSTEE
By:
-----------------------------
Date:
---------------------------
A-1-1
<PAGE>
(Back of Note)
11 1/4% Series A Senior Discount Notes due 2008
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY
OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE
TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC") TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME
AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED
IN RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES
FOR THE BENEFIT OF THE ISSUER THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE
SECURITIES ACT, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR
(d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO
REQUESTS), (2) TO THE ISSUER OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Cash interest on the Notes will not accrue on the
Notes until May 15, 2003; PROVIDED that if the Company exercises the Cash
Interest Election, cash interest will accrue on the Notes from the Semi-Annual
Accrual Date with respect to which the Cash Interest Election is made. Cash
interest on the Notes will accrue at a rate of 11 1/4% PER ANNUM from and
including the most recent date to which interest has been paid or duly provided
for or, if no interest has been paid or duly provided for, from and including
A-1-2
<PAGE>
the earlier of May 15, 2003 or the Semi-Annual Accrual Date with respect to
which the Cash Interest Election is made, through but excluding the date on
which interest is paid or duly provided for. Interest shall be payable in
arrears on each May 15 and November 15 and at stated maturity, commencing on
the earlier of November 15, 2003 or the Interest Payment Date immediately
following the Semi-Annual Accrual Date with respect to which the Cash Interest
Election is made (or if any such Interest Payment Date is not a Business Day,
on the next succeeding Business Day). Interest will be computed on the basis
of a 360-day year of twelve 30-day months. The Issuer will pay Liquidated
Damages, if any, in cash semi-annually on May 15 and November 15 of each year,
or if any such day is not a Business Day, on the next succeeding Business Day.
Whether or not the Notes are then otherwise accruing cash interest, the Issuer
shall pay cash interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue Accreted Value, principal and premium, if
any, from time to time on demand at a rate that is 1% per annum in excess of
the rate of interest on the Notes (whether or not cash interest is then
accruing or payable). Whether or not the Notes are then otherwise accruing
cash interest, the Issuer shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue installments of interest
and Liquidated Damages (without regard to any applicable grace periods) from
time to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Issuer will pay interest on the Notes
except defaulted interest and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the May 1 or November 1
next preceding the Interest Payment Date, even if such Notes are canceled after
such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to Accreted Value, principal, premium and
Liquidated Damages, if any, and interest at the office or agency of the Issuer
maintained for such purpose within or without the City and State of New York,
or, at the option of the Issuer, payment of interest and Liquidated Damages may
be made by check mailed to the Holders at their addresses set forth in the
register of Holders; and PROVIDED that payment by wire transfer of immediately
available funds will be required with respect to principal of and interest,
premium and Liquidated Damages on, all Global Notes and all other Notes the
Holders of which shall have provided wire transfer instructions to the Issuer
or the Paying Agent. Such payment shall be in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and
Trust Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Issuer may change any Paying Agent or Registrar without notice
to any Holder. The Issuer or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Issuer issued the Notes under an Indenture dated
as of May 18, 1998 ("Indenture") between the Issuer and the Trustee. The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code Sections 77aaa-77bbbb). The Notes are subject to all such terms,
and Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the indenture shall govern and
be controlling. The Notes are obligations of the Issuer limited to $31,100,000
in aggregate Original Principal Amount at Maturity.
5. OPTIONAL REDEMPTION.
(a) The Issuer shall not have the option to redeem the Notes prior
to May 15, 2003. Thereafter, the Issuer shall have the option to redeem the
Notes, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of Principal Amount
at Maturity) set forth below plus accrued and unpaid interest and Liquidated
Damages thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on May 15 of the years indicated below:
A-1-3
<PAGE>
YEAR PERCENTAGE
2003 . . . . . . . . . . . . . . . . . . . 105.625%
2004 . . . . . . . . . . . . . . . . . . . 103.750%
2005 . . . . . . . . . . . . . . . . . . . 101.875%
2006 and thereafter. . . . . . . . . . . . 100.000%
6. MANDATORY REDEMPTION.
On May 15, 2003, the Company will be required to pay accrued and
unpaid interest on the Notes by redeeming an amount per Note equal to the
Accreted Value of such Note on May 15, 2003, LESS the original issue price with
respect to such Note ($597.07 per $1,000 Original Principal Amount at Maturity)
at a redemption price equal to 105.625% of the amount so redeemed; and the
Principal Amount at Maturity of such Note shall thereafter be reduced by the
amount of such payment.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Issuer shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (such
that any Note not tendered for purchase shall be in a denomination equal to
$1,000 Principal Amount at Maturity or an integral multiple thereof) of each
Holder's Notes at a purchase price equal to 101% of the Accreted Value thereof
plus accrued and unpaid interest thereon, if any, and Liquidated Damages
thereon, if any, to the date of purchase (in either case, the "Change of
Control Payment"). Within 10 days following any Change of Control, the Issuer
shall mail a notice to each Holder setting forth the procedures governing the
Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales,
within five days of each date on which the aggregate amount of Excess Proceeds
exceeds $5 million, the Issuer shall commence an offer to all Holders of Notes
(an "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase
the maximum Accreted Value of Notes that may be purchased out of the Excess
Proceeds at an offer price in cash in an amount equal to 100% of the Accreted
Value thereof plus accrued and unpaid interest thereon, if any, and Liquidated
Damages thereon, if any, to the date fixed for the closing of such offer, in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate Accreted Value of Notes tendered pursuant to an Asset Sale Offer
is less than the Excess Proceeds, the Issuer (or such Subsidiary) may use such
deficiency for general corporate purposes. If the aggregate Accreted Value of
Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a PRO RATA basis. Holders of
Notes that are the subject of an offer to purchase will receive an Asset Sale
Offer from the Issuer prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 Principal Amount at Maturity may be optionally
redeemed in part but only in whole multiples of $1,000 Principal Amount at
Maturity, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date, Accreted Value ceases to accrete and interest ceases
to accrue on Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons, originally issued in denominations of $1,000 Original
Principal Amount at Maturity and integral multiples of $1,000 Original
Principal Amount at Maturity. The transfer of Notes may be registered and
Notes may be exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Holder,
A-1-4
<PAGE>
among other things, to furnish appropriate endorsements and transfer
documents and the Issuer may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. The Issuer need not exchange
or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Issuer need not exchange or register the transfer of any
Notes for a period of 15 days before a selection of Notes to be redeemed or
during the period between a record date and the corresponding Interest
Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in Principal Amount at Maturity
of the then outstanding Notes voting as a single class, and any existing
default or compliance with any provision of the Indenture or the Notes may be
waived with the consent of the Holders of a majority in Principal Amount at
Maturity of the then outstanding Notes voting as a single class. Without the
consent of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Issuer's obligations to Holders of the Notes
in case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder or to
comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default
for 30 days in the payment when due of interest or Liquidated Damages on the
Notes; (ii) default in payment when due of Accreted Value, principal of or
premium, if any, on the Notes when the same becomes due and payable at
maturity, upon redemption (including in connection with an offer to purchase)
or otherwise; (iii) failure by the Issuer to comply with Section 4.07, 4.09,
4.10, 4.14 or 5.01 of the Indenture; (iv) failure by the Issuer for 60 days
after notice to the Issuer by the Trustee or the Holders of at least 25% in
Principal Amount at Maturity of the Notes then outstanding voting as a single
class to comply with certain other agreements in the Indenture or the Notes;
(v) default under certain other agreements relating to Indebtedness of the
Issuer which default results in the acceleration of such Indebtedness prior to
its express maturity; (vi) certain final judgments for the payment of money
that remain undischarged for a period of 60 days; or (vii) certain events of
bankruptcy or insolvency with respect to the Issuer or any of its Significant
Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in Principal Amount at Maturity of the then
outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without farther action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in Principal Amount at Maturity of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of Accreted Value, principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in
aggregate Principal Amount at Maturity of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal or Accreted Value of, the Notes. The Issuer is required to
deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Issuer is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
A-1-5
<PAGE>
13. TRUSTEE DEALINGS WITH ISSUER. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Issuer or its Affiliates, and may otherwise deal with the
Issuer or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, partner,
employee, incorporator or stockholder, of the Issuer, as such, shall not have
any liability for any obligations of the Issuer under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
15. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A
(= Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of May 18, 1998, between the Issuer and
the parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuer has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Issuer will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
The Restaurant Company
6075 Poplar Avenue
Suite 800
Memphis, Tennessee 38117
Attention: Chief Financial Officer
A-1-6
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- ------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ------------------------------------------------------
to transfer this Note on the books of the Issuer. The agent may substitute
another to act for him.
- ------------------------------------------------------------------------------
Date:___________________
Your Signature:
---------------------------------
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee.
A-1-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuer
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.14
If you want to elect to have only part of the Note purchased by the
Issuer pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
Principal Amount at Maturity you elect to have purchased: $__________
Date: _____________ Your Signature:________________________
(Sign exactly as your name appears
on the Note)
Tax Identification No:________________
Signature Guarantee.
A-1-8
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
Principal Amount at
Amount of decrease Amount of increase Maturity of this Signature of
in Principal Amount in Principal Amount Global Note following authorized officer
Date of at Maturity of this at Maturity of this such decrease (or of Trustee or Note
Exchange Global Note Global Note increase) Custodian
- -------- ------------------- ------------------- --------------------- -------------------
<S> <C> <C> <C> <C>
</TABLE>
A-1-9
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
THE RESTAURANT COMPANY
THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF SECTION 1271
ET SEQ. OF THE INTERNAL REVENUE CODE. FOR EACH $1,000 OF ORIGINAL PRINCIPAL
AMOUNT AT MATURITY OF THIS NOTE, THE ISSUE PRICE IS $579.07 AND THE AMOUNT OF
ORIGINAL ISSUE DISCOUNT IS $420.93. THE ISSUE DATE OF THIS NOTE IS MAY 18,
1998 AND THE YIELD TO MATURITY IS 11-1/4%.
11-1/4% Series A Senior Discount Notes due 2008
No. ______
CUSIP NO. ______ $[ ] Original Principal Amount at Maturity
THE RESTAURANT COMPANY, a Delaware corporation (the "Company" or the
"Issuer"), promises to pay to [ ] or registered assigns upon
surrender hereof the principal sum of [ ] Dollars or, if less,
the Accreted Value of this Note, on May 15, 2008.
Interest Payment Dates: May 15 and November 15, commencing on the
earlier of November 15, 2003 or the Interest Payment Date next succeeding the
Semi-Annual Accrual Date with respect to which the Cash Interest Election is
made, and at stated maturity.
THE RESTAURANT COMPANY
By:
-------------------------------------------
Name:
Title:
By:
-------------------------------------------
Name:
Title:
This is one of the Global Notes
referred to in the within-mentioned
Indenture:
STATE STREET BANK AND TRUST COMPANY,
AS TRUSTEE
By:
-----------------------------------
Date:
---------------------------------
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<PAGE>
(Back of Regulation S Temporary Global Note)
11 1/4% Series A Senior Discount Notes due 2008
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATE D NOTES, ARE
AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED
IN RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES
FOR THE BENEFIT OF THE ISSUER THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE
SECURITIES ACT, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR
(d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO
REQUESTS), (2) TO THE ISSUER OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
reset free sequence numbers
1. INTEREST. Cash interest on the Notes will not accrue on the
Notes until May 15, 2003; PROVIDED that if the Company exercises the Cash
Interest Election, cash interest will accrue on the Notes from the Semi-Annual
Accrual Date with respect to which the Cash Interest Election is made. Cash
interest on the Notes will accrue at a rate of 11 1/4% PER ANNUM from and
including the most recent date to which interest has been paid or duly provided
for or, if no interest has been paid or duly provided for, from and including
the earlier of May 15, 2003 or the Semi-Annual Accrual Date with respect to
which the Cash Interest Election is made through but excluding the date on
which interest is paid or duly provided for. Interest shall be payable in
arrears on each May 15 and November 15 and at stated maturity, commencing on
the earlier of November 15, 2003 or the Interest Payment Date immediately
following the Semi-Annual Accrual Date with respect to which the Cash Interest
Election is made (or if any such Interest Payment Date is not a Business Day,
on the next succeeding Business Day). Interest will be computed on the basis
of a 360-day year of twelve 30-day months. The Issuer will pay Liquidated
Damages, if any, in cash semi-annually on May 15 and November 15 of each year,
or if any such day is not a Business Day, on the next succeeding Business Day.
Whether or not the Notes are then otherwise accruing cash interest, the Issuer
shall pay cash interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue Accreted Value, principal and premium, if
any, from time to time on demand at a rate that is 1% per annum in excess of
the rate of interest on the Notes (whether or not cash interest is then
accruing or payable). Whether or not the Notes are then otherwise accruing
cash interest, the Issuer shall pay interest (including
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<PAGE>
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. METHOD OF PAYMENT. The Issuer will pay interest on the Notes
except defaulted interest and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the May 1 or November 1
next preceding the Interest Payment Date, even if such Notes are canceled after
such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to Accreted Value, principal, premium and
Liquidated Damages, if any, and interest at the office or agency of the Issuer
maintained for such purpose within or without the City and State of New York,
or, at the option of the Issuer, payment of interest and Liquidated Damages may
be made by check mailed to the Holders at their addresses set forth in the
register of Holders; and PROVIDED that payment by wire transfer of immediately
available funds will be required with respect to principal of and interest,
premium and Liquidated Damages on, all Global Notes and all other Notes the
Holders of which shall have provided wire transfer instructions to the Issuer
or the Paying Agent. Such payment shall be in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and
Trust Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Issuer may change any Paying Agent or Registrar without notice
to any Holder. The Issuer or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Issuer issued the Notes under an Indenture
dated as of May 18, 1998 ("Indenture") between the Issuer and the Trustee.
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all
such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. To the extent any provision of this Note conflicts
with the express provisions of the Indenture, the provisions of the indenture
shall govern and be controlling. The Notes are obligations of the Issuer
limited to $31,100,000 in aggregate Original Principal Amount at Maturity.
5. OPTIONAL REDEMPTION.
(a) The Issuer shall not have the option to redeem the Notes prior
to May 15, 2003. Thereafter, the Issuer shall have the option to redeem the
Notes, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of Principal Amount
at Maturity) set forth below plus accrued and unpaid interest and Liquidated
Damages thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on May 15 of the years indicated below:
YEAR PERCENTAGE
2003 . . . . . . . . . . . . . . . . . . . 105.625%
2004 . . . . . . . . . . . . . . . . . . . 103.750%
2005 . . . . . . . . . . . . . . . . . . . 101.875%
2006 and thereafter. . . . . . . . . . . . 100.000%
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<PAGE>
6. MANDATORY REDEMPTION.
On May 15, 2003, the Company will be required to pay accrued and
unpaid interest on the Notes by redeeming an amount per Note equal to the
Accreted Value of such Note on May 15, 2003, LESS the original issue price with
respect to such Note ($597.07 per $1,000 Original Principal Amount at Maturity)
at a redemption price equal to 105.625% of the amount so redeemed; and the
Principal Amount at Maturity of such Note shall thereafter be reduced by the
amount of such payment.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Issuer shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (such
that any Note not tendered for purchase shall be in a denomination equal to
$1,000 Principal Amount at Maturity or an integral multiple thereof) of each
Holder's Notes at a purchase price equal to 101% of the Accreted Value thereof
plus accrued and unpaid interest thereon, if any, and Liquidated Damages
thereon, if any, to the date of purchase (in either case, the "Change of
Control Payment"). Within 10 days following any Change of Control, the Issuer
shall mail a notice to each Holder setting forth the procedures governing the
Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales,
within five days of each date on which the aggregate amount of Excess Proceeds
exceeds $5 million, the Issuer shall commence an offer to all Holders of Notes
(an "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase
the maximum Accreted Value of Notes that may be purchased out of the Excess
Proceeds at an offer price in cash in an amount equal to 100% of the Accreted
Value thereof plus accrued and unpaid interest thereon, if any, and Liquidated
Damages thereon, if any, to the date fixed for the closing of such offer, in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate Accreted Value of Notes tendered pursuant to an Asset Sale Offer
is less than the Excess Proceeds, the Issuer (or such Subsidiary) may use such
deficiency for general corporate purposes. If the aggregate Accreted Value of
Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a PRO RATA basis. Holders of
Notes that are the subject of an offer to purchase will receive an Asset Sale
Offer from the Issuer prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 Principal Amount at Maturity may be optionally
redeemed in part but only in whole multiples of $1,000 Principal Amount at
Maturity, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date, Accreted Value ceases to accrete and interest ceases
to accrue on Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 Original Principal Amount at
Maturity and integral multiples of $1,000 Original Principal Amount at
Maturity. The transfer of Notes may be registered and Notes may be exchanged
as provided in the Indenture. The Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and the Issuer may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. The Issuer need not exchange or
register the transfer of any Note or portion of a Note selected for redemption,
except for the unredeemed portion of any Note being redeemed in part. Also,
the Issuer need not exchange or register the transfer of any Notes for a period
of 15 days before a selection of Notes to be redeemed or during the period
between a record date and the corresponding Interest Payment Date.
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<PAGE>
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in Principal Amount at Maturity
of the then outstanding Notes voting as a single class, and any existing
default or compliance with any provision of the Indenture or the Notes may be
waived with the consent of the Holders of a majority in Principal Amount at
Maturity of the then outstanding Notes voting as a single class. Without the
consent of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Issuer's obligations to Holders of the Notes
in case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder or to
comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default
for 30 days in the payment when due of interest or Liquidated Damages on the
Notes; (ii) default in payment when due of Accreted Value, principal of or
premium, if any, on the Notes when the same becomes due and payable at
maturity, upon redemption (including in connection with an offer to purchase)
or otherwise; (iii) failure by the Issuer to comply with Section 4.07, 4.09,
4.10, 4.14 or 5.01 of the Indenture; (iv) failure by the Issuer for 60 days
after notice to the Issuer by the Trustee or the Holders of at least 25% in
Principal Amount at Maturity of the Notes then outstanding voting as a single
class to comply with certain other agreements in the Indenture or the Notes;
(v) default under certain other agreements relating to Indebtedness of the
Issuer which default results in the acceleration of such Indebtedness prior to
its express maturity; (vi) certain final judgments for the payment of money
that remain undischarged for a period of 60 days; or (vii) certain events of
bankruptcy or insolvency with respect to the Issuer or any of its Significant
Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in Principal Amount at Maturity of the then
outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without farther action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in Principal Amount at Maturity of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of Accreted Value, principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in
aggregate Principal Amount at Maturity of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal or Accreted Value of, the Notes. The Issuer is required to
deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Issuer is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. TRUSTEE DEALINGS WITH ISSUER. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Issuer or its Affiliates, and may otherwise deal with the
Issuer or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, partner,
employee, incorporator or stockholder, of the Issuer, as such, shall not have
any liability for any obligations of the Issuer under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or
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<PAGE>
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
15. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A
(= Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of May 18, 1998, between the Issuer and
the parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuer has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Issuer will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
The Restaurant Company
6075 Poplar Avenue
Suite 800
Memphis, Tennessee 38117
Attention: Chief Financial Officer
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<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- ------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint_______________________________________________________
to transfer this Note on the books of the Issuer. The agent may substitute
another to act for him.
- ------------------------------------------------------------------------------
Date:___________________
Your Signature:_________________________________
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee.
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuer
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.14
If you want to elect to have only part of the Note purchased by the
Issuer pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
Principal Amount at Maturity you elect to have purchased: $__________
Date: _____________ Your Signature:_________________________
(Sign exactly as your name appears
on the Note)
Tax Identification No.:_________________
Signature Guarantee.
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<PAGE>
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this Regulation S Temporary Global Note, have
been made:
<TABLE>
Principal Amount at
Amount of decrease Amount of increase Maturity of this Signature of
in Principal Amount in Principal Amount Global Note following authorized officer
Date of at Maturity of this at Maturity of this such decrease (or of Trustee or Note
Exchange Global Note Global Note increase) Custodian
- -------- ------------------- ------------------- --------------------- -------------------
<S> <C> <C> <C> <C>
</TABLE>
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<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
The Restaurant Company
6075 Poplar Avenue
Suite 800
Memphis, TN 38119
State Street Bank and Trust Company
225 Asylum Street
Hartford, CT 06103
Re: 11-1/4% SENIOR DISCOUNT NOTES DUE 2008
Reference is hereby made to the Indenture, dated as of May 18, 1998
(the "INDENTURE"), between The Restaurant Company, as issuer (the "ISSUER"),
and State Street Bank and Trust Company, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
________________ (the "TRANSFEROR") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
Principal Amount at Maturity of $__________ in such Note[s] or interests (the
"TRANSFER"), to _____________ (the "TRANSFEREE"), as further specified in Annex
A hereto. In connection with the Transfer, the Transferor hereby certifies
that:
[CHECK ALL THAT APPLY]
1. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "SECURITIES ACT"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Note for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and
such Person and each such account is a "qualified institutional buyer" within
the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A
and such Transfer is in compliance with any applicable blue sky securities laws
of any state of the United States. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the 144A Global Note
and/or the Definitive Note and in the Indenture and the Securities Act.
2. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A
DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities
Act and, accordingly, the Transferor hereby further certifies that (i) the
Transfer is not being made to a person in the United States and (x) at the time
the buy order was originated, the Transferee was outside the United States or
such Transferor and any Person acting on its behalf reasonably believed and
believes that the Transferee was outside the United States or (y) the
transaction was executed in, on or through the facilities of a designated
offshore securities market and neither such Transferor nor any Person acting on
its behalf knows that the transaction was prearranged with a buyer in the
United States, (ii) no directed selling efforts have been made in contravention
of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the
Securities Act, (iii) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act and (iv) if the proposed
transfer is being made prior to the expiration of the Restricted Period, the
transfer is
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<PAGE>
not being made to a U.S. Person or for the account or benefit of a U.S.
Person (other than an Initial Purchaser). Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
Transfer enumerated in the Private Placement Legend printed on the Regulation
S Global Note, the Temporary Regulation S Global Note and/or the Definitive
Note and in the Indenture and the Securities Act.
3. / / CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT
OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in
compliance with the transfer restrictions applicable to beneficial interests in
Restricted Global Notes and Restricted Definitive Notes and pursuant to and in
accordance with the Securities Act and any applicable blue sky securities laws
of any state of the United States, and accordingly the Transferor hereby
further certifies that (check one):
(a) / / such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) / / such Transfer is being effected to one of the Issuer or a
subsidiary thereof;
or
(c) / / such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) / / such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or
Rule 904, and the Transferor hereby further certifies that it has not
engaged in any general solicitation within the meaning of Regulation D
under the Securities Act and the Transfer complies with the transfer
restrictions applicable to beneficial interests in a Restricted Global
Note or Restricted Definitive Notes and the requirements of the
exemption claimed, which certification is supported by (1) a certificate
executed by the Transferee in the form of Exhibit D to the Indenture and
(2) an Opinion of Counsel provided by the Transferor or the Transferee
(a copy of which the Transferor has attached to this certification), to
the effect that such Transfer is in compliance with the Securities Act.
Upon consummation of the proposed transfer in accordance with the terms
of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Definitive Notes and in the
Indenture and the Securities Act.
4. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN
UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) / / CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any state of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will no
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<PAGE>
longer be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(b) / / CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) / / CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Issuer.
---------------------------------------------
[Insert Name of Transferor]
By:
------------------------------------------
Name:
Title:
Dated: _________________, ____
B-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP ________), or
(ii) / / Regulation S Global Note (CUSIP _______), or
(b) / / a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP _______), or
(ii) / / Regulation S Global Note (CUSIP ________), or
(iii) / / Unrestricted Global Note (CUSIP ________), or
(b) a Restricted Definitive Note; or
(c) an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
The Restaurant Company
6075 Poplar Avenue
Suite 800
Memphis, TN 38119
State Street Bank and Trust Company
225 Asylum Street
Hartford, CT 06103
Re: 11 1/4% SENIOR DISCOUNT NOTES DUE 2008
(CUSIP _________)
Reference is hereby made to the Indenture, dated as of May 18, 1998
(the "INDENTURE"), between The Restaurant Company (the "ISSUER") and State
Street Bank and Trust Company, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
_______________ (the "OWNER") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the Principal Amount
at Maturity of $____________ in such Note[s] or interests (the "EXCHANGE"). In
connection with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL
INTERESTS IN AN UNRESTRICTED GLOBAL NOTE
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE.
In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Note for a beneficial interest in an Unrestricted Global
Note in an equal Principal Amount at Maturity , the Owner hereby certifies
(i) the beneficial interest is being acquired for the Owner's own account
without transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Global Notes and pursuant to and in
accordance with the United States Securities Act of 1933, as amended (the
"SECURITIES ACT"), (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest
in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with
the Exchange of the Owner's beneficial interest in a Restricted Global Note
for an Unrestricted Definitive Note, the Owner hereby certifies (i) the
Definitive Note is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant
to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Definitive Note is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
(c) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in
an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial
interest is
C-1
<PAGE>
being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest
is being acquired in compliance with any applicable blue sky securities laws
of any state of the United States.
(d) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner
hereby certifies (i) the Unrestricted Definitive Note is being acquired for
the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Unrestricted Definitive Note
is being acquired in compliance with any applicable blue sky securities laws
of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal Principal Amount at Maturity, the
Owner hereby certifies that the Restricted Definitive Note is being acquired
for the Owner's own account without transfer. Upon consummation of the
proposed Exchange in accordance with the terms of the Indenture, the
Restricted Definitive Note issued will continue to be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed
on the Restricted Definitive Note and in the Indenture and the Securities Act.
(b) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest
in the [CHECK ONE] "144A Global Note," Regulation S Global Note, with an
equal Principal Amount at Maturity, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant
to and in accordance with the Securities Act, and in compliance with any
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Exchange in accordance with the terms of the
Indenture, the beneficial interest issued will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the
relevant Restricted Global Note and in the Indenture and the Securities Act.
C-2
<PAGE>
This certificate and the statements contained herein are made for
your benefit and the benefit of the Issuer.
---------------------------------------------
[Insert Name of Owner]
By:
------------------------------------------
Name:
Title:
Dated: ___________________, ____
C-3
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
State Street Bank and Trust Company
225 Asylum Street
Hartford, CT 06103
Re: 11 1/4% SENIOR DISCOUNT NOTES DUE 2008
Reference is hereby made to the Indenture, dated as of May 18, 1998
(the "INDENTURE"), between The Restaurant Company (the "ISSUER") and State
Street Bank and Trust Company, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $ aggregate
Principal Amount at Maturity of:
(a) / / a beneficial interest in a Global Note, or
(b) / / a Definitive Note,
we confirm that:
1 . We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set fourth
in the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "SECURITIES ACT").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest
therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which
we are acting as hereinafter stated, that if we should sell the Notes or any
interest therein, we will do so only (A) to the Issuer or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (c) to an institutional
"accredited investor" (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and
to the Issuer a signed letter substantially in the form of this letter and an
Opinion of Counsel in form reasonably acceptable to the Issuer to the effect
that such transfer is in compliance with the Securities Act, (D) outside the
United States in accordance with Rule 904 of Regulation S under the Securities
Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or
(F) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing the Definitive Note or
beneficial interest in a Global Note from us in a transaction meeting the
requirements of clauses (A) through (E) of this paragraph a notice advising
such purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Issuer such certifications, legal opinions and other in-
<PAGE>
formation as you and the Issuer may reasonably require to confirm that the
proposed sale complies with the foregoing restrictions. We further
understand that the Notes purchased by us will bear a legend to the foregoing
effect. We further understand that any subsequent transfer by us of the
Notes or beneficial interest therein acquired by us must be effected through
the Registrar.
4. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Issuer are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
---------------------------------------------
[Insert Name of Accredited Investor]
By:
------------------------------------------
Name:
Title:
Dated: ____________________, ____
<PAGE>
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of May 18, 1998
by and among
The Restaurant Company
and
Salomon Brothers Inc
BancBoston Securities Inc.
<PAGE>
This Registration Rights Agreement (this "AGREEMENT") is made and entered
into as of May 18, 1998, by and among The Restaurant Company (the "COMPANY" or
the "ISSUER"), and Salomon Brothers Inc and BancBoston Securities Inc. (each an
"INITIAL PURCHASER" and, collectively, the "INITIAL PURCHASERS"), each of whom
has agreed to purchase the Issuer's 11 1/4% Series A Senior Discount Notes due
2008 (the "SERIES A NOTES") pursuant to the Purchase Agreement (as defined
below).
This Agreement is made pursuant to the Purchase Agreement, dated May 13,
1998, (the "PURCHASE AGREEMENT"), by and among the Issuer and the Initial
Purchasers. In order to induce the Initial Purchasers to purchase the Series A
Notes, the Issuer has agreed to provide the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the obligations of the Initial Purchasers set forth in Section 8 of the
Purchase Agreement. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the Indenture, dated May 18, 1998,
between the Issuer and State Street Bank and Trust Company of Connecticut,
N.A., as Trustee, relating to the Series A Notes and the Series B Notes (the
"INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
CERTIFICATED SECURITIES: Definitive Notes, as defined in the Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the Series B
Notes to be issued in the Exchange Offer, (b) the maintenance of such Exchange
Offer Registration Statement continuously effective and the keeping of the
Exchange Offer open for a period not less than the period required pursuant to
Section 3(b) hereof and (c) the delivery by the Issuer to the Registrar under
the Indenture of Series B Notes in the same aggregate Principal Amount at
Maturity (as
<PAGE>
defined in the Indenture) as the aggregate Principal Amount at Maturity of
Series A Notes tendered by Holders thereof pursuant to the Exchange Offer.
EFFECTIVENESS DEADLINE: As defined in Section 3(a) and 4(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The exchange and issuance by the Issuer of a Principal
Amount at Maturity of Series B Notes (which shall be registered pursuant to the
Exchange Offer Registration Statement) equal to the outstanding Principal
Amount at Maturity of Series A Notes that are tendered by such Holders in
connection with such exchange and issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchasers propose
to sell the Series A Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act or pursuant to Regulation S under
the Act.
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
HOLDERS: As defined in Section 2 hereof.
INDEMNIFIED HOLDER: As defined in Section 8(a) hereof.
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including any post-effective amendments, and all material incorporated by
reference into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Issuer relating
to (a) an offering of Series B Notes pursuant to an Exchange Offer or (b) the
registration for resale of Transfer Restricted Securities pursuant to the Shelf
Registration Statement, in each case, (i) that is filed pursuant to the
provisions of this Agreement and (ii) including the Prospectus included
therein, all amendments and supplements thereto (including any post-effective
amendments) and all exhibits thereto and material incorporated by reference
therein.
REGULATION S: Regulation S promulgated under the Act.
-2-
<PAGE>
RESTRICTED BROKER-DEALER: Any Broker-Dealer that holds Series B Notes
that were acquired in the Exchange Offer in exchange for Series A Notes that
such Broker-Dealer acquired for its own account as a result of market making
activities or other trading activities (other than Series A Notes acquired
directly from the Issuer or any of its affiliates).
RULE 144: Rule 144 promulgated under the Act.
SERIES B NOTES: The Issuer's 11 1/4% Series B Senior Notes due 2008 to
be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 4 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Note, until the earliest to occur of
(a) the date on which such Note is exchanged in the Exchange Offer and entitled
to be resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Act, (b) the date on which such Note
has been disposed of in accordance with a Shelf Registration Statement, (c) the
date on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan
of Distribution" contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein) or (d) the date on
which such Note is distributed to the public pursuant to Rule 144 under the
Act.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have
been complied with), the Issuer shall (i) cause the Exchange Offer
Registration Statement to be filed with the Commission as soon as practicable
after the Closing Date (the "EXCHANGE OFFER FILING DATE"), but in no event
later than 45 days after the Closing Date (such 45th day being the "FILING
DEADLINE"), (ii) use all commercially reasonable efforts to cause such
Exchange Offer Registration Statement to become effective at the earliest
possible time, but in no event later than 120 days after the Closing Date
(such 120th day being the "EFFECTIVENESS DEADLINE"), (iii) in connection with
the foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause it to become
effective, (B) file, if applicable, a
-3-
<PAGE>
post-effective amendment to such Exchange Offer Registration Statement
pursuant to Rule 430A under the Act and (C) cause all necessary filings, if
any, in connection with the registration and qualification of the Series B
Notes to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Exchange Offer Registration Statement, commence and
Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting registration of the Series B Notes to be offered
in exchange for the Series A Notes that are Transfer Restricted Securities
and to permit resales of Series B Notes by Broker-Dealers that tendered into
the Exchange Offer for Series A Notes that such Broker-Dealer acquired for
its own account as a result of market making activities or other trading
activities (other than Series A Notes acquired directly from the Issuer or
any of its Affiliates) as contemplated by Section 3(c) below.
(b) The Issuer shall use all commercially reasonable efforts to cause the
Exchange Offer Registration Statement to be effective continuously, and shall
keep the Exchange Offer open for a period of not less than the minimum period
required under applicable federal and state securities laws to Consummate the
Exchange Offer; PROVIDED, HOWEVER, that in no event shall such period be less
than 20 Business Days. The Issuer shall cause the Exchange Offer to comply
with all applicable federal and state securities laws. No securities other
than the Series B Notes shall be included in the Exchange Offer Registration
Statement. The Issuer shall use all commercially reasonable efforts to cause
the Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 Business Days thereafter.
(c) The Issuer shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any BrokerDealer who holds Transfer Restricted
Securities that were acquired for the account of such Broker-Dealer as a
result of market-making activities or other trading activities (other than
Transfer Restricted Securities acquired directly from the Issuer or any
Affiliate of the Issuer), may exchange such Transfer Restricted Securities
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to
be an "underwriter" within the meaning of the Act and must, therefore,
deliver a prospectus meeting the requirements of the Act in connection with
their initial sale of any Series B Notes received by such Broker-Dealer in
the Exchange Offer and that the Prospectus contained in the Exchange Offer
Registration Statement may be used to satisfy such prospectus delivery
requirement. Such "Plan of Distribution" section shall also contain all
other information with respect to such sales by such Broker-Dealers that the
Commission may require in order to permit such sales pursuant thereto, but
such "Plan of Distribution" shall not name any such Broker-Dealer or disclose
the amount of Transfer Restricted Securities held by any such Broker-Dealer,
except to the extent required by the Commission as a result of a change in
policy, rules or regulations after the date of this Agreement. See the
SHEARMAN & STERLING no-action letter (available July 2, 1993).
-4-
<PAGE>
To the extent necessary to ensure that the Exchange Offer Registration
Statement is available for sales of Series B Notes by Broker-Dealers, the
Issuer agrees to use all commercially reasonable efforts to keep the Exchange
Offer Registration Statement continuously effective, supplemented and amended
as required by the provisions of Section 6(c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of 180 days from
the date on which the Exchange Offer is Consummated, or such shorter period as
will terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold pursuant thereto. The Issuer shall
promptly provide sufficient copies of the latest version of such Prospectus to
such Broker-Dealers promptly upon request, and in no event later than two
Business Days after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(A) SHELF REGISTRATION. If (i) the Exchange Offer is not permitted by
applicable law (after the Issuer has complied with the procedures set forth in
Section 6(a)(i) below) or (ii) if any Holder of Transfer Restricted Securities
shall notify the Issuer within 20 Business Days following the Consummation of
the Exchange Offer that (A) such Holder was prohibited by law or Commission
policy from participating in the Exchange Offer or (B) such Holder may not
resell the Series B Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the Prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales
by such Holder or (C) such Holder is a Broker-Dealer and holds Series A Notes
acquired directly from the Issuer or any of its Affiliates, then the Issuer
shall:
(x) cause to be filed, on or prior to 30 days after the earlier of (i)
the date on which the Issuer determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Issuer receives the notice specified in clause (a) (ii) above,
(such earlier date, the "FILING DEADLINE"), a shelf registration statement
pursuant to Rule 415 under the Act (which may be an amendment to the Exchange
Offer Registration Statement (the "SHELF REGISTRATION STATEMENT")), relating to
all Transfer Restricted Securities the Holders of which shall have provided the
information required pursuant to Section 4(b) hereof, and
(y) use all commercially reasonable efforts to cause such Shelf
Registration Statement to become effective on or prior to 90 days after the
Filing Deadline (such 90th day the "EFFECTIVENESS DEADLINE").
If, after the Issuer has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Issuer is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law, then the filing
of the Exchange Offer Registration Statement shall be deemed to
-5-
<PAGE>
satisfy the requirements of clause (x) above; PROVIDED that, in such event,
the Issuer shall remain obligated to meet the Effectiveness Deadline set
forth in clause (y).
The Issuer shall use all commercially reasonable efforts to keep any Shelf
Registration Statement required by this Section 4(a) continuously effective,
supplemented and amended as required by and subject to the provisions of
Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a), and to ensure that it conforms
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
at least two years (as extended pursuant to Section 6(c)(i)) following the date
on which such Shelf Registration Statement first becomes effective under the
Act, or such shorter period as will terminate when all Transfer Restricted
Securities covered by such Registration Statement have been sold pursuant
thereto.
(B) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Issuer in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information
previously furnished to the Issuer by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any
such Registration Statement has not been declared effective by the Commission
on or prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer
has not been Consummated within 30 Business Days after the Exchange Offer
Registration Statement is first declared effective by the Commission or (iv)
any Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded immediately (but in any event
within three Business Days thereafter) by a post-effective amendment to such
Registration Statement that cures such failure and that is itself declared
effective within such three Business Day period (each such event referred to in
clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the Issuer hereby
agrees to pay to each Holder of Transfer Restricted Securities affected thereby
liquidated damages in an amount equal to $.05 per week per $1,000 in average
Accreted Value of Transfer Restricted Securities held by such Holder for each
week or portion thereof that the Registration Default
-6-
<PAGE>
continues for the first 90-day period immediately following the occurrence of
such Registration Default. The amount of the liquidated damages shall
increase by an additional $.05 per week per $1,000 in average Accreted Value
of Transfer Restricted Securities with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum
amount of liquidated damages of $.50 per week per $1,000 in average Accreted
Value of Transfer Restricted Securities; PROVIDED that the Issuer shall in no
event be required to pay liquidated damages for more than one Registration
Default at any given time. Notwithstanding anything to the contrary set forth
herein, (1) upon filing of the Exchange Offer Registration Statement (and/or,
if applicable, the Shelf Registration Statement), in the case of (i) above,
(2) upon the effectiveness of the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement), in the case of
(ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii)
above, or (4) upon the filing of a post-effective amendment to the
Registration Statement or an additional Registration Statement that causes
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement) to again be declared effective or made usable in the
case of (iv) above, the liquidated damages payable with respect to the
Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or
(iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture,
on each November 15 and May 15, as more fully set forth in the Indenture and
the Notes. All obligations of the Issuer set forth in the preceding paragraph
that are outstanding with respect to any Transfer Restricted Security at the
time such security ceases to be a Transfer Restricted Security shall survive
until such time as all such obligations with respect to such Security shall
have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the
Exchange Offer, the Issuer shall comply with all applicable provisions of
Section 6(c) below, shall use all commercially reasonable efforts to effect
such exchange and to permit the resale of Series B Notes by Broker-Dealers that
tendered in the Exchange Offer Series A Notes that such Broker-Dealer acquired
for its own account as a result of its market making activities or other
trading activities (other than Series A Notes acquired directly from the Issuer
or any of its Affiliates) being sold in accordance with the intended method or
methods of distribution thereof, and shall comply with all of the following
provisions:
(i) If, following the date hereof there has been announced a change
in Commission policy with respect to exchange offers such as the
Exchange Offer, that in the reasonable opinion of counsel to the
Issuer raises a substantial question as to whether the Exchange Offer
is permitted by applicable federal law, the Issuer hereby agrees to
seek a no-action letter or other favorable decision from the
-7-
<PAGE>
Commission allowing the Issuer to Consummate an Exchange Offer for
such Transfer Restricted Securities. The Issuer hereby agrees to
pursue the issuance of such a decision to the Commission staff level.
In connection with the foregoing, the Issuer hereby agrees to take
all such other actions as may be requested by the Commission or
otherwise required in connection with the issuance of such decision,
including without limitation (A) participating in telephonic
conferences with the Commission, (B) delivering to the Commission
staff an analysis prepared by counsel to the Issuer setting forth the
legal bases, if any, upon which such counsel has concluded that such
an Exchange Offer should be permitted and (C) diligently pursuing a
resolution (which need not be favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without
limitation, any Holder who is a BrokerDealer) shall furnish, upon the
request of the Issuer, prior to the Consummation of the Exchange
Offer, a written representation to the Issuer (which may be contained
in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an Affiliate
of the Issuer, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Series B Notes to be issued in
the Exchange Offer and (C) it is acquiring the Series B Notes in its
ordinary course of business. Each Holder using the Exchange Offer to
participate in a distribution of the Series B Notes hereby
acknowledges and agrees that, if the resales are of Series B Notes
obtained by such Holder in exchange for Series A Notes acquired
directly from the Issuer or an Affiliate thereof, it (1) could not,
under Commission policy as in effect on the date of this Agreement,
rely on the position of the Commission enunciated in MORGAN STAN1EY
AND CO., INC. (available June 5, 1991) and EXXON CAPITAL HOLDINGS
CORPORATION (available May 13, 1988), as interpreted in the
Commission's letter to SHEARMAN & STERLING dated July 2, 1993, and
similar no-action letters (including, if applicable, any no-action
letter obtained pursuant to clause (i) above), and (2) must comply
with the registration and prospectus delivery requirements of the Act
in connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of
Regulation S-K.
(iii) To the extent required by the Commission, prior to
effectiveness of the Exchange Offer Registration Statement, the
Issuer shall provide a supplemental letter to the Commission (A)
stating that the Issuer is registering the Exchange Offer in reliance
on the position of the Commission enunciated in EXXON CAPITAL
HOLDINGS CORPORATION (available May 13, 1988), MORGAN STANLEY AND
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CO., INC. (available June 5, 1991) as interpreted in the Commission's
letter to SHEARMAN & STERLING dated July 2, 1993, and, if applicable,
any no-action letter obtained pursuant to clause (i) above, (B)
including a representation that the Issuer has not entered into any
arrangement or understanding with any Person to distribute the Series
B Notes to be received in the Exchange Offer and that, to the best of
the Issuer's information and belief, each Holder participating in the
Exchange Offer is acquiring the Series B Notes in its ordinary course
of business and has no arrangement or understanding with any Person
to participate in the distribution of the Series B Notes received in
the Exchange Offer and (C) any other undertaking or representation
required by the Commission as set forth in any no-action letter
obtained pursuant to clause (i) above, if applicable.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Issuer shall comply with all the provisions of
Section 6(c) below and shall use its best efforts to effect such registration
to permit the sale of the Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof (as
indicated in the information furnished to the Issuer pursuant to Section 4(b)
hereof), and pursuant thereto the Issuer will prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof.
(c) GENERAL PROVISIONS. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Issuer shall:
(i) use all commercially reasonable efforts to keep such
Registration Statement continuously effective and provide all
requisite financial statements for the period specified in Section 3
or 4 of this Agreement, as applicable. Upon the occurrence of any
event that would cause any such Registration Statement or the
Prospectus contained therein (A) to contain a material misstatement
or omission or (B) not to be effective and usable for resale of
Transfer Restricted Securities during the period required by this
Agreement, the Issuer shall file promptly an appropriate amendment to
such Registration Statement curing such defect, and, if Commission
review is required, use all commercially reasonable efforts to cause
such amendment to be declared effective as soon as practicable.
Notwithstanding the foregoing, if (A) the Board of Directors of the
Company determines in good faith that it is in the best interests of
the Issuer not to disclose the existence of or facts surrounding any
proposed or pending material transaction involving either of the
Issuer or its subsidiaries and (B) the Issuer notifies the Holders
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within two Business Days after the Board of Directors makes such
determination, the Issuer may allow the Shelf Registration Statement
to fail to be effective and usable as a result of such nondisclosure
for up to 60 days during the two-year period of effectiveness
required by Section 4 hereof, but in no event for any period in
excess of 30 consecutive days; PROVIDED, HOWEVER, that the two-year
period referred to in Section 4 hereof during which the Shelf
Registration Statement is required to be effective and usable shall
be extended by the number of days during which such registration
statement was not effective or usable pursuant to the foregoing
provision.
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the applicable Registration Statement as may
be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may
be; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Act, and to comply fully with Rules 424, 430A and
462, as applicable, under the Act in a timely manner; and comply with
the provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods
of distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the selling Holders promptly and, if requested by
such Persons, confirm such advice in writing, (A) when the Prospectus
or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to any applicable Registration Statement or
any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus
or for additional information relating thereto, (C) of the issuance
by the Commission of any stop order suspending the effectiveness of
the Registration Statement under the Act or of the suspension by any
state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes,
(D) of the existence of any fact or the happening of any event that
makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto or any
document incorporated by reference therein untrue, or that requires
the making of any additions to or changes in the Registration
Statement in order to make the statements therein not misleading, or
that requires the making of any additions to or changes in the
Prospectus in order to make the statements therein, in the light of
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the circumstances under which they were made, not misleading (such
notice to also include a statement that the indemnity provisions
contained in Section 8 shall be limited as set forth in Section
8(a)(C) in the event of continued use of such Registration Statement
or Prospectus). If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement, or
any state securities commission or other regulatory authority shall
issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state
securities or Blue Sky laws, the Issuer shall use all commercially
reasonable efforts to obtain the withdrawal or lifting of such order
at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated by
Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement
or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the
Prospectus will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in the fight of the circumstances under which they were
made, not misleading;
(v) furnish to the Initial Purchasers and each selling Holder named
in any Shelf Registration Statement or Prospectus in connection with
such sale, if any, before filing with the Commission, copies of any
Shelf Registration Statement or any Prospectus included therein or
any amendments or supplements to any such Shelf Registration
Statement or Prospectus (including all documents incorporated by
reference after the initial filing of such Shelf Registration
Statement), which documents will be subject to the review and comment
of such Holders in connection with such sale, if any, for a period of
at least five Business Days, and the Issuer will not file any such
Shelf Registration Statement or Prospectus or any amendment or
supplement to any such Shelf Registration Statement or Prospectus
(including all such documents incorporated by reference) to which the
selling Holders of the Transfer Restricted Securities covered by such
Shelf Registration Statement in connection with such sale, if any,
shall reasonably object within five Business Days after the receipt
thereof A selling Holder shall be deemed to have reasonably objected
to such filing if such Shelf Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed,
contains a material misstatement or omission or fails to comply with
the applicable requirements of the Act;
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<PAGE>
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Shelf Registration Statement or
Prospectus, provide copies of such document to the selling Holders in
connection with such sale, if any, make the Issuer's representatives
available for discussion of such document and other customary due
diligence matters, and include such information in such document
prior to the filing thereof as such selling Holders may reasonably
request;
(vii) subject to execution of confidentiality agreements that are
reasonably satisfactory to the Issuer as to the disclosure of any non-
public information obtained pursuant to this Section 6(c)(vii) and
upon reasonable notice and at reasonable times, make available for
inspection at the Company's offices located in Memphis, Tennessee by
the selling Holders participating in any disposition pursuant to such
Registration Statement and any attorney or accountant retained by
such selling Holders, all financial and other records, pertinent
corporate documents of the Issuer and cause the Issuer's officers,
directors and employees to supply all information reasonably
requested by any such selling Holder, attorney or accountant in
connection with such Registration Statement or any post-effective
amendment thereto subsequent to the filing thereof and prior to its
effectiveness.
(viii) in the case of any Shelf Registration Statement, if
requested by any selling Holders in connection with such sale, if
any, promptly include in any Shelf Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such selling Holders may reasonably
request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer
Restricted Securities; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as
practicable after the Issuer is notified of the matters to be
included in such Prospectus supplement or post-effective amendment;
(ix) in the case of any Shelf Registration Statement, furnish to each
selling Holder in connection with such sale, if any, without charge,
at least one copy of the Shelf Registration Statement, as first filed
with the Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits
(including exhibits incorporated therein by reference);
(x) deliver to each selling Holder, without charge, as many copies
of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Persons reasonably may
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request; the Issuer hereby consents to the use (in accordance with
law) of the Prospectus and any amendment or supplement thereto by
each of the selling Holders in connection with the offering and the
sale of the Transfer Restricted Securities covered by the Prospectus
or any amendment or supplement thereto;
(xi) upon the request of any selling Holder, enter into such
customary agreements (including customary underwriting agreements)
and make such customary representations and warranties and take all
such other customary actions in connection therewith in order to
expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any applicable Registration Statement
contemplated by this Agreement as may be reasonably requested by any
Holder of Transfer Restricted Securities in connection, with any sale
or resale pursuant to any applicable Registration Statement and in
such connection, the Issuer shall:
(A) upon request of any selling Holder, furnish (or in the
case of paragraphs (2) and (3), use its best efforts to cause to
be furnished) to each selling Holder, upon the effectiveness of
the Shelf Registration Statement or upon Consummation of the
Exchange Offer, as the case may be:
(1) a certificate, dated such date, signed on behalf
of the Issuer by (x) the President or any Vice President
and (y) a principal financial or accounting officer of the
Company, confirming, as of the date thereof, the matters
set forth in paragraphs (a), (b), (g) and (h) of Section 8
of the Purchase Agreement and such other similar matters as
the selling Holders may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer, or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of the counsel
for the Issuer covering matters similar to those set forth
in paragraphs (c) and (d) of Section 8 of the Purchase
Agreement and such other matter as the selling Holders may
reasonably request, and in any event including a statement
to the effect that such counsel has participated in
conferences with officers and other representatives of the
Issuer, representatives of the independent public
accountants for the Issuer and have considered the matters
required to be stated therein and the statements contained
therein, although such counsel has not independently
verified the accuracy, completeness or fairness of such
statements; and that such counsel advises that, on the
basis of the foregoing, no facts came to such counsel's
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attention that caused such counsel to believe that the
applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment
thereto became effective and, in the case of the Exchange
Offer Registration Statement, as of the date of
Consummation of the Exchange Offer, contained an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus
contained in such Registration Statement as of its date
and, in the case of the opinion dated the date of
Consummation of the Exchange Offer, as of the date of
Consummation, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order
to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Without limiting the foregoing, such counsel may state
further that such counsel assumes no responsibility for,
and has not independently verified, the accuracy,
completeness or fairness of the financial statements, notes
and schedules and other financial and statistical data
included in any Registration Statement contemplated by this
Agreement or the related Prospectus; and
(3) a customary comfort letter, dated the date of
Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration Statement, as the
case may be, from the Issuer's independent accountants, in
the customary form and covering matters of the type
customarily covered in comfort letters to underwriters in
connection with underwritten offerings, and affirming the
matters set forth in the comfort letters delivered pursuant
to Section 8(f) of the Purchase Agreement, and
(B) deliver such other documents and certificates as may
be reasonably requested by the selling Holders to evidence
compliance with clause (A) above and with any customary
conditions contained in the any agreement entered into by the
Issuer pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all
other acts or things necessary or advisable to enable
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the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the applicable Registration Statement;
PROVIDED, HOWEVER, that the Issuer shall not be required to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject them to the
service of process in suits or to taxation, other than as to
matters and transactions relating to the Registration Statement, in
any jurisdiction where they are not now so subject;
(xiii) issue, upon the request of any Holder of Series A Notes
covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate Principal Amount at
Maturity equal to the aggregate Principal Amount at Maturity of
Series A Notes surrendered to the Issuer by such Holder in exchange
therefor or being sold by such Holder; such Series B Notes to be
registered in the name of such Holder or in the name of the
purchaser(s) of such Series B Notes, as the case may be; in return,
the Series A Notes held by such Holder shall be surrendered to the
Issuer for cancellation;
(xiv) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being
Transfer Restricted Securities, cooperate with the selling Holders to
facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not
bearing any restrictive legends; and to register such Transfer
Restricted Securities in such denominations and such names as the
selling Holders may request at least two Business Days prior to such
sale of Transfer Restricted Securities;
(xv) use all commercially reasonable efforts to cause the disposition
of the Transfer Restricted Securities covered by the Registration
Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof to consummate the disposition of such
Transfer Restricted Securities, subject to the proviso contained in
clause (xii) above;
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide
the Trustee under the Indenture with printed certificates for the
Transfer Restricted Securities which are in a form eligible for
deposit with the Depository Trust Company;
(xvii) otherwise use all commercially reasonable efforts to comply
with all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
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(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term
is defined in paragraph (c) of Rule 158 under the Act);
(xviii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required
by this Agreement and, in connection therewith, cooperate with the
Trustee and the Holders to effect such changes to the Indenture as
may be required for such Indenture to be so qualified in accordance
with the terms of the TIA; and execute and use all commercially
reasonable efforts to cause the Trustee to execute, all documents
that may be required to effect such changes and all other forms and
documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
(xix) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13
or Section 15(d) of the Exchange Act.
(d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Issuer of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof (in each case, a "SUSPENSION
NOTICE"), such Holder will forthwith discontinue disposition of Transfer
Restricted Securities pursuant to the applicable Registration Statement until
(i) such Holder has received copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is advised in
writing by the Issuer that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus (in each case, the "RECOMMENCEMENT DATE"). Each
Holder receiving a Suspension Notice hereby agrees that it will either (i)
destroy any Prospectuses, other than permanent file copies, then in such
Holder's possession which have been replaced by the Issuer with more recently
dated Prospectuses or (ii) deliver to the Issuer (at the Issuer's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the Prospectus covering such Transfer Restricted Securities that was current at
the time of receipt of the Suspension Notice. The time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4
hereof, as applicable, shall be extended by a number of days equal to the
number of days in the period from and including the date of delivery of the
Suspension Notice to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Issuer's performance of or compliance
with this Agreement will be borne by the Issuer, regardless of whether a
Registration Statement becomes effective, including without limitation: (i)
all registration and filing fees and expenses;
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(ii) all fees and expenses of compliance with federal securities and state
Blue Sky or securities laws; (iii) all expenses of printing (including
printing certificates for the Series B Notes to be issued in the Exchange
Offer and printing of Prospectuses), messenger and delivery services and
telephone; (iv) all reasonable fees and disbursements of counsel for the
Issuer and, in accordance with Section 7(b) hereof, the Holders of Transfer
Restricted Securities and (v) all reasonable fees and disbursements of
independent certified public accountants of the Issuer (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Issuer will, in any event, bear its internal expenses (including,
without limitation, a salaries and expenses of their officers and employees
performing legal or accounting duties), the expenses of any annual audit and
the fees and expenses of any Person, including special experts, retained by the
Issuer.
(b) In connection with any Shelf Registration Statement required by has
Agreement, the Issuer will reimburse the Holders of Transfer Restricted
Securities for the reasonable fees and disbursements of not more than one
counsel, who shall be Cahill Gordon & Reindel, unless another firm shall be
chosen by the Holders of a majority in Principal Amount at Maturity of the
Transfer Restricted Securities for whose benefit such Shelf Registration
Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Issuer agrees to indemnify and hold harmless (i) each Holder and
(ii) each person, if any, who controls (within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act) any Holder (any of the persons referred
to in this clause (ii) being hereinafter referred to as a "controlling person")
and (iii) the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person (any person
referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an
"INDEMNIFIED HOLDER"), from and against any and all losses, claims, damages,
liabilities, judgments, (including without limitation, any legal or other
expenses incurred in connection with investigating or defending any matter,
including any action that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto)
provided by the Issuer to any holder or any prospective purchaser of Series B
Notes, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or judgments (A) are caused by an untrue statement or omission or
alleged untrue statement or omission that is based upon information relating to
any of the Holders furnished in writing to the Issuer by any of the Holders,
(B) with respect to the preliminary prospectus, result from the fact that the
Holder sold Transfer Restricted Notes to a person to whom there was not sent or
given, at or
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prior to the written confirmation of such sale, a copy of the prospectus, as
amended or supplemented, if the Issuer shall have previously furnished copies
thereof to the Holder in accordance with this Agreement, and the Issuer
proves that the prospectus, as amended or supplemented, would have corrected
such untrue statement or omission or (C) are a result of the use by the
Indemnified Holder of any prospectus, when, upon receipt of a notice from the
Issuer of the existence of any fact of the kind described in Section 6 hereof
as contemplated pursuant to Section 6(d) hereof, the Indemnified Holder was
not permitted to do so.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Issuer and its directors and
officers, and each person, if any, who controls (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Issuer, to the same extent
as the foregoing indemnity from the Issuer to each of the Indemnified Holders,
but only with reference to information relating to such Indemnified Holder
furnished in writing to the Issuer by such Indemnified Holder expressly for use
in any Registration Statement. In no event shall any Indemnified Holder be
liable or responsible for any amount in excess of the amount received by such
Indemnified Holder with respect to its sale of Transfer Restricted Securities
pursuant to a Registration Statement.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b)
(the "indemnified party"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying person")
in writing and the indemnifying party shall assume the defense of such
action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all fees and expenses of such counsel,
as incurred (except that in the case of any action in respect of which
indemnity may be sought pursuant to both Sections 8(a) and 8(b), an
Indemnified Holder shall not be required to assume the defense of such action
pursuant to this Section 8(c), but may employ separate counsel and
participate in the defense thereof, but the fees and expenses of such
counsel, except as provided below, shall be at the expense of the Indemnified
Holder). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties
to any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party, and the indemnified party shall
have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of
the indemnified party). In any such case, the indemnifying party shall not,
in connection with any one action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses
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of more than one separate firm of attorneys (in addition to any local
counsel) for all indemnified parties and all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by
a majority of the Indemnified Holders, in the case of the parties indemnified
pursuant to Section 8(a), and by the Issuer, in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall indemnify
and hold harmless the indemnified party from and against any and all losses,
claims, damages, liabilities and judgments by reason of any settlement of any
action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty business
days after the indemnifying party shall have received a request from the
indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party
shall have failed to comply with such reimbursement request in respect of any
such fees and expenses that are not being contested in good faith. No
indemnifying party shall, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld), effect
any settlement or compromise of, or consent to the entry of judgment with
respect to, any pending or threatened action in respect of which the
indemnified party is a party and indemnity or contribution may be or could
have been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the
indemnified party from all liability on claims that are or could have been
the subject matter of such action and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
the indemnified party.
(d) To the extent that the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Issuer, on the one
hand, and the Holders, on the other hand, from their sale of Transfer
Restricted Securities or (ii) if the allocation provided by clause 8(d)(i) is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause 8(d)(i) above but
also the relative fault of the Issuer, on the one hand, and of the Indemnified
Holder, on the other hand, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or judgments, as well as
any other relevant equitable considerations. The relative fault of the Issuer,
on the one hand, and of the Indemnified Holder, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Issuer, on the one
hand, or by the Indemnified Holder, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and judgments referred to
above shall be deemed to include, subject to the limitations set forth in the
second paragraph of Section 8(a),
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<PAGE>
any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
The Issuer and each Holder agree that it would not be just and equitable
if contribution pursuant to this Section 8(d) were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder or
its related Indemnified Holders shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the total received by
such Holder with respect to the sale of its Transfer Restricted Securities
pursuant to a Registration Statement exceeds the sum of (A) the amount paid by
such Holder for such Transfer Restricted Securities PLUS (B) the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Holders' obligations to contribute
pursuant to this Section 8(c) are several in proportion to the respective
Principal Amount at Maturity of Transfer Restricted Securities held by each of
the Holders hereunder and not joint.
SECTION 9. RULE 144A
The Issuer hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Issuer is not subject to Section 13 or 15(d) of the Securities Exchange Act, to
make available, upon request of any Holder of Transfer Restricted Securities,
to any Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale thereof and any prospective purchaser of such Transfer
Restricted Securities designated by such Holder or beneficial owner, the
information required by Rule 144A(d)(4) under the Act in order to permit
resales of such Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. MISCELLANEOUS
(a) REMEDIES. The Issuer acknowledges and agrees that any failure by the
Issuer to comply with its obligations under Sections 3 and 4 hereof may result
in material irreparable injury to the Initial Purchasers or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchasers or any Holder may obtain such relief as may
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<PAGE>
be required to specifically enforce the Issuer's obligations under Sections 3
and 4 hereof. The Issuer further agrees to waive the defense in any action
for specific performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Issuer will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement
or otherwise conflicts with the provisions hereof. The Issuer has not
previously entered into any agreement granting any registration rights with
respect to its securities to any Person. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Issuer's securities under any agreement in
effect on the date hereof.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Issuer has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Issuer has obtained the written
consent of Holders of a majority of the outstanding Principal Amount at
Maturity of Transfer Restricted Securities (excluding Transfer Restricted
Securities held by the Issuer or its Affiliates). Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose securities are being
tendered pursuant to the Exchange Offer and that does not affect directly or
indirectly the rights of other Holders whose securities are not being tendered
pursuant to such Exchange Offer may be given by the Holders of a majority of
the outstanding Principal Amount at Maturity of Transfer Restricted Securities
subject to such Exchange Offer.
(d) THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Issuer, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right
to enforce such agreements directly to the extent they may deem such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Issuer:
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<PAGE>
6075 Poplar Avenue
Suite 800
Memphis, Tennessee 38119
Telecopier No.: 901-766-6482
Attention: Donald F. Wiseman
with a copy to:
Mayer, Brown & Platt
120 South LaSalle Street
Chicago, IL 60603
Telecopier No.: 312-701-8164
Attention: James T. Lidbury
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
receipt acknowledged, if telecopied; and on the next business day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
Upon the date of filing of the Exchange Offer or a Shelf Registration
Statement, as the case may be, notice shall be delivered to Salomon Brothers
Inc, on behalf of the Initial Purchasers (in the form attached hereto as
Exhibit A) and shall be addressed to: Salomon Brothers Inc, Seven World Trade
Center, New York, New York 10048 Attention: (Compliance Department), New York,
New York 10048.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; PROVIDED, that nothing
herein shall be deemed to permit any assignment, transfer or other disposition
of Transfer Restricted Securities in violation of the terms hereof or of the
Purchase Agreement or the Indenture. If any transferee of any Holder shall
acquire Transfer Restricted Securities in any manner, whether by operation of
law or otherwise, such Transfer Restricted Securities shall be held subject to
all of the terms of this Agreement, and by taking and holding such Transfer
Restricted Securities such Person shall be conclusively deemed to have agreed
to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement
and, if applicable, the Purchase Agreement, and such Person shall be entitled
to receive the benefits hereof.
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<PAGE>
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
THE RESTAURANT COMPANY
By:
--------------------------------
Name:
Title:
SALOMON BROTHERS INC
By:
------------------------------
Name:
Title:
BANCBOSTON SECURITIES CORP.
By:
------------------------------
Name:
Title:
S-1
<PAGE>
EXHIBIT A
NOTICE OF FILING OF
A/B EXCHANGE OFFER REGISTRATION STATEMENT
To: Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Attention: (Compliance Department)
Fax: (212) 783-7400
From: The Restaurant Company
Re: 11 1/4% Senior Discount Notes due 2008
Date: ___________________, 199_
For your information only (NO ACTION REQUIRED):
Today, _______________, 199_, we filed [an A/B Exchange Registration
Statement/a Shelf Registration Statement] with the Securities and Exchange
Commission. We currently expect this registration statement to be declared
effective within ____ business days of the date hereof.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report on The Restaurant Company (and to all references to our Firm) included in
or made a part of this registration statement.
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
June 24, 1998.
<PAGE>
EXHIBIT 99.1
STOCKHOLDERS AGREEMENT
This is an agreement dated the 21 day of November, 1985 by and among
Tennessee Restaurant Company, a Delaware corporation ("TRC"), Holiday Inns,
Inc., a Tennessee corporation ("HI"), Bass Investment Limited Partnership, a
Texas limited partnership ("Bass"), Donald N. Smith ("Smith"), Leon Irons
("Irons"), and John P. Lambert ("Lambert"). HI, Bass, Smith, Irons, Lambert
and any other person who holds any capital stock of TRC subject to this
Agreement are hereinafter referred to together as "Stockholders."
TRC has the authority to issue One Million (1,000,000) shares of common
stock, $.01 par value per share (the "Common Stock"), of which Fifty Eight
Thousand Two Hundred (58,200) shares are on the date hereof issued and
outstanding. All of the issued and outstanding Common Stock is held among the
Stockholders on the date hereof as follows:
<TABLE>
<CAPTION>
Name Number of Shares
---- ----------------
<S> <C>
HI 46,020
Bass 5,820
Smith 5,820
Irons 270
Lambert 270
</TABLE>
For good and valuable consideration, the receipt and
<PAGE>
sufficiency of which being hereby acknowledged, the parties hereto agree as
follows:
SECTION 1
TERM OF AGREEMENT; APPLICATION; CERTAIN DEFINITIONS; ETC.
SECTION 1.1. THREE STAGES OF APPLICATION.
This Agreement contains agreements concerning the governance of TRC and
each TRC Subsidiary and the ownership of shares of the Common Stock during
three possible stages. The three stages are:
(i) Stage One - the period of time beginning the date hereof and
continuing until the earlier to commence of Stage Two or
Stage Three;
(ii) Stage Two - in the event the Primary Option is exercised, the
period of time beginning the closing under the Primary Option
and continuing until the termination of this Agreement; and
(iii) Stage Three - the period of time beginning on the date the
Primary Option expires without being exercised and continuing
until the termination of this Agreement.
SECTION 1.2. TERM OF AGREEMENT.
(a) The provisions of Section 2 shall remain in effect until November
20, 1995.
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<PAGE>
(b) The provisions of Section 3 shall remain in effect until November
20, 1989.
(c) The provisions of Section 4 and of the remainder of this Agreement
shall remain in effect until terminated by their own terms, by mutual written
agreement of all parties hereto, by amendment of this Agreement pursuant to
the terms hereof, or until such earlier time as may be required by the Rule
Against Perpetuities.
SECTION 1.3 CERTAIN DEFINITIONS.
For for purposes of this Agreement, the following terms shall have tthe
following meanings:
(a) "Class B Stock" shall mean (i) the 5,820 shares of Common Stock
originally held by Bass, (ii) any shares of Common Stock from time to time
issued or exchanged in respect thereof in connection with a stock dividend,
stock split or corporate reorganization or otherwise, and (iii) any stock
into which such Common Stock may from time to time be changed, in any such
case whether held by Bass or any of its transferees or assigns.
(b) "Class H Stock" shall mean (i) the 46,020 shares of Common Stock
originally held by HI, (ii) any shares of Common Stock from time to time
issued or exchanged in respect thereof in connection with a stock dividend,
stock split or corporate reorganization or otherwise, and (iii) any stock
into which such Common Stock may from time to time be changed, in any such
case whether held by HI or any of its transferees or assigns.
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<PAGE>
(c) "Class S Stock" shall mean (i) the 5,820 shares of Common Stock
originally held by Smith, (ii) any shares of Common Stock from time to time
issued or exchanged in respect thereof in connection with a stock dividend,
stock split or corporate reorganization or otherwise, and (iii) any stock into
which such Common Stock may from time to time be changed, in any such case
whether held by Smith or any of his heirs, transferees or assigns.
(d) "Commission", as defined in Section 7.1(a).
(e) "Employment Shares", as defined in Section 8.14.
(f) "Fair Market Value" of Common Stock, unless otherwise qualified
herein, shall mean the price in terms of a cash transaction at which the
Common Stock would change hands between a willing buyer and a willing seller,
neither being under any compulsion to buy or sell, assuming that TRC is a
going concern and taking into consideration the rights and obligations
associated with the shares of Common Stock being valued (including without
limitation the rights and obligations under this Agreement such as the right
of the holder of such shares to benefit from the exercise of the Primary
Option and the rights and obligations of the holder of such shares under the
governance provisions referred to in Section 2 of this Agreement), but
disregarding any "control premium" or other premium or discount associated
with the status of the holder of
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<PAGE>
such shares as a majority or minority stockholder of TRC. Whenever the terms
of this Agreement shall require the determination of the Fair Market Value of
Common Stock, the Fair Market Value shall be determined in accordance with
the following procedures:
(i) Each person having an interest as a buyer or seller in the
shares to be valued ("Interested Party") shall select a representative who
shall, within ten (10) days of deliverance of notice of the event giving
rise to the need to determine the Fair Market Value (the "Notice Date"),
meet with the representatives of the other Interested Parties for the
purpose of attempting to reach an accord on the Fair Market Value of the
Common Stock then being valued.
(ii) In the event such representatives cannot agree as to the Fair
Market Value, then within thirty (30) days after the Notice Date, the
Interested Parties shall agree on one investment banker who will be
charged with determining as promptly as possible the Fair Market Value of
the Common Stock then being valued.
(iii) If the Interested Parties are unable to agree on an investment
banker within such thirty (30) day period, then each Interested Party
shall designate in writing one investment banker within forty-five (45)
days of the Notice
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<PAGE>
Date. Such investment bankers shall determine and agree upon a Fair
Market Value of the Common Stock as promptly as possible.
(iv) In the event such investment bankers are unable to agree
upon the Fair Market Value within thirty (30) days of their appointment,
then such investment bankers shall select one or two additional investment
bankers (whichever number of additional investment bankers is necessary to
result in an odd number of investment bankers participating in the
determination) within ten (10) days of the expiration of such thirty (30)
day period (or earlier if such original investment bankers deem such
earlier action to be appropriate). Such original investment bankers and
such additional investment banker(s) shall determine its or their
opinion(s) of the Fair Market Value of the Common Stock as promptly as
possible. The highest and lowest valuations shall then be disregarded
until there is but one determined value remaining, which shall constitute
the Fair Market Value.
(v) In the event any Interested Party fails to designate its
investment banker representative within the time periods provided above,
then the investment banker(s) designated by the other Interested Party(s)
shall serve as the only investment banker(s) for purposes of the
determination of Fair Market Value.
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<PAGE>
(vi) Whenever the Fair Market Value of Common Stock is determined
pursuant to this Agreement, each Interested Party shall bear the expense of
the participation of the investment banker selected by it, and all Interested
Parties shall share equally the expense of the participation of the
independent investment banker(s), if any, selected by the original investment
bankers, or a single investment banker if only one is chosen. Notwithstanding
the above, if any Interested Party pursuant to this Agreement shall elect not
to go forward with a transaction with respect to which the Fair Market Value
of Common Stock was determined, then the Interested Party so electing shall
bear the entire expense of the determination of Fair Market Value in
connection therewith, together with reasonable expenses incurred by the other
Interested Parties in connection with the abandoned transaction.
(vii) Whenever the purchase price of Common Stock under this Agreement
is the Fair Market Value of such stock as of a certain date (other than with
respect to the Stage Three Smith Put Option or the Stage Three Bass Put
Option), the purchase price shall bear interest from such date until paid at
the rate of interest announced from time to time by Citibank, N.A., New York,
New York, as being its prime or base rate of interest. Such interest will be
payable on the date such purchase price is payable.
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<PAGE>
(g) "First Refusal Option Committee", as defined in Section 5.3(b).
(h) "FMV Shares", as defined in Section 8.14.
(i) "Indemnitee", as defined in Section 7.4.
(j) "Indemnifying Party", as defined in Section 7.4.
(k) "Interested Party", as defined in Section 1.3(f)(i).
(l) "Involuntary Termination of Employment" of Smith shall mean (i)
Smith's death, (ii) Smith's Permanent Disability, (iii) Smith's firing,
removal or other termination by TRC or Perkins Restaurants, Inc. ("Perkins")
as chairman or chief executive officer of TRC or Perkins, without Smith's
consent, (iv) the material reduction, without Smith's consent, of Smith's
total compensation package, including benefits, or (v) the material
reduction, without Smith's consent, of Smith's responsibilities, functions,
duties, or authority from those typically associated with or enjoyed by a
chief executive officer of a major restaurant chain.
(m) "Notice Date", as defined in Sections 1.3(f)(i), 4.1(c), 4.2(c),
4.3(c), 4.4(a) and 4.5(a).
(n) "Option Stockholders", as defined in Section 6.1.
(o) "Permanent Disability" of Smith shall mean Smith's inability, by
reason of physical or mental injury, illness or condition, to perform his
responsibilities or authority as chief executive officer of TRC or any TRC
Subsidiary for a
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<PAGE>
period of at least one hundred fifty (150) consecutive days. The
determination of whether Smith suffers a Permanent Disability shall be made
by the TRC Board acting promptly, reasonably and in good faith. The date of
Smith's Permanent Disability for purposes of this Agreement shall be the date
of such determination by the TRC Board.
(p) "Primary Option", as defined in Section 3.1.
(q) "Primary Option Committee", as defined in Section 3.7.
(r) "Primary Option Price", as defined in Section 3.2.
(s) "Primary Option Public Offering", as defined in Section 3.9.
(t) "Primary Option Shares", as defined in Section 3.1.
(u) "Proxy Shares", as defined in Section 2.4.
(v) "Public Offering", as defined in Section 7.1(a).
(w) "Registration Shares", as defined in Section 7.1(a).
(x) "Registration Statement", as defined in Section 7.1(a).
(y) "Second Offer", as defined in Section 6.3(c).
(z) "Second Offeree", as defined in Section 6.3(c).
(aa) "Securities Act", as defined in Section 7.1(a).
(bb) "Selling Stockholder", as defined in Section 7.3.
(cc) "Stage One Bass Put Option", as defined in Section 4.3(a).
(dd) "Stage One Smith Call Option", as defined in Section 4.2(a).
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<PAGE>
(ee) "Stage One Smith Call Option Committee", as defined in Section
4.2(f).
(ff) "Stage One Smith Put Option", as defined in Section 4.1(a).
(gg) "Stage Three Bass Put Option", as defined in Section 4.5(a).
(hh) "Stage Three Bass Put Option Sale", as defined in Section 4.5(c).
(ii) "Stage Three Bass Waiting Period", as defined in Section 4.5(a)
(jj) "Stage Three Smith Put Option", as defined in Section 4.4(a).
(kk) "Stage Three Smith Put Option Sale", as defined in Section 4.4(c).
(ll) "Stage Three Smith Waiting Period", as defined in Section 4.4(a).
(mm) "Stockholder Employment Agreements" as defined in Section 8.14.
(nn) "TRC Board" shall mean the board of directors of TRC.
(oo) "TRC Subsidiary" shall mean each corporation in which TRC
beneficially owns capital stock possessing more than fifty (50) percent of
the voting power with respect to the election of directors. The parties
hereby acknowledge that as of the date hereof neither Xian Foods Corporation,
Cookie Factory of America, Inc., nor The French Baker, Inc. is a TRC
Subsidiary.
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<PAGE>
(pp) "TRC Subsidiary Board" shall mean the board of directors of any TRC
Subsidiary.
(qq) "Transferring Stockholder", as defined in Sections 5.1(b) and (c).
(rr) "Two Year Restriction Period", as defined in Section 5.1(a).
(ss) "Underwriter", as defined in Section 7.1(a).
(tt) "Voluntary Termination of Employment" of Smith shall mean (i)
Smith's willful resignation, quitting, abandonment or termination of his
services as chief executive officer of TRC, or (ii) Smith's material
disregard of his duties and responsibilities as chief executive officer of
TRC, which in either case is not the result of, and not under circumstances
contemplated by, Section 1.3(l) above.
SECTION 2
GOVERNANCE
SECTION 2.1. MEMBERSHIP ON BOARDS OF DIRECTORS.
(a) At all times that the provisions of this Section 2 are in effect,
TRC and each of the Stockholders shall take all actions necessary to cause
the TRC Board and each TRC Subsidiary Board to consist of the following:
(i) Throughout Stages One and Two - three directors of whom one
shall be designated by the holder(s)
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<PAGE>
of the Class H Stock, one shall be designated by the holders(s)
of the Class B Stock, and one shall be designated by the holder(s)
of the Class S Stock; provided, however, that for such time as
Smith is a holder of Class S Stock and is able to serve as a
director, the third director shall be Smith.
(ii) Throughout Stage Three - three directors all of whom shall be
designated by the holder(s) of the Class H Stock.
Notwithstanding the above, (x) if the Notice Date of the Stage One Smith
Put Option, the Stage One Smith Call Option, or the Stage One Bass Put Option
occurs, or (y) if during Stage One or Stage Two all of the Common Stock of
either Bass or Smith is purchased by TRC (or proportionately by the other
Stockholders as provided herein), or (z) after Smith's Involuntary
Termination of Employment but before the Stage One Smith Call Option becomes
exercisable TRC delivers to Smith a written commitment to exercise the Stage
One Smith Call Option in the event the Stage One Smith Put Option is not
exercised and closed (subject to the last sentence of Section 4.2(d) hereof),
then upon the occurrance of any such event described in (x), (y) or (z)
above, TRC and the remaining Stockholders immediately shall take all actions
necessary (including without
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<PAGE>
limitation obtaining director resignations, if necessary) to permit the
holder(s) of the Class H Stock to designate two of the three directors on the
TRC Board and each TRC Subsidiary Board and to permit the holder(s) of the
Class B Stock or the holder(s) of the Class S Stock (whichever class of
Common Stock is not being sold pursuant to such put or call option or
otherwise as set forth above) to designate the third such director; provided,
however, if pursuant to the terms of this Agreement the Stage One Smith Put
Option, the Stage One Smith Call Option, or the Stage One Bass Put Option, as
the case may be, is not closed, then TRC and the Stockholders immediately
shall take all actions necessary to permit the holder(s) of the Class H
Stock, the holder(s) of the Class S Stock and the holder(s) of the Class B
Stock each to designate one of the three directors on the TRC Board and each
TRC Subsidiary Board during Stages One and Two.
(b) On the date hereof the TRC Board and each of the TRC Subsidiary
Boards consist of the following persons:
Richard J. Goeglein (Class H Stock designee)
Peter M. Joost (Class B Stock designee)
Donald N. Smith (Class S Stock designee).
(c) If at the time of notice of any meeting of stockholders of TRC or
any TRC Subsidiary to be convened for the purpose, in whole or in part, of
electing one or more
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<PAGE>
members of the TRC Board or the TRC Subsidiary Board, as the case may be, a
director designated by the holder(s) of the Class H Stock, the holder(s) of
the Class B Stock, or the holder(s) of the Class S Stock shall have resigned
or otherwise ceased to be a director, then at least ten (10) days prior to
such meeting the holder(s) of the Class H Stock, the holder(s) of the Class B
Stock, or the holder(s) of the Class S Stock, as the case may be, shall
provide TRC (or the TRC Subsidiary if appropriate) with the name of the
designee to fill any vacancy formerly held by the director such holder(s) had
designated. If all members of the TRC Board or the TRC Subsidiary Board, as
the case may be, are to be elected at such meeting, then at least ten (10)
days prior to such meeting the holder(s) of the Class H Stock, the holder(s)
of the Class B Stock, and the holder(s) of the Class S Stock shall provide
TRC (or the TRC Subsidiary, as the case may be) with the name of its or their
designee to serve on the applicable board of directors upon election at such
meeting. If the holder(s) of the Class H Stock, the holder(s) of the Class B
Stock, or the holder(s) of the Class S Stock do not provide TRC (or the TRC
Subsidiary, as the case may be) with the name of its or their designee, the
designee of such holder(s) will be deemed to be the individual who was most
recently designated by such holder(s). In any case, TRC and each of the
Stockholders shall take all actions
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<PAGE>
necessary to cause the election of the various designees as members of the
appropriate board of directors.
(d) If at any time the person(s) designating any director shall request
either (1) the removal of such director, or (2) the election of a new
designee to fill a vacancy created by the departure of such director, TRC and
each Stockholder shall take all actions necessary to cause the immediate
removal of such designee, if requested, and the election of such new designee
to the appropriate board of directors.
SECTION 2.2. SPECIAL AGREEMENT OF TRC REGARDING TRC SUBSIDIARIES.
Subject to the laws of the jurisdiction in which any TRC Subsidiary is
incorporated, TRC agrees to vote its shares of common stock of each TRC
Subsidiary in favor of (i) the adoption of Bylaws for the TRC Subsidiary
substantially identical in form and substance to the Bylaws of TRC in effect
from time to time during the effectiveness of this Section 2, and (ii) the
election, as chairman and chief executive officer of the TRC Subsidiary, of
the person(s) from time to time holding such offices in TRC. In the event the
laws of the jurisdiction of incorporation of any TRC Subsidiary would
frustrate or conflict with the objectives set forth in (i) or (ii) above, TRC
and the Stockholders hereby agree to take any and all actions necessary to
realize, to the extent reasonable, the intent of such objectives.
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<PAGE>
SECTION 2.3. SPECIAL PROVISIONS REGARDING THE CHAIRMAN AND CHIEF EXECUTIVE
OFFICER OF TRC.
(a) The chairman and chief executive officer of TRC shall be elected by
the stockholders of TRC and may be removed from office by the stockholders of
TRC at any time, with or without cause. The parties hereto acknowledge that
during such time as HI holds in excess of fifty (50) percent of the Common
Stock, HI will by virtue of this provision have the exclusive power and
authority to elect and remove the chairman and the chief executive officer of
TRC from office, with or without cause. No stockholder shall have any
liability to any person or entity solely by reason of exercising such
authority.
(b) In the event of Smith's Voluntary Termination of Employment or his
Involuntary Termination of Employment, certain options with respect to his
shares of Common Stock shall become effective as set forth in Section 4,
below.
SECTION 2.4. HI PROXIES GRANTED TO BASS AND SMITH.
HI shall on the date hereof grant an irrevocable limited proxy to Bass
and an irrevocable limited proxy to Smith, substantially in the forms
attached hereto as Exhibit 2.4, to enable Bass and Smith during Stage One to
vote 26,800 of HI's shares of Common Stock (the "Proxy Shares") in any matter
submitted to a vote of the stockholders of TRC (OTHER THAN the election or
removal of the chairman or chief executive officer of TRC) on a pro rata
basis such that the number of the Proxy
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Shares to be voted by Bass (rounded to the nearest whole number) shall bear
to the total number of Proxy Shares the same relation as the number of shares
of Common Stock owned by Bass bears to the total number of shares of Common
Stock owned by both Bass and Smith, and Smith shall be entitled to vote the
remainder of the Proxy Shares. No transfer by HI of the Proxy Shares shall
affect the validity or effectiveness of the proxies granted hereby, and any
Proxy Shares so transferred will be subject to the proxies described herein.
Upon the commencement of Stage Two or Stage Three, the irrevocable limited
proxies granted pursuant to this Section 2.4 shall automatically terminate
and be of no further force and effect. In the event Smith ceases to be the
chief executive officer of TRC prior to the commencement of Stage Two or
Stage Three, the irrevocable limited proxy granted to Smith pursuant to this
Section 2.4 shall thereupon automatically terminate and be of no further
force and effect. The intent of the provisions of this Section 2.4 is to
provide for equal shareholder voting among Smith, HI and Bass during Stage
One on all matters other than the election and removal of the chairman and
chief executive officer of TRC or as otherwise provided in this Agreement.
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SECTION 3
PRIMARY OPTION
SECTION 3.1. GRANT OF PRIMARY OPTION.
HI hereby grants to TRC an option (the "Primary Option") to purchase
40,200 shares of the Class H Stock (the "Primary Option Shares") for the
price and upon the terms and conditions set forth below in this Section 3.
SECTION 3.2. PRIMARY OPTION PRICE.
Unless otherwise provided herein, the price (the "Primary Option Price")
of the Primary Option Shares upon exercise of the Primary Option shall be
$32,200,000. In the event during Stage One more than fifty (50) percent of
the stock or assets of Holiday Corporation is acquired in a transaction not
approved by a majority of the disinterested directors of Holiday Corporation,
the Primary Option Price will be discounted from the last day for exercise of
the Primary Option to the date of any exercise calculated using a twelve (12)
percent discount rate; provided the Primary Option is exercised within six
(6) months of the closing of such acquisition.
SECTION 3.3. TRANSFER OF PRIMARY OPTION SHARES.
No transfer of shares of Class H Stock during Stage One shall affect the
validity or effectiveness of the Primary Option or reduce HI's obligation to
deliver the Primary Option Shares upon closing of the Primary Option. Any
notice given to
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TRC or the other Stockholders of the desire of any holder of Class H Stock to
sell, transfer, pledge or otherwise encumber shares of Class H Stock pursuant
to Section 5 of this Agreement or otherwise shall include an indication as to
whether all or any portion of such shares constitute Primary Option Shares.
SECTION 3.4. TERM OF PRIMARY OPTION.
The Primary Option shall expire at 12:01 A.M., Memphis, Tennessee time,
on November 21, 1989. Any and all rights and obligations connected with the
Primary Option shall terminate and expire if the Primary Option has not
closed by 12:01 A.M., Memphis, Tennessee time, on November 21, 1989. Time is
of the essence.
SECTION 3.5. EXERCISE OF PRIMARY OPTION.
The Primary Option may be exercised at any time during the term of the
Primary Option for all, but not less than all, of the Primary Option Shares,
by written notice to the holder(s) of the Primary Option Shares. Subject to
the limitations of Section 3.4, in the event at any time the Primary Option
is exercised and fails to close within the time specified in Section 3.6, the
Primary Option may again be exercised at any time during the term of the
Primary Option.
SECTION 3.6. CLOSING UPON EXERCISE.
(a) The closing of the purchase upon exercise of the Primary Option
shall be held at the offices of HI in Memphis,
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Tennessee thirty (30) days after notice of exercise is given, or at such
other place or such other time (no later than sixty (60) days after notice of
exercise) as HI and the Primary Option Committee shall select.
(b) At such closing each holder of the Primary Option Shares shall
deliver a certificate or certificates representing the Primary Option Shares
duly endorsed for transfer to TRC together with full warranties of title and
a written representation that such holder owns such Primary Option Shares
free and clear of any liens, claims, or encumbrances except as may be created
by this Agreement.
(c) At such closing the seller(s) of the Primary Option Shares shall
receive the Primary Option Price in immediately available funds.
(d) If the Primary Option is exercised and is not closed as provided in
this Section 3.6, then the holders of the Class S Stock and Class B Stock
(proportionate to Common Stock ownership) shall reimburse TRC and the holders
of the Class H Stock for all reasonable expenses incurred by them as a result
of such exercise of the Primary Option.
SECTION 3.7. COMMITTEE.
Simultaneously with the execution and delivery hereof, the TRC Board has
by resolution established the Primary Option Committee of the TRC Board (the
"Primary Option Committee")
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with exclusive authority to exercise the Primary Option and to take such
other actions as may be required to enable TRC to consummate the purchase of
the Primary Option Shares, including without limitation Significant Director
Actions (as defined in the Bylaws of TRC), subject, however, to Section 3.8,
below. The Primary Option Committee shall at all times consist of the
director(s) of TRC other than the director(s) designated by the holder(s)
of the Class H Stock or by HI. Any action taken by the Primary Option
Committee shall require the unanimous vote of the members thereof. A copy of
such resolution of the TRC Board is attached hereto as Exhibit 3.7.
SECTION 3.8. UNDERTAKING OF THE PARTIES.
In accordance with the parties' contractual obligations as set forth in
this Agreement, the parties agree and acknowledge that if the Primary Option
is exercised (i) the holder(s) of the Primary Option Shares will be paid
$32,200,000 (as adjusted pursuant to Section 3.2, above) in immediately
available funds at closing; (ii) the holder(s) of the Class H Stock will
immediately after the exercise of the Primary Option own at least one-third
(1/3), or in the event there are no shares of Class B Stock or no shares of
Class S Stock outstanding at such time, at least one-half (1/2), of the
outstanding Common Stock, as reasonably adjusted to reflect the dilution of
shares held by the holder(s) of the Class H Stock, the holder(s) of the
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Class B Stock, or the holder(s) of the Class S Stock at the time of the
exercise of the Primary Option due to (A) the issuance of shares to Lambert
and Irons pursuant to their Stockholder Employment Agreements and any
repurchases by TRC pursuant to such agreements or (B) the issuance of shares
of capital stock pursuant to a Primary Option Public Offering made in
accordance with Section 3.9, below; (iii) the Primary Option Shares, upon
consummation of the Primary Option, will be retired and returned to the status
of authorized but unissued shares; and (iv) TRC will immediately after the
consummation of the Primary Option own the businesses and substantially all
the fixed assets it owned immediately prior to the exercise of the Primary
Option (except to the extent a Primary Option Public Offering involves the
sale of shares of capital stock of a TRC Subsidiary). The Stockholders will
take all actions reasonably requested by the Primary Option Committee to
cause the Primary Option to be exercised in such a manner as to provide the
holder(s) of the Class H Stock or the holder(s) of the Primary Option Shares,
as the case may be, with the economic consequences contemplated by the first
sentence of this Section 3.8, including without limitation, executing
consents (stockholder and other) for, voting for and granting approvals (as a
stockholder and otherwise) of, and otherwise approving, assisting and
promoting transactions reasonably proposed by the
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Primary Option Committee to exercise the Primary Option, such as mergers,
liquidations, transfers of assets, and financing arrangements (including
without limitation secured debt financing and a Primary Option Public
Offering); provided that HI will not be required to assume or incur any
additional liabilities as a result of the exercise of the Primary Option.
SECTION 3.9. PRIMARY OPTION PUBLIC OFFERING.
(a) At any time during the period commencing on November 21, 1988 and
ending upon the commencement of Stage Two or Stage Three, the Primary Option
Committee may cause TRC to file or to cause a TRC Subsidiary to file a
Registration Statement (as defined in Section 7.1(a) except that for purposes
of this Section 3.9 "Registration Statement" shall be deemed to include a
registration statement for shares of any capital stock or other securities
and not solely common stock) in connection with a Public Offering (as defined
in Section 7.1(a) except that for purposes of this Section 3.9 "Public
Offering" shall be deemed to include an offering of shares of any capital
stock or other securities and not solely common stock) pursuant to which TRC
or a TRC Subsidiary shall either (i) issue shares of capital stock (common
and/or preferred) or other securities of TRC, or (ii) issue or sell shares of
capital stock (common and/or preferred) or other securities of any TRC
Subsidiary, in either case for an amount not in excess
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of $32,200,000, the proceeds of which offering shall be used exclusively (x)
for the purchase of the Primary Option Shares pursuant to the exercise of the
Primary Option, or (y) for the purpose of repaying indebtedness incurred
during the period described above for the sole purpose of purchasing the
Primary Option Shares pursuant to the exercise of the Primary Option;
provided that in the case of (y) above, such Public Offering is commenced no
later than thirty (30) days following the date notice of exercise of the
Primary Option is delivered (the "Primary Option Public Offering"). The
substance and content of any Registration Statement and any related
prospectus, notification or the like filed or used in connection with the
Primary Option Public Offering must be reviewed and approved by all three
members of the TRC Board; provided, however, that the director(s) designated
by the holder(s) of the Class H Stock shall not unreasonably withhold
approval thereof. In the event of the proposed filing of such a Registration
Statement, the Stockholders shall cause TRC to take all action reasonably
requested by the Primary Option Committee in order to consummate the Primary
Option Public Offering. No Stockholder shall have any rights under Section
7.1 of this Agreement in connection with the Primary Option Public Offering.
(b) In the event of a Primary Option Public Offering, the indemnity set
forth in Section 7.4 of this Agreement shall apply.
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(c) TRC shall pay all of the expenses in connection with the Primary
Option Public Offering, if any.
(d) In the event a Registration Statement filed pursuant to this
Section 3.9 becomes effective, the Primary Option Committee shall give
written notice of the exercise of the Primary Option (if not previously
given) as promptly as possible but in no event more than ninety (90) days
after the effective date of such Registration Statement, and the Primary
Option shall close in accordance with Section 3.6, above.
SECTION 4
PUT AND CALL OPTIONS APPLICABLE IN CERTAIN EVENTS
SECTION 4.1. STAGE ONE SMITH PUT OPTION.
(a) In the event of Smith's Involuntary Termination of Employment
during Stage One, then for a period of six (6) months thereafter Smith shall
have one option to sell to TRC all of Smith's shares of Common Stock (but not
less than all of such shares) for the purchase price and upon the terms as
set forth below (the "Stage One Smith Put Option"). To exercise the Stage One
Smith Put Option, Smith must give written notice to TRC of Smith's intent to
exercise the option within said six (6) month period.
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(b) In the event TRC is unable, after diligent attempt to obtain
financing, to purchase all of Smith's shares of Common Stock pursuant to the
Stage One Smith Put Option, then Bass and HI shall, within ninety (90) days
after the determination of the Fair Market Value, each purchase one-half
(1/2) of such shares that TRC is unable to purchase, unless Bass has
exercised the Stage One Bass Put Option, in which event HI alone shall
purchase such number of shares of Smith's Common Stock that TRC is unable to
purchase pursuant to the Stage One Smith Put Option. Notwithstanding the fact
that HI and Bass may be purchasers of shares under the Stage One Smith Put
Option, for purposes of determining the Fair Market Value, TRC and Smith
shall be the only Interested Parties.
(c) The aggregate purchase price to be paid for Smith's shares of
Common Stock sold pursuant to the Stage One Smith Put Option shall be the
Fair Market Value of such shares as of the end of the month immediately
preceding the month in which the notice of exercise of the Stage One Smith
Put Option is delivered (the "Notice Date").
(d) At any time after the determination of the Fair Market Value of the
shares subject to the Stage One Smith Put Option and prior to the closing of
the Stage One Smith Put Option, Smith may elect in writing not to close the
Stage One Smith Put Option. In such event, the Stage One Smith Put Option
will be
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extinguished and there shall be no further Stage One Smith Put Option.
(e) The closing of the purchase upon exercise of the Stage One Smith Put
Option shall be held at the offices of TRC in Memphis, Tennessee thirty (30)
days after the determination of the Fair Market Value, or at such other place
or such other time (no later than forty-five (45) days after such
determination) as TRC and Smith shall select. At such closing, Smith shall
deliver a certificate or certificates representing his shares of Common Stock
duly endorsed for transfer to the purchaser(s) together with full warranties
of title and a written representation that Smith owns such shares free and
clear of any liens, claims or encumbrances except as may be created by this
Agreement. At closing, Smith shall receive the purchase price from the
purchaser(s) in immediately available funds. No person other than the
purchaser(s) shall have any obligation or liability to pay any portion of the
purchase price under the Stage One Smith Put Option.
SECTION 4.2. STAGE ONE SMITH CALL OPTION.
(a) In the event of Smith's Voluntary Termination of Employment during
Stage One, then for a period of six (6) months thereafter (or in the event of
Smith's Involuntary Termination of Employment during Stage One and the
failure by Smith to exercise and close the Stage One Smith Put Option,
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then for a period of sixty (60) days following the expiration of six (6)
months after Smith's Involuntary Termination of Employment) TRC shall have
one option to buy all of the outstanding shares of Class S Stock (but not
less than all of such shares) for the purchase price and upon the terms as
set forth below (the "Stage One Smith Call Option"). To exercise the Stage
One Smith Call Option, TRC must give written notice to the holder(s) of the
Class S Stock of TRC's intent to exercise the option within the applicable
option period.
(b) In the event TRC exercises the Stage One Smith Call Option, but is
unable, after diligent attempt to obtain financing (or due to an inability to
take any necessary Significant Director Action), to purchase all of the Class
S Stock pursuant thereto, then Bass and HI shall, within ninety (90) days
after the determination of the Fair Market Value, each purchase one-half
(1/2) of such number of shares of Class S Stock that TRC is unable to
purchase, unless Bass has exercised the Stage One Bass Put Option or Bass
elects not to purchase any Class S Stock, in which event HI alone shall
purchase such number of shares of Class S Stock that TRC is unable to
purchase pursuant to the Stage One Smith Call Option. Notwithstanding the
fact that HI and Bass may be purchasers under the Stage One Smith Call
Option, for purposes of determining the Fair Market Value, TRC and the
holder(s) of the Class S Stock shall be the only Interested Parties.
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(c) The aggregate purchase price to be paid for the shares of Class S
Stock sold pursuant to the Stage One Smith Call Option shall be the Fair
Market Value of such shares as of the end of the month immediately preceding
the month in which the notice of exercise of the Stage One Smith Call Option
is delivered (the "Notice Date").
(d) At any time after the determination of the Fair Market Value of the
shares subject to the Stage One Smith Call Option and prior to the closing of
the Stage One Smith Call Option, TRC may elect in writing not to close the
Stage One Smith Call Option. In such event, the Stage One Smith Call Option
will be extinguished and there shall be no further Stage One Smith Call
Option. Also, in the event the Primary Option is consummated after the Notice
Date but before the closing of the Stage One Smith Call Option, the Stage One
Smith Call Option will be extinguished.
(e) The closing of the purchase upon exercise of the Stage One Smith
Call Option shall be held at the offices of TRC in Memphis, Tennessee thirty
(30) days after the determination of the Fair Market Value or at such other
place or such other time (no later than forty-five (45) days after such
determination) as TRC and Smith shall select. At such closing, each holder of
the Class S Stock shall deliver a certificate or certificates representing
his or its shares of Class S Stock duly endorsed
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for transfer to the purchaser(s) together with full warranties of title and a
written representation that such person owns such shares free and clear of
any liens, claiming or encumbrances except as may be created by this
Agreement. At closing, the holder(s) of the Class S Stock shall receive the
purchase price from the purchaser(s) in immediately available funds. No
person other than the purchaser(s) shall have any obligation or liability to
pay any portion of the purchase price under the Stage One Smith Call Option.
(f) Simultaneously with the execution and delivery hereof, the TRC Board
has by resolution established the Stage One Smith Call Option Committee of
the TRC Board (the "Stage One Smith Call Option Committee") with exclusive
authority to exercise the Stage One Smith Call Option and to take such other
actions as may be required to consummate the purchase of shares of Class S
Stock pursuant to the Stage One Smith Call Option. The Stage One Smith Call
Option Committee shall at all times consist of the director(s) of TRC elected
by the holder(s) of the Class H Stock. A copy of such resolution of the TRC
Board is attached hereto as Exhibit 4.2.
SECTION 4.3. STAGE ONE BASS PUT OPTION.
(a) In the event of Smith's Involuntary Termination of Employment during
Stage One, other than his death or Permanent Disability and other than an
Involuntary Termination of
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Employment of Smith to which Bass agrees in writing, then for a period of six
(6) months thereafter, Bass shall have one option to sell to TRC all of Bass'
shares of Common Stock (but not less than all of such shares) for the
purchase price and upon the terms as are set forth below (the "Stage One Bass
Put Option"). To exercise the Stage One Bass Put Option, Bass must give
written notice to TRC of Bass' intent to exercise the option within such six
(6) month period.
(b) In the event TRC is unable, after diligent attempt to obtain
financing, to purchase all of Bass' shares of Common Stock pursuant to the
Stage One Bass Put Option, then HI shall, within ninety (90) days after
determination of the Fair Market Value, purchase all of Bass' shares that TRC
is unable to purchase. Notwithstanding the fact that HI may be a purchaser
under the Stage One Bass Put Option, for purposes of determining the Fair
Market Value, TRC and Bass shall be the only Interested Parties.
(c) The aggregate purchase price to be paid for Bass' shares of Common
Stock sold pursuant to the Stage One Bass Put Option shall be the Fair Market
Value of such shares as of the end of the month immediately preceding the
month in which the notice of exercise of the Stage One Bass Option is
delivered (the "Notice Date").
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(d) At any time after the determination of the Fair Market Value of the
shares subject to the Stage One Bass Put Option and prior to the closing of
the Stage One Bass Put Option, Bass may elect in writing not to close the
Stage One Bass Put Option. In such event, the Stage One Bass Put Option will
be extinguished and there shall be no further Stage One Bass Put Option.
Also, in the event the Primary Option is consummated after the Notice Date
but before the closing of the Stage One Bass Put Option, the Stage One Bass
Put Option will be extinguished.
(e) The closing of the purchase upon exercise of the Stage One Bass Put
Option shall be held at the offices of TRC in Memphis, Tennessee thirty (30)
days after the determination of the Fair Market Value or at such other place
or such other time (no later than forty-five (45) days after such
determination) as TRC and Bass shall select. At such closing, Bass shall
deliver a certificate or certificates representing its shares of Common Stock
duly endorsed for transfer to the purchaser(s) together with full warranties
of title and a written representation that Bass owns such shares free and
clear of any liens, claims or encumbrances except as may be created by this
Agreement. At closing, Bass shall receive the purchase price from the
purchaser(s) in immediately available funds. No person other than the
purchaser(s) shall have any obligation or
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liability to pay any portion of the purchase price under the Stage One Bass
Put Option.
SECTION 4.4. STAGE THREE SMITH PUT OPTION.
(a) At any time during Stage Three, Smith shall have one option to sell
to TRC all of Smith's shares of Common Stock (but not less than all of such
shares) for the purchase price and upon the terms as set forth below (the
"Stage Three Smith Put Option"). To exercise the Stage Three Smith Put
Option, Smith must give written notice to TRC of Smith's intent to exercise
the option. Any such notice given prior to the commencement of Stage Three
will be deemed given on the day on which Stage Three commences. The date of
such notice of exercise (the "Notice Date") shall mark the beginning of a
twelve-month period during which, except as noted below in Section 4.4(d),
the Stage Three Smith Put Option may not be consummated (the "Stage Three
Smith Waiting Period").
(b) The aggregate purchase price to be paid for Smith's shares of Common
Stock sold pursuant to the Stage Three Smith Put Option shall be the Fair
Market Value of such shares as of the end of the month immediately preceding
the Notice Date.
(c) At any time during the Stage Three Smith Waiting Period, HI may
contract to sell all of its shares of Common Stock and all of Smith's shares
of Common Stock to any party, free and clear of the Stage Three Smith Put
Option (the "Stage
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Three Smith Put Option Sale"). If the purchase price per share pursuant to
the Stage Three Smith Put Option Sale is equal to or greater than ninety (90)
percent of the Fair Market Value per share of the shares subject to the Stage
Three Smith Put Option, as determined in accordance with Section 4.4(b)
above, then Smith shall be obligated to sell all of his shares of Common
Stock in the Stage Three Smith Put Option Sale, and if the Stage Three Smith
Put Option Sale is consummated, the Stage Three Smith Put Option will be
extinguished and there shall be no further Stage Three Smith Put Option. In
the event the purchase price per share pursuant to the Stage Three Smith Put
Option Sale is less than ninety (90) percent of the Fair Market Value per
share of the shares subject to the Stage Three Smith Put Option, as
determined in accordance with Section 4.4(b) above, then Smith may, but shall
not be obligated to, sell all or a portion of his shares of Common Stock
pursuant to the Stage Three Smith Put Option Sale, and if the Stage Three
Smith Put Option Sale is consummated, the Stage Three Smith Put Option shall
be extinguished and there shall be no further Stage Three Smith Put Option.
If the purchase price pursuant to the Stage Three Smith Put Option Sale
consists in whole or in part of consideration other than cash, and Smith
sells shares of Common Stock pursuant thereto, then, at Smith's election, TRC
shall at the closing of the Stage Three Smith Put
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Option Sale purchase from Smith his portion of such non-cash consideration
for an amount in cash or publicly traded securities (not subject to resale
restrictions applicable to Smith) equal to the then present value of Smith's
portion of such non-cash consideration.
At any time during the Stage Three Smith Waiting Period, TRC may
contract to sell substantially all of its assets or to merge, consolidate or
enter into any other business combination with another entity in a
transaction wherein the Stockholders will receive consideration for their
shares of Common Stock in a manner similar to that in a sale of stock. In
such event, Smith and Bass shall cooperate fully to effect such transaction.
If the consideration to be received by Smith in connection with such a
transaction consists in whole or in part of consideration other than cash,
then, at Smith's election, TRC shall at the closing of such transaction pay
or otherwise arrange for the payment to Smith of an amount in cash or
publicly traded securities (not subject to resale restrictions applicable to
Smith) equal to the then present value of Smith's proportionate share of such
non-cash consideration. Upon the consummation of such event during the Stage
Three Smith Waiting Period, the Stage Three Smith Put Option shall be
extinguished and there shall be no further Stage Three Smith Put Option.
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(d) If within the thirty (30) day period following the determination of
the Fair Market Value in accordance with Section 4.4(b) above, HI has not
begun actively to pursue a Stage Three Smith Put Option Sale, or TRC has not
begun actively to pursue a sale of assets or business combination as
described above, the closing of the purchase upon exercise of the Stage Three
Smith Put Option shall be held at the offices of TRC in Memphis, Tennessee
forty (40) days after the determination of the Fair Market Value in
accordance with Section 4.4(b) above, or at such other place or such other
time (no later than sixty (60) days after such determination) as TRC and
Smith shall select. If HI or TRC, as the case may be, does not succeed
within the Stage Three Smith Waiting Period in closing a Stage Three Smith
Put Option Sale or a sale of assets or business combination as described
above, then the closing of the purchase upon exercise of the Stage Three
Smith Put Option shall be held at the offices of TRC in Memphis, Tennessee
ten (10) days after the expiration of the Stage Three Smith Waiting Period,
or at such other place or at such other time (no more than thirty (30) days
after the expiration of the Stage Three Smith Waiting Period) as TRC and
Smith shall select. At closing, Smith shall deliver a certificate or
certificates representing his shares of Common Stock duly endorsed for
transfer to TRC together with full warranties of title and a
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written representation that Smith owns such shares free and clear of any
liens, claims or encumbrances except as may be created by this Agreement. At
closing, Smith shall receive the purchase price from TRC in immediately
available funds. No person other than TRC shall have any obligation or
liability to pay any portion of the purchase price under the Stage Three
Smith Put Option.
SECTION 4.5. STAGE THREE BASS PUT OPTION.
(a) At any time during Stage Three, Bass shall have one option to sell
to TRC all of Bass' shares of Common Stock (but not less than all of such
shares) for the purchase price and upon the terms as set forth below (the
"Stage Three Bass Put Option"). To exercise the Stage Three Bass Put Option,
Bass must give written notice to TRC of Bass' intent to exercise the option.
Any such notice given prior to the commencement of Stage Three will be deemed
given on the day on which Stage Three commences. The date of such notice of
exercise (the "Notice Date") shall mark the beginning of a twelve-month
period during which, except as noted below in Section 4.5(d), the Stage Three
Bass Put Option may not be consummated (the "Stage Three Bass Waiting
Period").
(b) The aggregate purchase price to be paid for Bass' shares of Common
Stock sold pursuant to the Stage Three Bass Put Option shall be the Fair
Market Value of such shares as of the end of the month immediately preceding
the Notice Date.
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(c) At any time during the Stage Three Bass Waiting Period, HI may
contract to sell all of its shares of Common Stock and all of Bass' shares of
Common Stock to any party, free and clear of the Stage Three Bass Put Option
(the "Stage Three Bass Put Option Sale"). If the purchase price per share
pursuant to the Stage Three Bass Put Option Sale is equal to or greater than
ninety (90) percent of the Fair Market Value per share of the shares subject
to the Stage Three Bass Put Option, as determined in accordance with Section
4.5(b) above, then Bass shall be obligated to sell all of its shares of
Common Stock in the Stage Three Bass Put Option Sale, and if the Stage Three
Bass Put Option Sale is consummated, the Stage Three Bass Put Option will be
extinguished and there shall be no further Stage Three Bass Put Option. In
the event the purchase price per share pursuant to the Stage Three Bass Put
Option Sale is less than ninety (90) percent of the Fair Market Value per
share of the shares subject to the Stage Three Bass Put Option, as determined
in accordance with Section 4.5(b) above, then Bass may, but shall not be
obligated to, sell all or a portion of its shares of Common Stock pursuant to
the Stage Three Bass Put Option Sale, and if the Stage Three Bass Put Option
Sale is consummated the Stage Three Bass Put Option shall be extinguished and
there shall be no further Stage Three Bass Put Option. If the purchase price
pursuant to the Stage Three Bass
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Put Option Sale consists in whole or in part of consideration other than cash,
and Bass sells shares of Common Stock pursuant thereto, then, at Bass'
election, TRC shall at the closing of the Stage Three Bass Put Option Sale
purchase from Bass Bass' portion of such non-cash consideration for an amount
in cash or publicly traded securities (not subject to resale restrictions
applicable to Bass) equal to the then present value of Bass' portion of such
non-cash consideration.
At any time during the Stage Three Bass Waiting Period, TRC may contract
to sell substantially all of its assets or to merge, consolidate or enter
into any other business combination with another entity in a transaction
wherein the Stockholders will receive consideration for their shares of
Common Stock in a manner similar to that in a sale of stock. In such event,
Smith and Bass shall cooperate fully to effect such transaction. If the
consideration to be received by Bass in connection with such a transaction
consists in whole or in part of consideration other than cash, then, at Bass'
election, TRC shall at the closing of such transaction pay or otherwise
arrange for the payment to Bass of an amount in cash or publicly traded
securities (not subject to resale restrictions applicable to Bass) equal to
the then present value of Bass' proportionate share of such non-cash
consideration. Upon the consummation of such event during the Stage Three
Bass Waiting
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Period, the Stage Three Bass Put Option shall be extinguished and there shall
be no further Stage Three Bass Put Option.
(d) If within the thirty (30) day period following the determination of
the Fair Market Value in accordance with Section 4.5(b) above, HI has not
begun actively to pursue a Stage Three Bass Put Option Sale or TRC has not
begun actively to pursue a sale of assets or business combination as
described above, the closing of the purchase upon exercise of the Stage Three
Bass Put Option shall be held at the offices of TRC in Memphis, Tennessee
forty (40) days after the determination of the Fair Market Value in
accordance with Section 4.5(b) above, or at such other place or such other
time (no later than sixty (60) days after such determination) as TRC and Bass
shall select. If HI or TRC, as the case may be, does not succeed within the
Stage Three Bass Waiting Period in closing a Stage Three Bass Put Option Sale
or a sale of assets or business combination as described above, then the
closing of the purchase upon exercise of the Stage Three Bass Put Option
shall be held at the offices of TRC in Memphis, Tennessee ten (10) days after
the expiration of the Stage Three Bass Waiting Period, or at such other place
or at such other time (no more than thirty (30) days after the expiration of
the Stage Three Bass Waiting Period) as TRC and Bass shall select. At such
closing, Bass shall deliver a certificate or certificates
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representing its shares of Common Stock duly endorsed for transfer to TRC
together with full warranties of title and a written representation that Bass
owns such shares free and clear of any liens, claims or encumbrances except as
may be created by this Agreement. At closing, Bass shall receive the purchase
price from TRC in immediately available funds. No person other than TRC shall
have any obligation or liability to pay any portion of the purchase price
under the Stage Three Bass Put Option.
SECTION 5
RESTRICTIONS AND RIGHTS ON TRANSFER OF COMMON STOCK
SECTION 5.1. TWO YEAR RESTRICTION, RIGHT OF FIRST REFUSAL AND PROCEDURES.
(a) Until the expiration of two (2) years from the date of this
Agreement (the "Two Year Restriction Period") no Stockholder may sell,
transfer, pledge or otherwise encumber any Common Stock to any person without
the prior written consent of TRC reflecting the unanimous approval of all
members of the TRC Board. Notwithstanding the above, any Stockholder may
during the Two Year Restriction Period or afterwards (i) sell or transfer his
or its shares of Common Stock in any transaction described in Section 5.9(ii)
or 5.9(vii) below, or (ii) pledge his or its shares of Common Stock (a) to
TRC pursuant to the Value Guaranty Agreement of even date herewith
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between Smith and TRC, or (b) to secure or otherwise guarantee the purchase
by TRC of the Primary Option Shares upon exercise of the Primary Option;
provided that in the case of any such pledge described in this subsection
(ii)(b) such Stockholder shall first have made the offers hereinafter
described in Section 5.7 and such offers shall not have been accepted.
(b) After the expiration of the Two Year Restriction Period and in the
event Stage Three has not commenced, no Stockholder (or in the event Stage
Three has commenced, no Stockholder other than HI) shall sell or transfer any
Common Stock, except as provided in Section 5.9, unless the Stockholder
desiring to make the sale or transfer (the "Transferring Stockholder") shall
have first made the offers to sell hereinafter described in Section 5.2 and
such offers shall not have been accepted in their entirety. Any sale, except
a sale permitted under Section 5.9, shall be for a consideration paid
exclusively in money, whether as cash at closing or on a deferred basis.
(c) After the expiration of the Two Year Restriction Period and in the
event Stage Three has not commenced, no Stockholder (or in the event Stage
Three has commenced, no Stockholder other than HI) shall pledge or otherwise
encumber any Common Stock, except as provided in Sections 5.9, unless the
Stockholder desiring to make the pledge or encumbrance (the
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"Transferring Stockholder") shall have first made the offers hereinafter
described in Section 5.7 and such offers shall not have been accepted.
SECTION 5.2. FIRST REFUSAL OFFER IN THE CASE OF A PROPOSED SALE.
Subject to Section 5.1 above, if the Transferring Stockholder desires to
sell or transfer shares to another Stockholder or to a third party, the
Transferring Stockholder shall first make an offer to sell all of the shares
that it desires to sell or transfer (but not less than all of such shares) to
TRC or the other Stockholders or both for the purchase price per share and on
the terms hereinafter set forth. This offer shall be in writing and shall
specify the nature of the sale or transfer in which the Transferring
Stockholder desires to engage, including the name or names of the other party
or parties to such proposed transaction and the purchase price and payment
terms. TRC shall have the first opportunity to respond to the Transferring
Stockholder's offer. TRC may accept the offer as to all of the shares, or may
accept the offer as to less than all of the shares provided the other
Stockholders accept the offer as to all of the remainder of the offered
shares. If TRC rejects the offer or fails to accept the offer in writing
within thirty (30) days after receipt thereof, or if TRC elects to purchase
some but not all of the shares of Common Stock offered by the
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Transferring Stockholder, then the Transferring Stockholder shall, within
five (5) days, make an offer (i) in the event State Three has commenced, to
HI or, (ii) in the event Stage Three has not commenced, to HI and the other
Stockholders, to sell all of such shares of Common Stock that TRC did not
elect to purchase (but not less than all of such shares) for the purchase
price per share and on the terms hereinafter set forth. The other
Stockholders shall have a period of sixty (60) days during which to respond
to such offer to them. If all of the shares of Common Stock offered by the
Transferring Stockholder are not accepted for purchase by TRC or such offeree
Stockholders or both, then all such shares shall be released from the
restrictions contained in Section 5.1(b) hereof as provided in Section 5.8
below. If more than one Stockholder elects to purchase, the purchasing
Stockholders shall participate pro rata in the purchase, such that the total
number of shares of Common Stock to be purchased by a participating
Stockholder shall bear to the total number of shares being purchased by all
participating Stockholders the same relation as the number of shares of
Common Stock owned by such participating Stockholder bears to the total
number of shares of Common Stock owned by all Stockholders participating in
the purchase, and the number of shares to be purchased by each participating
Stockholder shall be rounded to the nearest
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whole number. For example, if Stockholder A, who owns 10 shares prior to the
purchase, and Stockholder B, who owns 25 shares prior to the purchase, both
were to participate in the purchase of 50 shares of Common Stock of the
Transferring Stockholder, Stockholder A would be entitled to purchase 14
(14.25/50 = 10/35) of such shares, and Stockholder B would be entitled to
purchase 36 (35.75/50 = 25/35) of such shares.
SECTION 5.3. PURCHASE BY TRC; FIRST REFUSAL OPTION COMMITTEE.
(a) If a Transferring Stockholder offers to sell its Common Stock to TRC
pursuant to Section 5.2, then the Transferring Stockholder agrees to take all
action in its power necessary to enable TRC to complete such purchase,
including without limitation, to vote its shares of Common Stock that are
offered for sale in accordance with the vote of the majority of shares of
Common Stock cast by the other Stockholders at any meeting of stockholders of
TRC to approve any corporate action that may be required to be taken by TRC
or its officers or directors in order to enable TRC to accept the offer and
purchase any or all of the shares of Common Stock offered by the Transferring
Stockholder.
(b) Simultaneously with the execution and delivery hereof, the TRC Board
has by resolution established the First Refusal Option Committee of the TRC
Board (the "First Refusal Option Committee") with exclusive authority to
exercise any option of
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first refusal available to TRC pursuant to this Section 5 and to take such
other actions as may be required to enable TRC to consummate the transactions
necessary in connection therewith, including without limitation Significant
Director Actions (as defined in the bylaws of TRC). The First Refusal Option
Committee shall at all times consist of the director(s) of the TRC Board
other than the director(s) designated by the Transferring Stockholder or its
transferees. Any action taken by the First Refusal Option Committee shall
require the unanimous vote of all of the members thereof. A copy of such
resolution of the TRC Board is attached hereto as Exhibit 5.3.
SECTION 5.4. PURCHASE PRICE AND TERMS.
The purchase price for each share of Common Stock sold pursuant to
Section 5.2 and the terms of payment therefor, shall be the same as the
purchase price and terms of payment set forth in the offer made to the
Transferring Stockholder, except that (i) neither TRC or HI shall be required
to grant any security interest or provide any collateral to assure payment of
a deferred purchase price, if any, other than a pledge of the shares
purchased, and (ii) if the consideration to be paid to the Transferring
Stockholder consists in whole or in part of property (rather than cash), the
purchaser(s) may transfer cash or other property of equivalent value to the
Transferring Stockholder in payment for his or its shares.
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SECTION 5.5. ACCEPTANCE OF OFFERS.
Any offer may be accepted within the time provided for acceptance of
such offer in Section 5.2 hereof by giving written notice of acceptance to
the person making the offer. An offer shall be deemed to be rejected unless
written notice of acceptance of the offer has been received by the person
making the offer prior to the expiration of the time for acceptance set forth
in Section 5.2.
SECTION 5.6. CLOSING OF PURCHASE.
If all of the shares of Common Stock included in the offers made by the
Transferring Stockholder pursuant to Section 5.2 are accepted for purchase,
then such shares shall be sold by the Transferring Stockholder to TRC, the
other Stockholders, or any combination thereof, as the case may be, accepting
such offers. The closing of the purchase or purchases shall take place no
later than thirty (30) days after the date of the notice of the last
acceptance of an offer made pursuant to Section 5.2 at the principal office
of TRC or at such other place as the Transferring Stockholder and the
purchasers may agree. The purchase price for all shares of Common Stock sold
pursuant to Section 5.2 hereof shall be paid in accordance with the terms for
payment determined as set forth in Section 5.4 above. The Transferring
Stockholder shall represent and warrant to the purchaser(s) that it is
conveying title to such
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shares, with full warranties of title, free and clear of any liens, claims,
or encumbrances except as may be created by this Agreement.
SECTION 5.7. FIRST REFUSAL OFFER IN THE CASE OF A PROPOSED PLEDGE OR
ENCUMBRANCE.
If, during the period described in Section 5.1(c), the Transferring
Stockholder desires to pledge or otherwise encumber shares of Common Stock to
another Stockholder or to a third party, the Transferring Stockholder shall
first make an offer to TRC and the other Stockholders or both to allow such
offerees or any combination thereof to perform the obligations of the proposed
pledgee to the Transferring Stockholder in connection with which the
Transferring Stockholder's shares of Common Stock are proposed to be pledged
or encumbered, on the same terms and conditions as such obligations would be
performed by the proposed pledgee. A first refusal offer made pursuant to
this Section 5.7 shall be subject to the same procedural requirements as are
applicable to a first refusal offer made pursuant to Section 5.2, including
without limitation all time limitations, except that (i) references to the
terms "purchase price" and "payment terms" shall be deemed to mean terms of
the proposed pledge or encumbrance and the underlying obligations of the
proposed pledgee, and (ii) whenever a first refusal offer is made pursuant to
this Section 5.7 regarding a pledge or encumbrance proposed to be
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made in connection with the exercise of a first refusal option under Section
5.2 hereof or in connection with the exercise of the Primary Option, then the
time limits applicable to the first refusal offer made under this Section 5.7
shall be reduced by fifty (50) percent.
SECTION 5.8. EFFECT OF FAILURE TO EXERCISE RIGHT OF FIRST REFUSAL;
OBLIGATIONS OF TRANSFEREE.
If fewer than all of the shares of Common Stock included in the first
refusal offer made by the Transferring Stockholder pursuant to Section 5.2
above are accepted for purchase by TRC and the Stockholders (or if, in the
case of a first refusal offer made pursuant to Section 5.7 involving a pledge
or encumbrance of shares, fewer than all of the shares included in such first
refusal offer are accepted for pledge to TRC or the Stockholders or both),
then all of the shares included in such first refusal offer shall be released
from the first refusal restrictions set forth in Section 5.1(b) or (c). Upon
the release of the shares of Common Stock desired to be sold, transferred,
pledged or encumbered by the Transferring Stockholder from the first refusal
restrictions set forth in Section 5.1(b) or (c), the Transferring Stockholder
may consummate the sale, transfer, pledge or encumbrance of such shares as
set forth in its offer described in Section 5.2 or Section 5.7, as the case
may be, to such described third party or parties and on the terms and
conditions therein described.
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Any shares transferred to any Stockholder or any third party pursuant to the
terms of this Section 5 shall remain subject to all of the terms and
conditions of this Agreement and shall be treated in the hands of the
transferee for purposes of this Agreement exactly as they would have been
treated if in the hands of the Transferring Stockholder, including without
limitation, with respect to all rights and options granted by this Agreement;
provided, however, that any rights or obligations in this Agreement that are
personal to Smith, HI or Bass shall not apply to such other transferee. Any
third party or parties purchasing shares of Common Stock pursuant to this
Agreement shall be required to execute a counterpart of this Agreement. If a
Transferring Stockholder shall fail to complete the proposed sale, transfer,
pledge or encumbrance within fifty-five (55) days following the expiration of
the time provided in this Agreement for acceptance of the final first refusal
offer made pursuant to Section 5.2 or Section 5.7, then such shares of Common
Stock shall again be subject to all of the first refusal restrictions of
Section 5.1(b) or (c).
SECTION 5.9. EXCEPTIONS.
Notwithstanding the restrictions on sales, transfers, pledges or
encumbrances of shares of Common Stock contained in the Sections 5.1(b) and
(c) above, the following transfers shall be permitted:
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(i) Provided such transfer shall not constitute an arms-length
transfer for value, any individual Stockholder shall have the
right to sell, give or otherwise transfer his shares of Common
Stock to his spouse or lineal descendants, any trust for his
benefit or the benefit of his spouse or lineal descendants, any
partnership in which all interests are held by such individual
Stockholder or his spouse or lineal descendants (or any trust
for the benefit of such persons) or any corporation in which
such Stockholder is the direct or beneficial owner of one
hundred (100) percent of the issued and outstanding stock;
provided, however, that (A) any such trust or partnership shall
have no terms inconsistent with the obligations of a Stockholder
under this Agreement, (B) each of the trustees of any such
trust, partners of any such partnership and directors of any
such corporation acquiring any such Common Stock shall agree in
writing with TRC that no interest in such trust or partnership
or shares in such corporation may be transferred to any person
other than such individual Stockholder or his spouse or lineal
descendants or a trust
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for their benefit, and (C) TRC shall receive an opinion of
counsel satisfactory to TRC that each of such agreements and
this Agreement is valid and enforceable according to its terms
with respect to the shares of Common Stock transferred to such
trust, partnership or corporation.
(ii) Any individual Stockholder's shares of Common Stock may be
transferred to his personal representative upon his death for
purposes of administration of his estate or upon his
incompetency for purposes of the protection and management of
his assets; but such personal representative may not transfer
such shares other than as provided in this Section 5.
(iii) Any Stockholder may transfer his or its shares of Common
Stock to any person pursuant to a sale in connection with a
Public Offering under the Securities Act in accordance with
Section 7.1 or Section 7.2 of this Agreement.
(iv) Provided such transfer shall not constitute an arms-length
transfer for value, Bass may transfer its shares of Common
Stock to any entity that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or
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is under common control with Bass (on the condition precedent
that Bass and such affiliated entity agree in writing with TRC,
if requested by TRC or any Stockholder, to maintain such
relationship with Bass).
(v) HI, during the time that Section 5 first refusal restrictions
are applicable to shares of Common Stock held by it, may
transfer its shares of Common Stock (A) to its parent
corporation or to any wholly-owned subsidiary of HI or of such
parent corporation (on the condition precedent that such parent
corporation agrees in writing with TRC, if requested by TRC or
any Stockholder, to maintain such transferee as a direct or
indirect wholly-owned subsidiary of such parent corporation);
or (B) in connection with (x) its acquisition by merger or
consolidation with another person, or (y) the acquisition by
another person of substantially all of the business, properties
or assets of HI.
(vi) Any transfer pursuant to Section 5.10 below.
(vii) Any sale or transfer of shares pursuant to the exercise of the
Primary Option, the Stage One Smith Put Option, the Stage One
Smith Call
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Option, the Stage One Bass Put Option, the Stage Three Smith
Put Option, the Stage Three Bass Put Option, any option to
buy or sell shares of Common Stock pursuant to Section 6 of
this Agreement, or any option to buy or sell shares of Common
Stock pursuant to the Stockholder Employment Agreements.
In the event of the transfer of Common Stock pursuant to this Section
5.9 (other than Subsection 5.9(iii)), the shares of stock so transferred
shall remain subject to the terms and conditions of this Agreement and shall
be treated in the hands of the transferee for purpose of this Agreement
exactly as they would have been treated if in the hands of the transferor,
including without limitation, with respect to all rights and options granted
by this Agreement. The transferee of such shares shall be required to
execute a counterpart of this Agreement.
SECTION 5.10. TAG ALONG RIGHTS.
Except in connection with transfers made pursuant to Section 5.9(i),
(ii), (iii), (iv), (v), or (vii) above, in the event any Stockholder (other
than Irons or Lambert) at any time reaches an agreement with any person by
which such Stockholder will transfer to such person shares of Common Stock
(in accordance with the terms of this Agreement), the other
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Stockholders (other than Irons or Lambert) shall be given written notice of
such proposed transaction and the option to elect in writing within ten (10)
days of such notice to participate pro rata in such transfer (on the terms
established) such that the total number of shares of Common Stock to be
transferred by a participating Stockholder (rounded to the nearest whole
number) shall bear to the total number of shares to be transferred the same
relation as the number of shares of Common Stock owned by such participating
Stockholder bears to the total number of shares of Common Stock owned by all
Stockholders participating in the transfer. In the event of such election,
such Stockholders must comply with the terms of such transaction.
SECTION 6
BUY-SELL OPTIONS
SECTION 6.1. MANNER OF OFFER.
At any time after the commencement of Stage Two, Smith, Bass, or HI (the
"Option Stockholders") may offer to the other Option Stockholders both to
sell all of the offeror's shares of Common Stock and to buy all of the
offerees' shares of Common Stock. Such offer must be in writing and must
contain the following:
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(i) a statement of intention to make an offer under this Section 6.1;
(ii) a statement that the purchase price per share of the shares of Common
Stock subject to the offer shall be the Fair Market Value determined as
of the last day of the month immediately preceding the offer, or such
greater amount as may be selected by the offeror; provided, however,
that at any time after the determination of the Fair Market Value of
Common Stock subject to an offer made hereunder and prior to the
closing of a purchase hereunder, the offeror may elect not to go
forward with its offers to buy or sell, and the offers shall be deemed
not to have been made;
(iii) a statement that the purchase price of the shares of Common Stock
subject to the offer shall be payable in immediately available funds at
closing; and
(iv) a statement that such offer is both an offer to sell all the shares of
Common Stock owned by the offeror and an offer to buy all the shares of
Common Stock owned by the offerees.
SECTION 6.2. TERM OF OFFER; FAILURE TO EXERCISE EITHER OFFER.
The offeror's offer shall be irrevocable for the longer of
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(i) ninety (90) days, or (ii) the expiration of thirty (30) days after the
determination of the purchase price, and the offerees may, on or before the
expiration of such longer period accept either the offer to sell or the offer
to buy. If either or both offerees fail to accept either the offer to sell or
the offer to buy, the offeror shall have the option, but not the obligation,
to buy the shares of Common Stock of the non-responding offeree(s) as set
forth in Sections 6.3(c), (d) and (e) below.
SECTION 6.3. MANNER OF ACCEPTANCE.
(a) If both offerees elect to accept the offeror's offer to buy, the
offeror must buy, and each offeree must sell to the offeror, all of the
shares of Common Stock owned by such selling offeree.
(b) If both offerees elect to accept the offeror's offer to sell, the
offeror must sell all of his shares of Common Stock, and each offeree shall
be required to buy from the offeror that portion of the offeror's shares of
Common Stock as the number of shares of Common Stock owned by such buying
offeree bears to the total number of shares of Common Stock owned by him and
the other buying offeree.
(c) If either, but not both, of the offerees accepts the offeror's offer
to sell (either because one offeree accepted the offeror's offer to buy or
because one offeree failed to
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accept either the offeror's offer to buy or the offeror's offer to sell), the
offeror must sell all of his shares of Common Stock to the offeree accepting
the offer to sell, and the offeror's offer to buy shall become null and void.
The offeree accepting the offeror's offer to sell, must buy all of the
offeror's shares of Common Stock and must immediately offer (the "Second
Offer") to buy all of the shares of Common Stock owned by the other offeree
who did not accept the original offeror's offer to sell (the "Second
Offeree"). The Second Offer shall be on the same terms as the original
offeror's offer to buy. If the Second Offeree fails to accept the Second
Offer within five (5) days, the Second Offer shall expire, at which time the
maker of the Second Offer shall have the right, exercisable on or before the
fifteenth (15th) day after the expiration of such five (5) day period, to buy
all of the shares of Common Stock of the Second Offeree, and if such right is
exercised, the Second Offeree shall be required to sell, in accordance with
the terms of the Second Offer and the provisions of this Section 6.
(d) If one of the offerees accepts the offeror's offer to buy and the
other offeree fails to accept either the offeror's offer to buy or offer to
sell, then the offeror shall buy, and the selling offeree shall sell to the
offeror, all of the selling offeree's shares of Common Stock. The offeror
shall
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then have the right, exercisable on or before the fifteenth (15th) day after
the expiration of the initial option period, to buy all the shares of Common
Stock of the non-responding offeree, and if the offeror exercises such right,
the non-responding offeree shall be required to sell to the offeror all of
his shares of Common Stock in accordance with the terms of the offer and the
provisions of this Section 6.
(e) If neither offeree accepts either of the offeror's offers to sell or
to buy within the option period, the offeror shall have the right,
exercisable on or before the fifteenth (15th) day after the expiration of the
option period, to buy all of the shares of Common Stock of both the
non-responding offerees (but not less than all of such shares), and if the
offeror exercises such right, the non-responding offerees shall be required
to sell such shares to the offeror, in accordance with the terms of the offer
and the provisions of this Section 6.
(f) Examples illustrating the hypothetical situations set forth in
Section 6.3(a) through (e) above are set forth on Exhibit 6.3 hereto.
SECTION 6.4. ASSIGNMENT OF OPTION.
Any Stockholder/offeree accepting an offer of the Stockholder/offeror to
sell and thereby incurring the obligation to buy shares of Common Stock under
this Section 6,
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shall have the right to assign to TRC the right and obligation to buy such
shares from the selling Stockholder on the same terms and conditions as set
forth in the original offer from the selling Stockholder, provided each other
Stockholder purchasing shares of Common Stock pursuant to Section 6 agrees to
such assignment and provided TRC shall have the ability to assume and carry
out such assigned rights and obligations.
SECTION 6.5. CLOSING.
The closing of any purchase or sale pursuant to this Section 6 shall be
held at the time and place and on the date specified by the buyer(s) by
written notice to the seller(s), which date shall be on or before the later
of (i) forty (40) days after the determination of the Fair Market Value of
the shares to be purchased, or (ii) ten (10) days after the date the last
such option to purchase or sell has been exercised. At closing the seller(s)
shall tender all documents, duly executed, necessary to convey the shares of
Common Stock being sold, with full warranties of title and a written
representation that such Common Stock is free and clear of any liens, claims
or encumbrances, except as may be created by this Agreement, and the buyer(s)
shall tender the purchase price therefor in immediately available funds.
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SECTION 7
REGISTRATION RIGHTS
SECTION 7.1. PIGGYBACK REGISTRATION RIGHTS.
(a) If TRC proposes to file a Registration Statement in connection with
a Public Offering (as defined below) other than a Primary Option Public
Offering, TRC will provide written notice thereof to the Stockholders at
least sixty (60) days prior to the filing of the Registration Statement. For
purposes of this Agreement, "Registration Statement" shall mean a
registration statement on the appropriate form in order to register shares of
Common Stock under the Securities Act of 1933, as amended ("Securities Act")
(otherwise than in connection with the registration of shares of Common Stock
issuable pursuant to an employee stock option, stock purchase or similar plan
or pursuant to a merger, exchange offer or in a transaction of the type
specified in Rule 145(a) under the Securities Act); "Public Offering" shall
mean the offering of shares of Common Stock pursuant to a Registration
Statement, including a Registration Statement filed pursuant to Section 7.2
hereof; and "Underwriter" or "Underwriters" shall mean, in the case of a
Public Offering under Section 7.1, an underwriter selected by TRC or, in the
case of a Public Offering initiated under Section 7.2, an underwriter
selected by TRC and the
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Selling Stockholder, if any, owning the greatest number of shares of Common
Stock to be included in the offering. At the written request of any
Stockholder delivered to TRC within fifteen (15) days after the receipt of
such notice from TRC, which request shall state the number of shares of
Common Stock held by such Stockholder that such Stockholder wishes to sell
under the Registration Statement (shares of Common Stock held by any
Stockholder that are requested to be offered and sold pursuant to this
Section 7.1 together with shares of Common Stock that are requested to be
offered and sold pursuant to Section 7.2 are herein referred to as
"Registration Shares"), TRC agrees, subject to Section 7.1(b), to use its
best efforts to cause all of the Registration Shares to be registered under
the Securities Act on such Registration Statement to the extent and under the
conditions such registration is permissible under the Securities Act and the
rules and regulations of the Securities and Exchange Commission (the
"Commission") thereunder.
(b) A Stockholder's right to request TRC to include such Stockholder's
Registration Shares in a Public Offering pursuant to Section 7.1(a) is
subject to the following conditions. If, in an underwritten Public Offering
(whether or not TRC proposes to sell Common Stock), the managing
Underwriter(s) thereof advise TRC in writing that in their opinion the number
of
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shares of Common Stock requested to be included in such Public Offering
exceeds the number which can reasonably be sold in such Public Offering, TRC
will include in such registration (i) first, the shares that TRC proposes to
sell, and (ii) second, the Registration Shares that the Stockholders propose
to sell pro rata among such Stockholders on the basis of the number of shares
of Common Stock held by the Stockholders at the time the Registration
Statement is filed.
SECTION 7.2. DEMAND REGISTRATION RIGHTS.
(a) At any time after any Public Offering of Common Shares has been
made, Bass, Smith or HI may, by written notice, request TRC to file on one
occasion each a Registration Statement in order to register all (or any
portion, as determined by such Stockholder) of the shares of Common Stock
owned by such Stockholder for resale pursuant to a Public Offering. Upon
receipt of such notice, TRC shall promptly (and in any event within ninety
(90) days) use its best efforts to file such Registration Statement under the
Securities Act with respect to such Stockholder's Registration Shares subject
to the following:
(i) If TRC has commenced taking action with respect to any
financing, acquisition, reorganization or other transaction or
development material to TRC, and in the reasonable and good faith
opinion of
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<PAGE>
the TRC Board, filing a Registration Statement would not be in
the best interests of TRC, TRC may delay filing the
Registration Statement until the earlier of (A) the
termination of activities with respect to any such transaction
or development, or (B) the consummation or abandonment of any
agreement with respect to such transaction or development, or
(C) one hundred twenty (120) days following TRC's receipt of
such Stockholder's notice pursuant to this Section 7.2.
(ii) If filing a Registration Statement could require TRC to
undergo a special interim audit, and in the reasonable and
good faith opinion of the TRC Board, the cost of such special
interim audit would exceed $50,000, TRC may delay filing a
Registration Statement until ninety (90) days after the close
of the fiscal year in which the request by such Stockholder
for registration of shares of Common Stock is made, unless
such Stockholder agrees to reimburse TRC for the cost of such
special interim audit.
In the event that TRC elects to delay filing a Registration Statement in
accordance with this Section 7.2, it will promptly notify the requesting
Stockholder thereof. The requesting
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<PAGE>
Stockholder may, within twenty (20) days following receipt of such notice,
decide to withdraw its request that TRC file a Registration Statement, in
which case the withdrawn request will not count as such Stockholder's
exercise of its right to request TRC to file a Registration Statement
pursuant to this Section 7.2.
(b) A Stockholder's right under Section 7.1(a) to request TRC to
include such Stockholder's Registration Shares in a Public Offering pursuant
to Section 7.2(a) is subject to the following conditions. If, in an
underwritten Public Offering (whether or not TRC proposes to sell Common
Stock), the managing Underwriter thereof advise TRC in writing that in its
opinion the number of shares of Common Stock requested to be included in
such Public Offering exceeds the number which can reasonably be sold in such
Public Offering, TRC will include in such registration (i) first, the
Registration Shares that the initiating Stockholder and the other
Stockholders propose to sell pro rata among such Stockholders on the basis of
the number of shares of Common Stock held by such Stockholders at the time
the Registration Statement is filed, and (ii) second, the shares, if any,
that TRC proposes to sell.
(c) If TRC so requests, it shall not be required to effect a Public
Offering under Section 7.2 for a period not to exceed nine (9) months
immediately following the date any other Public
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<PAGE>
Offering was commenced. If any Stockholder initiating a Public Offering under
this Section 7.2 so requests, TRC shall not and shall not be required to
initiate another Public Offering under either Section 7.1 of Section 7.2 for
a period not to exceed ninety (90) days immediately following the date on
which such first Public Offering initiated pursuant to this Section 7.2 was
commenced.
SECTION 7.3. PROCEDURES.
Whenever TRC shall include Registration Shares owned by a Stockholder
("Selling Stockholder") in a Registration Statement, TRC shall:
(i) promptly prepare and file with the Commission a Registration
Statement on an appropriate form with respect to the
Registration Shares (as well as any necessary amendments or
supplements thereto), and use its best efforts to cause the
Registration Statement to become promptly effective.
(ii) furnish to each Selling Stockholder copies of the
Registration Statement and any amendments or supplements
thereto and any prospectus forming a part thereof prior to
filing;
(iii) notify each Selling Stockholder, promptly after TRC shall
receive notice thereof, of the time
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<PAGE>
when the Registration Statement became effective or when any
amendment or supplement to any prospectus forming a part of
the Registration Statement has been filed;
(iv) notify each Selling Stockholder promptly of any request by
the Commission for the amending or supplementing of such
Registration Statement or prospectus or for additional
information;
(v) advise each Selling Stockholder, after TRC shall receive
notice or obtain knowledge thereof, of the issuance of any
order by the Commission suspending the effectiveness of any
Registration Statement or amendment thereto or of the
initiation or threatening of any proceeding for that purpose,
and promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal promptly if such
stop order should be issued;
(vi) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus
forming a part thereof as may be necessary to keep the
Registration Statement effective for the lesser of (A) a
period of time necessary to permit each
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<PAGE>
Selling Stockholder pursuant to the Registration Statement to
dispose of all of such Registration Shares, (B) nine (9) months
and (C) the maximum period of time permitted by law to keep
effective a registration statement, and comply with the
provisions of the Securities Act with respect to the
disposition of all shares of Common Stock covered by such
Registration Statement during such period in accordance with
the intended methods of disposition by each Selling Shareholder
set forth in the Registration Statement;
(vii) use its best efforts to register or qualify such Registration
Shares under such other securities or blue sky laws of such
jurisdictions as determined by the managing Underwriter after
consultation with TRC (or if there is no Underwriter, as
determined by TRC) and do any and all other acts and things
which may be reasonably necessary or advisable to enable each
Selling Stockholder to consummate the disposition in such
jurisdictions of the Registration Shares; provided that TRC
will not be required (except for the State of Tennessee) to (A)
qualify
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<PAGE>
generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph, (B)
subject itself to taxation in any such jurisdiction or (C)
consent to general service of process in any such jurisdiction;
(viii) notify each Selling Stockholder, during any period when a
prospectus is required to be delivered under the Securities
Act, of the happening of any event as a result of which the
prospectus contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading,
and, at the request of each Selling Stockholder, prepare a
supplement or amendment to such prospectus so that such
prospectus will not contain an untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading;
(ix) use its best efforts to cause all Registration Shares to be
listed on at least one securities exchange or the NASDAQ System
and comply with the
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<PAGE>
applicable requirements of such exchange or the NASDAQ System
and the applicable rules and regulations under the Securities
and Exchange Act of 1934;
(x) provide a transfer agent and registrar for all such
Registration Shares not later than the effective date of the
Registration Statement;
(xi) enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other actions as
the Selling Stockholder or the Underwriter(s), if any,
reasonably request in order to expedite or facilitate the
disposition of the Registration Shares (including, without
limitation, effecting a stock split or a combination of shares);
(xii) make available for inspection by each Selling Stockholder, any
Underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney, accountant or other
agent retained by each Selling Stockholder or such Underwriter,
all financial and other records, pertinent corporate documents
and properties of TRC, and cause TRC's officers, directors and
employees to supply all information
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<PAGE>
reasonably requested by each Selling Stockholder, or an
underwriter, attorney, accountant or agent in connection with
such Registration Statement;
(xiii) use its best efforts to cause Registration Shares covered by
such Registration Statement to be promptly registered with or
approved by such other governmental agencies or authorities as
may be necessary to enable each Selling Stockholder to
consummate the disposition of such Registration Shares;
(xiv) obtain a cold comfort letter from TRC's independent public
accountants in customary form and covering such matters of the
type customarily covered by cold comfort letters; and
(xv) cause TRC's counsel to provide customary legal opinions in
connection with such Registration Statement.
SECTION 7.4. INDEMNIFICATION.
TRC will indemnify and hold harmless each Stockholder, the officers,
directors, partners and partners of partners of such Stockholder, and each
Underwriter of shares of Common Stock sold pursuant to Section 3.9, 7.1 or
7.2 (and any person who controls such Stockholder or any such Underwriter
within the meaning of Section 15 of the Securities Act) against all
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<PAGE>
claims, losses, damages, liabilities and expenses resulting from any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement or in any related prospectus, notification or the like
and from any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same may have been based on information
furnished in writing to TRC by such Stockholder or such Underwriter expressly
for use therein and use in accordance with such writing. Each Stockholder, by
acceptance of the registration provisions provided herein, agrees to furnish
to TRC such information concerning such Stockholder and the proposed sale or
distribution as shall, in the opinion of counsel for TRC, be necessary in
connection with any such registration or qualification of any shares of stock
proposed to be made pursuant to Section 3.9, 7.1 or 7.2 and to indemnify and
hold harmless TRC, its officers and directors, each of its Underwriters and
the other Stockholders (and any person who controls TRC or such Underwriters
or such other Stockholders within the meaning of Section 15 of the Securities
Act and the officers, directors, partners and partners of partners of such
Stockholders) against all claims, losses, damages, liabilities and expenses
resulting from any untrue statement or alleged
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<PAGE>
untrue statement of a material fact furnished in writing to TRC by such
Stockholder expressly for use in connection with such registration or
qualification and used in accordance with such writing and from any omission
therefrom or alleged omission therefrom of a material fact needed to be
furnished or necessary to make the information furnished not misleading.
If any party (the "Indemnitee") receives notice of any claim or the
commencement of any action or proceeding with respect to which any other
party (or parties) is obligated to provide indemnification (the "Indemnifying
Party") pursuant to this Section 7.4, the Indemnitee shall promptly give the
Indemnifying Party notice thereof. If the Indemnitee does not promptly give
this notice, the Indemnifying Party shall not be obligated to provide
indemnification hereunder to the extent that the liability for which such
indemnification is claimed could have been avoided or mitigated if the
Indemnitee had promptly given notice to the Indemnifying Party. The
Indemnifying Party may compromise, defend or settle, at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel, any such
matter involving the asserted liability of the Indemnitee. If the
Indemnifying Party chooses to defend any claim, the Indemnitee shall make
available to the Indemnifying Party any books, records or other documents
within its control that are necessary or appropriate for such defense.
SECTION 7.5. EXPENSES.
TRC shall pay all of the expenses in connection with a
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<PAGE>
Public Offering in which a Selling Stockholder participates in accordance
with Section 7.1 or 7.2, including, without limitation, costs of complying
with federal and state securities laws and regulations, attorneys' and
accounting fees of TRC, printing expenses and federal and state filing fees,
except that transfer taxes, underwriting commissions, fees and expenses
incurred by the Selling Stockholders and fees and disbursements of counsel
(if any) to the Selling Stockholders will be borne by the Selling
Stockholders.
SECTION 8
MISCELLANEOUS
SECTION 8.1. ISSUANCE OF ADDITIONAL COMMON STOCK.
Except in connection with a Public Offering initiated by TRC described
in Sections 3.9 or 7.1 hereof, TRC agrees not to issue, and the Stockholders
agree not to cause TRC to issue, additional shares of Common Stock to any
persons or entities who are not parties to this Agreement unless (i) such
issuance is in accordance with the Bylaws of TRC, (ii) such persons agree in
writing to be bound by the terms and conditions of this Agreement, and (iii)
the stock certificates representing such shares bear the legend set forth in
Section 8.6 of this Agreement, with such additions or deletions as may be
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<PAGE>
determined appropriate by counsel to TRC.
SECTION 8.2. NEW STOCKHOLDERS.
Any shares of Common Stock transferred by a Stockholder to a person or
entity not presently a party to this Agreement (except with respect to
transfers pursuant to a Public Offering) shall remain subject to the terms,
conditions and restrictions of this Agreement.
SECTION 8.3. SPECIFIC PERFORMANCE.
In any action or proceeding to enforce the provisions of this Agreement,
any person (including TRC) against whom such action or proceeding is brought
hereby waives the claim or defense therein that the plaintiff or claimant has
an adequate remedy at law, and such person shall not urge in any such action
or proceeding the claim or defense that such remedy at law exists. The
provisions of this Section 8.3, however, shall not prevent any party from
seeking a remedy at law in connection with any breach of this Agreement.
SECTION 8.4. NOTICES.
Any and all notices, designations, consents, offers, acceptances, or any
other communications provided for in this Agreement shall be given in writing
by personal delivery or by telegram, telex, air courier, or registered or
certified mail which shall be addressed, in the case of TRC or any corporate
Stockholder, to its principal executive office to the attention
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<PAGE>
of the Secretary, and in the case of an individual Stockholder to his
residence address or such other address as may be designated by such
person. All notices hereunder shall be deemed to have been given on
the date received; provided that with respect to any notices given by
registered or certified mail, such notices shall be deemed to have
been given on the third (3rd) business day following mailing of such
notices by certified or registered mail.
SECTION 8.5. AMENDMENTS.
No change, amendment, or modification of this Agreement shall be
valid unless it is in writing and signed by TRC and the holders of at
least ninety-five (95) percent of the issued and outstanding Common
Stock. In the event of an initial Public Offering (as defined in
Section 7.1(a) or Section 3.9), the parties hereto agree not to
withhold consent unreasonably to any amendment to this Agreement
necessary to effect such Public Offering.
SECTION 8.6. LEGEND ON STOCK CERTIFICATES.
Upon the execution of this Agreement, the certificates
representing the shares of Common Stock subject hereto shall be
surrendered to TRC and endorsed substantially as follows:
"The shares represented by this certificate are
subject to the provisions contained in a
Stockholders Agreement dated the 21 day of
November, 1985, between and among TRC and the
holders of Common Stock thereof, a copy of which
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<PAGE>
is on file in the office of TRC. No transfer or
encumbrance of the shares represented hereby may
be made except in accordance with such Agreement."
After endorsement, the certificates shall be returned to the
Stockholders who shall, subject to the terms of this Agreement, be
entitled to exercise all rights of ownership of such Common Stock.
All certificates for Common Stock hereinafter newly issued or
transferred shall bear the same endorsement, unless such endorsement
is inapplicable with respect to such shares pursuant to the terms of
this Agreement. At such time as the restrictions of this Agreement
cease to apply to any shares of Common Stock, the certificates
representing such shares may be surrendered to TRC for removal of the
above endorsement and, if necessary, new certificates shall be issued
in replacement thereof.
SECTION 8.7. WAIVERS.
Nothing contained in this Agreement shall prevent the waiver of
the provisions of this Agreement by the parties hereto. No party to
this Agreement, however, shall be deemed to have waived any of its
rights under this Agreement unless such waiver shall be in writing
and signed by such party. A waiver on any one occasion shall not be
construed as a bar to
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<PAGE>
or waiver of any right on any future occasion.
SECTION 8.8. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one and
the same instrument.
SECTION 8.9. BENEFIT AND ASSIGNMENT.
All of the terms, covenants, agreements and conditions contained in this
Agreement shall be binding upon and inure to the benefit of all of the
parties hereto, and their respective heirs, executors, administrators,
successors and permitted assigns. Other than as provided herein, no party
hereto shall have the right to assign any of its rights and obligations under
this Agreement without the prior written consent of each of the other parties.
SECTION 8.10. GOVERNING LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware.
SECTION 8.11. CONFLICT WITH BY-LAWS.
In the event of any conflict between the terms and provisions of this
Agreement and the terms and provisions of the Bylaws of TRC, the terms and
provisions of this Agreement shall control.
SECTION 8.12. GENDER.
As used in this Agreement, the masculine or neuter gender shall be
construed to mean the masculine, feminine or neuter
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<PAGE>
gender, as appropriate.
SECTION 8.13. COMPLIANCE WITH SECURITIES LAWS.
Any transfer of shares of Common Stock otherwise permitted or required
by this Agreement shall be in compliance with applicable state and federal
securities laws, and TRC may require an opinion of counsel of the transferor
as to such compliance.
SECTION 8.14. IRONS AND LAMBERT SHARES.
(a) For purposes of this Agreement, the "FMV Shares" at any time are the
"Employment Shares" which, at the time of determination, are "vested" (as
such terms are defined in the Employment Agreements of even date herewith
between TRC, on the one hand, and Lambert and Irons, on the other hand (the
"Stockholder Employment Agreements")) and which TRC has the right to purchase
pursuant to Paragraph 4(g) of the Stockholder Employment Agreements.
(b) In the event of any Voluntary Termination (as defined in the
Stockholder Employment Agreements) prior to July 1, 1988 of either Lambert or
Irons, Smith will (irrespective of TRC's exercise or decision not to exercise
the right to purchase the FMV Shares of Lambert or Irons, as the case may be,
pursuant to Paragraph 4(g) of the Stockholder Employment Agreements) within
sixty (60) days after such Voluntary Termination do one of the following (at
Smith's election): (i) pay cash to TRC in an amount equal to the Fair Market
Value (as defined in and
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<PAGE>
determined pursuant to, the Stockholder Employment Agreements) of the FMV
Shares of Lambert or Irons, as the case may be; (ii) transfer to each of HI
and Bass (for a purchase price of $.01 per share) a number of shares of
Common Stock equal to one-third of the number of the FMV Shares of Lambert or
Irons, as the case may be; or (iii) deliver to TRC any combination of cash
pursuant to clause (i) and shares pursuant to clause (ii) above.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
Attest TENNESSEE RESTAURANT COMPANY
/s/ [Illegible] By: /s/ D. N. Smith
- --------------------------- -------------------------------
Secretary President
[CORPORATE SEAL]
STOCKHOLDERS:
Attest: HOLIDAY INNS, INC.
/s/ Vincent De Young By: /s/ C. H. Norville
- --------------------------- ------------------------------
Assistant Secretary Title: Vice President
------------------------
[CORPORATE SEAL]
(Signatures continued next page)
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<PAGE>
EXHIBIT 2.4
Forms of Irrevocable Limited Proxies to Smith and Bass
IRREVOCABLE LIMITED PROXY TO SMITH
The capitalized terms used herein, unless otherwise indicated, shall
have the same meanings assigned to such terms in that certain Stockholders
Agreement, dated November ___, 1985, by and among Tennessee Restaurant
Company ("TRC") and its stockholders (the "Stockholders Agreement").
Pursuant to Section 212 of the General Corporation Law of the State of
Delaware, HI hereby grants to Donald N. Smith (the "Proxy Holder") an
irrevocable limited proxy to vote (which shall include the right to take part
in and consent to any stockholder action), in the absolute discretion of the
Proxy Holder, at any duly convened meeting of the stockholders of TRC or in
any consent action of stockholders of TRC, 13,400 shares of the Common Stock
of TRC that the undersigned would otherwise be entitled to vote, with respect
to any matter submitted to a vote of the stockholders of TRC or any matter
submitted to a vote of the stockholders of TRC or any matter that is the
subject of a consent action; provided, however, that this irrevocable limited
proxy expressly does not apply to, or entitle the Proxy Holder to vote with
respect to, the election to or removal from office of the chairman or chief
executive officer of TRC.
This irrevocable limited proxy shall expire on the earliest of (i)
November ___, 1995, (ii) the commencement of Stage Two or Stage Three, (iii)
the termination for any reason of the Proxy Holder as chairman or chief
executive officer of TRC prior to the commencement of Stage Two or Stage
Three, or (iv) the termination of the Stockholders Agreement.
This irrevocable proxy is coupled with an interest sufficient in law to
support an irrevocable proxy, and shall be and remain in full force and
effect until its expiration in accordance with the terms hereof. This
irrevocable limited proxy may not be assigned by the Proxy Holder to any
person.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this irrevocable limited
proxy to be executed and delivered by its duly authorized officer this ___
day of November, 1985.
HOLIDAY INNS, INC.
By:
------------------------------------
Title:
---------------------------------
Sworn to and subscribed
before me this ____
day of November, 1985.
- -----------------------------------
Notary Public
My commission expires:
- -----------------------------------
Witness
<PAGE>
EXHIBIT 2.4, CONTINUED
IRREVOCABLE LIMITED PROXY TO BASS
The capitalized terms used herein, unless otherwise indicated, shall
have the same meanings assigned to such terms in that certain Stockholders
Agreement, dated November __, 1985, by and among Tennessee Restaurant Company
("TRC") and its stockholders (the "Stockholders Agreement").
Pursuant to Section 212 of the General Corporation Law of the State of
Delaware, HI hereby grants to Bass Investment Limited Partnership (the "Proxy
Holder") an irrevocable limited proxy to vote (which shall include the right
to take part in and consent to any stockholder action), in the absolute
discretion of the Proxy Holder, at any duly convened meeting of the
stockholders of TRC, or in any consent action of stockholders of TRC, 13,400
shares of the Common Stock of TRC that the undersigned would otherwise be
entitled to vote, with respect to any matter submitted to a vote of the
stockholders of TRC or any matter that is the subject of a consent action;
provided, however, that this irrevocable limited proxy expressly does not
apply to, or entitle the Proxy Holder to vote with respect to, the election
to or removal from office of the chairman or chief executive officer of TRC.
This irrevocable limited proxy shall expire on the earliest of (i)
November 1, 1995, (ii) the commencement of Stage Two or Stage Three, or (iii)
the termination of the Stockholders Agreement.
This irrevocable proxy is coupled with an interest sufficient in law to
support an irrevocable proxy, and shall be and remain in full force and
effect until its expiration in accordance with the terms hereof. This
irrevocable limited proxy may not be assigned by the Proxy Holder to
any person.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this irrevocable limited
proxy to be executed and delivered by its duly authorized officer this ____
day of November, 1985.
HOLIDAY INNS, INC.
By:
---------------------------
Title:
------------------------
Sworn to and subscribed
before me this ______
day of November, 1985.
- --------------------------------
Notary Public
My commission expires:
- --------------------------------
Witness
<PAGE>
EXHIBIT 3.7
Resolution Establishing Primary Option Committee
WHEREAS, the Corporation and its stockholders have entered into a
Stockholders Agreement dated November ___, 1985 (the "Stockholders
Agreement"); and
WHEREAS, Section 3.7 of the Stockholders Agreement contemplates the
establishment of a committee of the Board of Directors of the Corporation to
be known as the Primary Option Committee;
NOW THEREFORE, BE IT RESOLVED, that there be and hereby is established a
committee of the Board of Directors of the Corporation to be known as the
Primary Option Committee which shall consist at all times of the director(s)
of the Corporation other than the director(s) designated by the holder(s) of
the Class H Stock, as defined in the Stockholders Agreement, or by Holiday
Inns, Inc. The Primary Option Committee shall have the exclusive authority to
exercise the Primary Option, as defined in the Stockholders Agreement, and to
take such other actions (including without limitation Significant Director
Actions, as defined in the Bylaws of the Corporation) as may be required to
enable the Corporation to consummate the purchase of the Primary Option
Shares, as defined in the Stockholders Agreement, in accordance with the
Stockholders Agreement, including without limitation Section 3.8 thereof. Any
action taken by the Primary Option Committee shall require the unanimous vote
of all of the members thereof.
<PAGE>
EXHIBIT 4.2
Resolution Establishing Stage One Smith Call Option Committee
WHEREAS, the Corporation and its stockholders have entered into a
Stockholders Agreement dated November ___, 1985 (the "Stockholders
Agreement"); and
WHEREAS, Section 4.2 of the Stockholders Agreement contemplates the
establishment of a committee of the Board of Directors of the Corporation to
be known as the Stage One Smith Call Option Committee;
NOW THEREFORE, BE IT RESOLVED, that there be and hereby is established a
committee of the Board of Directors of the Corporation to be known as the
Stage One Smith Call Option Committee which shall consist at all times of the
director(s) of the Corporation designated by the holder(s) of the Class H
Stock, as defined in the Stockholders Agreement. The Stage One Smith Call
Option Committee shall have the exclusive authority to exercise the Stage One
Smith Call Option, as defined in the Stockholders Agreement, and to take such
other actions (other than Significant Director Actions, as defined in the
Bylaws of the Corporation) as may be required to enable the Corporation to
consummate the purchase of the Class S Stock, as defined in the Stockholders
Agreement, pursuant to the exercise of the Stage One Smith Call Option.
<PAGE>
EXHIBIT 5.3
Resolution Establishing First Refusal Option Committee
WHEREAS, the Corporation and its stockholders have entered into a
Stockholders Agreement dated November ___, 1985 (the "Stockholders
Agreement"); and
WHEREAS, Section 5.3 of the Stockholders Agreement contemplates the
establishment of a committee of the Board of Directors of the Corporation to
be known as the First Refusal Option Committee;
NOW THEREFORE, BE IT RESOLVED, that there be and hereby is established a
committee of the Board of Directors of the Corporation to be known as the
First Refusal Option Committee which shall consist at all times of the
director(s) of the Corporation other than the director(s) designated by the
Transferring Stockholder, as defined in the Stockholders Agreement, or its
transferees. The First Refusal Option Committee shall have the exclusive
authority to exercise any option of first refusal available to the
Corporation pursuant to Section 5 of the Stockholders Agreement and to take
such other actions (including without limitation Significant Director
Actions, as defined in the Bylaws of the Corporation) as may be required to
enable the Corporation to consummate the transactions necessary in connection
therewith. Any action taken by the First Refusal Option Committee shall
require the unanimous vote of all of the members thereof.
<PAGE>
EXHIBIT 6.3
BUY-SELL OPTION HYPOTHETICAL ILLUSTRATIONS
Assumptions:
Prior to exercise of any Buy/Sell Option:
Stockholder X holds 10 shares
Stockholder Y holds 10 shares
Stockholder Z holds 10 shares
OFFER AND RESPONSE RESULT AFTER EXERCISE
- -----------------------------------------------------------------------------
Y
| X would hold 30 shares
a) \/ Sell Y would hold 0 shares
X ----------- > Z would hold 0 shares
Buy/Sell /\ Sell
|
Z
- -----------------------------------------------------------------------------
Y
| X would hold 0 shares
b) \/ Buy Y would hold 15 shares
X ----------- > Z would hold 15 shares
Buy/Sell /\ Buy
|
Z
- -----------------------------------------------------------------------------
<PAGE>
OFFER AND RESPONSE RESULT AFTER EXERCISE
- -----------------------------------------------------------------------------
Y
| X would hold 0 shares
c) \/ Buy Y would hold 30 shares
X ----------- > Z would hold 0 shares
Buy/Sell /\ Sell
|
Z
OR
Y
| X would hold 0 shares
\/ Buy If Y opts to buy Z's 10 shares,
X ----------- > then Y would hold 30
Buy/Sell /\ No Response shares and Z would hold
| 0 shares.
Z If Y does NOT opt to buy
Z's 10 shares, Y would
own 20 shares and Z would
continue to own 10 shares.
- -----------------------------------------------------------------------------
Y Y would hold 0 shares
|
\/ Sell If X opts to buy Z's 10
X ----------- > shares, X would hold 30
Buy/Sell /\ No Response shares and Z would hold
| 0 shares.
Z
If X does NOT opt to buy Z's
shares, X would hold 20
shares and Z would continue
to hold 10 shares.
- -----------------------------------------------------------------------------
Y If X opts to buy both Y's
| 10 shares AND Z's 10
\/ No Response shares, X would hold 30
X ----------- > shares and Y and Z would
Buy/Sell /\ No Response each hold 0 shares.
|
Z If X does not opt to buy all
of Y's shares AND all of
Z's shares, X would continue
to own 10 shares and Y and
Z would each continue to
own 10 shares.
- -----------------------------------------------------------------------------
<PAGE>
BASS INVESTMENT LIMITED PARTNERSHIP
By: BMA Limited Partnersip,
General Partner
By: /s/ Dort A. Cameron, III
------------------------------
Dort A. Cameron, III,
General Partner
/s/ D. N. Smith
------------------------------------
Donald N. Smith
/s/ Leon Irons
------------------------------------
Leon Irons
/s/ John P. Lambert
------------------------------------
John P. Lambert
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<PAGE>
BASS INVESTMENT LIMITED PARTNERSHIP
By: BMA Limited Partnersip,
General Partner
By: /s/ Dort A. Cameron, III
------------------------------
Dort A. Cameron, III,
General Partner
/s/ D. N. Smith
------------------------------------
Donald N. Smith
/s/ Leon Irons
------------------------------------
Leon Irons
/s/ John P. Lambert
------------------------------------
John P. Lambert
/s/ Peter M. Joost
------------------------------------
Peter M. Joost
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BASS INVESTMENT LIMITED PARTNERSHIP
By: BMA Limited Partnership,
General Partner
By: /s/ Dort A. Cameron, III
------------------------------------
Dort A. Cameron, III,
General Partner
/s/ D. N. Smith
------------------------------------
Donald N. Smith
/s/ Peter M. Joost
------------------------------------
Peter M. Joost
/s/ Larry W. Browne
------------------------------------
Larry Browne
